As filed with the Securities and Exchange Commission on July 3, 2008
File No. 001-34036
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10/A
(Amendment No. 3)
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
John Bean Technologies Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware | 91-1650317 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-5900
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class To Be so Registered |
Name of Exchange on Which Each Class is to be Registered |
|
Common stock, par value $0.01 per share |
New York Stock Exchange | |
Preferred Share Purchase Rights |
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ¨
INFORMATION INCLUDED IN INFORMATION STATEMENT
AND INCORPORATED BY REFERENCE IN FORM 10
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10
This registration statement on Form 10 (the Form 10) incorporates by reference information contained in the information statement filed as exhibit 99.1 hereto (the information statement). The cross-reference table below identifies where the items required by Form 10 can be found in the information statement.
Item No. |
Item Caption |
Location in Information Statement |
||
1. |
Business | Executive Summary and Business | ||
1A. |
Risk Factors | Risk Factors | ||
2. |
Financial Information | SummarySummary Combined Financial Data; Capitalization; Unaudited Pro Forma Combined Financial Data; Selected Combined Financial Data; and Managements Discussion and Analysis of Financial Condition and Results of Operations | ||
3. |
Properties | Business Facilities and Properties | ||
4. |
Security Ownership of Certain Beneficial Owners and Management | Security Ownership by Certain Beneficial Owners and Management | ||
5. |
Directors and Executive Officers | Management | ||
6. |
Executive Compensation | Executive Compensation | ||
7. |
Certain Relationships and Related Transactions, and Director Independence | Our Relationship with FMC Technologies After the Spin-Off and Corporate Governance | ||
8. |
Legal Proceedings | BusinessLegal Proceedings | ||
9. |
Market Price of and Dividends on the Registrants Common Equity and Related Stockholder Matters | Summary; Risk Factors; The Spin-Off; Capitalization; Dividend Policy; and Description of Our Capital Stock | ||
10. |
Recent Sale of Unregistered Securities | None | ||
11. |
Description of Registrants Securities to be Registered | Description of Our Capital Stock | ||
12. |
Indemnification of Directors and Officers | Description of Our Capital Stock; and Our Relationship with FMC Technologies After the Spin-Off | ||
13. |
Financial Statements and Supplementary Data | SummarySummary Combined Financial Data; Unaudited Pro Forma Combined Financial Data; Selected Combined Financial Data; Managements Discussion and Analysis of Financial Condition and Results of Operations; and Index to Combined Financial Statements including the Combined Financial Statements | ||
14. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | None | ||
15. |
Financial Statements and Exhibits |
(a) | List of Financial Statements |
The following historical and pro forma combined financial statements of John Bean Technologies Corporation are included in the information statement and filed as part of this registration statement on Form 10:
(1) | Audited Combined Financial Statements, including Report of Independent Registered Public Accounting Firm, as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007; |
(2) | Unaudited Combined Financial Statements as of March 31, 2007 and 2008 and for the three months ended March 31, 2007 and 2008; and |
(3) | Unaudited Pro Forma Combined Income Statements for the year ended December 31, 2007 and for the three months ended March 31, 2008 and Unaudited Pro Forma Balance Sheet as of March 31, 2008. |
(b) | Exhibits |
The following exhibits are filed herewith unless otherwise indicated:
Exhibit
|
Exhibit Description |
|
2.1 |
Form of Separation and Distribution Agreement between FMC Technologies, Inc. and John Bean Technologies Corporation (JBT Corporation) | |
3.1* |
Amended and Restated Certificate of Incorporation of JBT Corporation | |
3.2* |
Amended and Restated By-Laws of JBT Corporation | |
4.1 |
Specimen common stock certificate of JBT Corporation | |
4.2 |
Form of Rights Agreement between JBT Corporation and National City Bank, as rights agent | |
4.3 |
Form of Certificate of Designations of Series A Junior Participating Preferred Stock | |
10.1 |
Form of Tax Sharing Agreement between JBT Corporation and FMC Technologies, Inc. | |
10.2 |
Form of Trademark License Agreement between JBT Corporation and FMC Technologies, Inc. | |
10.3 |
Form of Trademark Assignment and Coexistence Agreement | |
10.4 |
Form of John Bean Technologies Corporation Incentive Compensation and Stock Plan | |
10.5 |
JBT Corporation Employees Retirement Program | |
10.6 |
John Bean Technologies Corporation Savings and Investment Plan | |
21.1 |
List of Subsidiaries of JBT Corporation | |
99.1 |
Preliminary Information Statement of JBT Corporation, subject to completion, dated July 3, 2008 |
* | Previously filed |
| Incorporated by reference to Exhibit A to the Form of Rights Agreement between JBT Corporation and National City Bank, as rights agent, filed as Exhibit 4.2 herewith |
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
John Bean Technologies Corporation | ||
By: | / S / C HARLES H. C ANNON , J R . | |
Name: | Charles H. Cannon, Jr. | |
Title: |
Chairman of the Board,
Chief Executive Officer and President |
Dated: July 3, 2008
Exhibit 2.1
FORM OF
SEPARATION AND DISTRIBUTION AGREEMENT
by and between
FMC TECHNOLOGIES, INC.
and
JOHN BEAN TECHNOLOGIES CORPORATION
Dated as of [ ], 2008
TABLE OF CONTENTS
Page | ||||
ARTICLE I. | DEFINITIONS | 2 | ||
1.1 |
General | 2 | ||
ARTICLE II. | THE CONTRIBUTION | 11 | ||
2.1 |
Contribution | 11 | ||
2.2 |
Conditions Precedent to Completion of the Contribution | 12 | ||
2.3 |
Transfers Not Effected Prior to the Separation; Transfers Deemed Effective at the Assumption Time | 13 | ||
2.4 |
Ancillary Agreements | 13 | ||
2.5 |
Certificate of Incorporation; By-laws; Rights Plan | 14 | ||
2.6 |
Dividend and Cash | 14 | ||
2.7 |
Pension Asset Transfers | 15 | ||
2.8 |
Foreign Exchange Forward Instruments | 17 | ||
ARTICLE III. | THE DISTRIBUTION | 17 | ||
3.1 |
Record Date and Distribution Date | 17 | ||
3.2 |
The Agent | 18 | ||
3.3 |
Delivery of Shares to the Agent | 18 | ||
3.4 |
Actions Prior to the Distribution | 18 | ||
3.5 |
The Distribution | 18 | ||
3.6 |
Conditions to Obligations | 19 | ||
ARTICLE IV. | SURVIVAL AND INDEMNIFICATION | 19 | ||
4.1 |
Survival of Agreements | 19 | ||
4.2 |
Indemnification | 20 | ||
4.3 |
Procedures for Indemnification for Third-Party Actions | 20 | ||
4.4 |
Additional Matters | 22 | ||
4.5 |
Survival of Indemnities | 22 | ||
4.6 |
Remedies Cumulative | 22 | ||
ARTICLE V. | CERTAIN ADDITIONAL COVENANTS | 22 | ||
5.1 |
Cooperation; Notices to Third Parties | 22 | ||
5.2 |
Intercompany Agreements and Accounts | 23 | ||
5.3 |
Guarantee Obligations | 24 | ||
5.4 |
Qualification as Tax-Free Distribution | 25 | ||
5.5 |
Non-Solicitation and Non-Hire | 25 |
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ARTICLE VI. | ACCESS TO INFORMATION | 25 | ||
6.1 |
Agreement for Exchange of Information | 25 | ||
6.2 |
Ownership of Information | 26 | ||
6.3 |
Compensation for Providing Information | 26 | ||
6.4 |
Record Retention | 26 | ||
6.5 |
Limitation of Liability | 26 | ||
6.6 |
Confidentiality | 26 | ||
6.7 |
Protective Arrangements | 27 | ||
ARTICLE VII. | NO REPRESENTATIONS OR WARRANTIES | 27 | ||
7.1 |
No Representations or Warranties | 27 | ||
ARTICLE VIII. | TERMINATION | 28 | ||
8.1 |
Termination by Mutual Consent | 28 | ||
8.2 |
Effect of Termination | 28 | ||
ARTICLE IX. | MISCELLANEOUS | 28 | ||
9.1 |
Complete Agreement; Corporate Power | 28 | ||
9.2 |
Expenses | 29 | ||
9.3 |
Governing Law | 29 | ||
9.4 |
Notices | 29 | ||
9.5 |
Amendment and Modification | 30 | ||
9.6 |
Successors and Assigns; No Third-Party Beneficiaries | 30 | ||
9.7 |
Counterparts | 30 | ||
9.8 |
Interpretation | 30 | ||
9.9 |
Severability | 30 | ||
9.10 |
References; Construction | 30 | ||
9.11 |
Specific Performance | 31 | ||
9.12 |
Conflict with Ancillary Agreements | 31 | ||
9.13 |
Joint Defense Cost Sharing Agreement | 31 | ||
9.14 |
Insurance Sharing | 32 | ||
ARTICLE X. | DISPUTE RESOLUTION | 33 | ||
10.1 |
Dispute Resolution | 33 |
Schedules to Separation and Distribution Agreement | ||
Schedule 1.1(a) | Equity Interests | |
Schedule 1.1(b) | Other Assets | |
Schedule 1.1(c) | Excluded Assets | |
Schedule 1.1(d)-(2) | Discontinued and Closed Businesses | |
Schedule 1.1(d)-(3) | Environmental Liabilities |
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SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION AGREEMENT (this Agreement ), dated as of , 2008, is by and between FMC TECHNOLOGIES, INC. , a Delaware corporation ( Parent ), and JOHN BEAN TECHNOLOGIES CORPORATION , a Delaware corporation and a wholly owned subsidiary of Parent ( Spinco ) (each of Parent and Spinco, a Party and together, the Parties ).
RECITALS
WHEREAS, the Board of Directors of Parent has determined that it is in the best interests of Parent and its stockholders to separate Parents existing businesses into two independent companies (the Separation ), pursuant to the terms and subject to the conditions set forth in this Agreement;
WHEREAS, to effect the Separation, Parent intends to cause the transfer to Spinco of certain assets of Parent and its subsidiaries, and the assumption by Spinco of certain liabilities of Parent and its subsidiaries associated with the assets being transferred, all of which are primarily related to the Spinco Business (the Contribution ) as contemplated by this Agreement and the Ancillary Agreements;
WHEREAS, in connection with the Separation, the Board of Directors of Parent has determined that it would be advisable and in the best interests of Parent and its stockholders for Parent to distribute to the holders of the issued and outstanding shares of common stock, par value $0.01 per share, of Parent (the Parent Common Stock ) as of the Record Date 100% of the issued and outstanding shares of common stock, par value $0.01 per share, of Spinco (the Spinco Common Stock ), together with the associated preferred stock purchase rights (each share of such stock, together with the associated preferred stock purchase right, a Spinco Share ), on the basis of 0.216 Spinco Shares for every share of Parent Common Stock (the Distribution );
WHEREAS, it is the intention of the parties to this Agreement that, for United States federal income tax purposes, the Distribution shall qualify as a tax-free spin-off under Section 355 of the Internal Revenue Code of 1986, as amended;
WHEREAS, the Boards of Directors of Parent and Spinco have each determined that the Separation, the Contribution, the Distribution and the other transactions contemplated by this Agreement and the Ancillary Agreements are in furtherance of and consistent with their respective business strategies and are in the best interests of their respective companies and stockholders and have approved this Agreement and the Ancillary Agreements; and
WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Separation and certain other agreements that will govern certain matters relating to the Separation, the Contribution, the Distribution and the relationship of Parent and Spinco and their respective subsidiaries following the Separation and the Distribution.
NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth in this Agreement, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 General . As used in this Agreement, the following terms shall have the following meanings:
Action: any claim, demand, action, lawsuit, countersuit, arbitration, inquiry, proceeding or investigation by or before any governmental or regulatory authority or any arbitration or mediation tribunal.
After Tax Operating Cash Flow: the sum of, based on Parents financial reporting system for the period from and including January 1, 2008 to and including the close of business on the Distribution Date, with all business transactions accounted for according Parents established cut-off, accounting and reporting procedures and protocols, the Net Operating Income of the Spinco Businesss continuing operations, plus or minus each of the following (as specified below):
(1) plus, Net Operating Income of Spincos discontinued businesses,
(2) plus, Spincos incremental corporate staff expense, after tax,
(3) plus the decrease or minus the increase in Spincos capital employed for its continuing operations, excluding cash and cash equivalents,
(4) plus the decrease or minus the increase in Spincos capital employed for its discontinued operations, excluding cash and cash equivalents,
(5) plus or minus, as applicable, the correcting adjustment for foreign exchange translation related to Spincos capital employed for both its continuing and discontinued operations,
(6) plus the increase or minus the decrease in Spincos liability for current and deferred income taxes and deferred tax assets,
(7) plus or minus, as applicable, the correcting adjustment for the foreign exchange translation adjustment related to Spincos liability for current and deferred income taxes and deferred tax assets,
(8) plus restatement gains or minus restatement losses, net of tax,
(9) plus impact of OCI, deferred derivative gains (losses) and other,
(10) plus, provisions for defined benefit retirement plans, pre-tax,
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(11) less, amortization expense in 2008 related to the 2006 restricted stock equity award, pre-tax,
(12) plus the increase or minus the decrease in Spincos health care reserves, and
(13) plus the increase or minus the decrease in Spincos insurance reserves.
Parent and Spinco agree to make such other adjustments as the parties determine necessary to fairly state the After Tax Operating Cash Flow and the Dividend Amount. Examples may include adjustments required for the impact on tax reserves of intercompany interest income or expense and prior year(s) taxes paid in 2008. Exhibit J includes an example of the calculation methodology for After Tax Operating Cash Flow.
Ancillary Agreements: the Tax Sharing Agreement, the agreements relating to the transfers and assumptions contemplated by Section 2.3 , the Transition Services Agreement substantially in the form of Exhibit B , the Trademark License Agreement substantially in the form of Exhibit F , the Trademark Assignment and Coexistence Agreement substantially in the form of Exhibit G , the Distributor Agreements substantially in the forms attached as Exhibit I , the Sublease Agreements substantially in the forms attached as Exhibit H and the other agreements entered into or to be entered into in connection with the Separation as contemplated by Article II of this Agreement.
Assets: any and all assets, properties and rights (including goodwill), whether accrued, contingent or otherwise, whether now existing or hereafter acquired, wheresoever situated, and in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person, including the following:
(1) all cash, cash equivalents, notes, accounts receivable, notes receivable and mortgages receivable (whether current or non-current);
(2) all interests in any capital stock or other equity interests, all rights as a partner or joint venturer or participant, certificates of deposit, bankers acceptances, bonds, notes, debentures, evidences of indebtedness, certificates of interest or participation in profit-sharing agreements, all puts, calls and options and all other securities of any kind;
(3) all Intellectual Property Rights;
(4) all rights, title and interests in, to and under leases, subleases, contracts, licenses, permits, registrations, certifications, distribution arrangements, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products, other sales and purchase agreements, confidentiality agreements, and other agreements and business arrangements;
(5) all rights, title and interests in, to and under real property of whatever nature, including all easements and rights of way, servitudes, leases, subleases, permits, licenses, options and other real property rights and interests, as an owner, mortgagee or
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holder of a security interest in real property, lessor, sublessor, lessee, sublessee or otherwise, and all rights, title and interests in and to all buildings, fixtures and improvements thereon;
(6) all leasehold improvements, fixtures, trade fixtures, machinery, equipment (including transportation and office equipment), tools, dies, furniture and furnishings;
(7) all fixtures, machinery, equipment, tools, other inventories of supplies and spare parts, vehicles and transportation equipment, miscellaneous supplies, models, prototypes, test devices and other tangible assets or properties of any kind;
(8) all computers and other electronic data processing and computer equipment and all computer applications, programs and other software, including design tools, systems documentation and instructions;
(9) all written technical information, data, specifications, research and development information, engineering drawings, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties;
(10) all raw materials, parts, work-in-process, supplies, finished goods, consigned goods, products and other inventories;
(11) all deposits, letters of credit, performance and surety bonds, prepayments and prepaid or advanced payments and expenses, trade accounts and other accounts and notes receivable;
(12) all rights to causes of action, lawsuits, judgments, claims, causes in action, all rights under express or implied warranties, all claims or rights against any Person arising from the ownership of any Asset, all rights in connection with any bids or offers, all rights of recovery and all rights of setoff of any kind and demands of any nature, in each case whether mature, contingent or otherwise, whether in tort, contract or otherwise, whether arising by way of counterclaim or otherwise;
(13) all rights to receive mail, payments on accounts receivable and other communications;
(14) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;
(15) all accounting and other files, records and data, including schematics, books, manuals, technical information and engineering data, programming information, computerized data, books of account, ledgers, employment records, lists and files relating to customers, vendors, suppliers and agents, quality records and reports, research records, cost information, pricing data, market surveys and marketing know-how, mailing lists, purchase and sale records and correspondence, advertising and marketing records, of every kind;
(16) all goodwill as a going concern and other intangible properties;
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(17) all rights under employee contracts;
(18) all tax assets (including carryforwards) described in the Tax Sharing Agreement; and
(19) all permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with or issued by, any governmental or regulatory authority in any jurisdiction, and all pending applications therefor.
Assumption Time: 12:01 a.m. on the Distribution Date.
Contribution: as defined in the Recitals hereto.
Distribution: as defined in the Recitals hereto.
Distribution Date: the date as of which the Distribution shall be effected, to be determined by, or under the authority of, the Board of Directors of Parent consistent with this Agreement.
Dividend Amount: an amount equal to:
(1) $200,000,000, plus
(2) the aggregate amount of cash and cash equivalents (as such term is defined in the footnotes to the financial statements included in Parents most recent Form 10-K filed with the U.S. Securities and Exchange Commission) of Spinco as of 11:59 p.m. on the Distribution Date, minus
(3) the amount of any Spinco indebtedness for borrowed money to the extent the creditor is not Parent, Spinco or any of their respective affiliates, minus
(4) the value of the After Tax Operating Cash Flow of the Spinco Business for the period from and including January 1, 2008 to and including 11:59 p.m. on the Distribution Date, if that amount is positive, plus
(5) the absolute value of the After Tax Operating Cash Flow of the Spinco Business for the period from and including January 1, 2008 to and including 11:59 p.m. on the Distribution Date, if such After Tax Operating Cash Flow amount is negative, minus
(6) the after-tax offset for excess assets left in Parents Brazilian pension plan, which is estimated at $463,737 (66% of $702,632).
Exhibit J includes an illustration of the calculation methodology for the Dividend Amount, including the identification of the accounts to be used to determine the After Tax Operating Cash Flow for the applicable period.
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Group: the Parent Group or the Spinco Group.
Guarantees: as defined in Section 5.3 hereof.
Indemnifiable Losses: all Liabilities suffered (and not actually reimbursed by insurance proceeds, provided that it is understood that any amount paid by a third party administrator that is within a self-insured retention shall not be considered to have been reimbursed by insurance proceeds) by an Indemnitee, including any reasonable out-of-pocket fees, costs or expenses of enforcing any indemnity hereunder; provided that Indemnifiable Losses shall not include:
(1) any special, indirect, incidental, punitive or consequential damages whatsoever of any indemnitee, including damages for lost profits and lost business opportunities, arising in connection with any Action other than any Action by any Person (including any governmental or regulatory authority) who is not a party to this Agreement or an affiliate or subsidiary of such a party; or
(2) any such Liability caused by, resulting from or arising out of the gross negligence, willful misconduct or fraud of such indemnitee.
Information: all records, books, contracts, instruments, computer data and other data and information.
Information Statement: as defined in Section 3.4 hereof.
Intellectual Property Rights:
(1) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof;
(2) all Marks, whether registered or unregistered Marks, and all applications, registrations, and renewals in connection with the Marks;
(3) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, all computer software (including data and related documentation), all websites as well as supporting HTML coding and source code, all mask works and all applications, registrations, and renewals in connection therewith;
(4) all trade secrets and confidential information, including ideas, research and development, know-how, proprietary processes and formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals;
(5) any income, royalties and payments which accrue as of the Distribution Date or thereafter with respect to any of the foregoing items, including payments for past, present or future infringements or misappropriation thereof, the right to sue and recover for past infringements or misappropriation thereof;
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(6) any goodwill associated with any of the foregoing;
(7) all other proprietary rights; and
(8) all copies and tangible embodiments thereof (in whatever form or medium).
Liabilities: losses, damages, Actions, judgments, payments, debts, commissions, duties, costs, fees, expenses, settlements, salaries, performance or delivery penalties, liabilities, warranty liabilities (whether implicit or explicit or whether granted orally or in writing) and obligations (whether pecuniary or not, including obligations to perform or forebear from performing acts or services), fines or penalties, of any kind or nature (including all reasonable out-of-pocket costs, fees and expenses, whether legal, accounting or otherwise), whether accrued or fixed, absolute or contingent, matured or un-matured, determined or determinable, known or unknown.
Marks : all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivation, and combinations thereof and including all goodwill associated therewith.
Parent: as defined in the Recitals hereto.
Parent Assets: all of the Assets owned by Parent or its subsidiaries, other than the Spinco Assets.
Parent Business: all businesses and operations (including related joint ventures and alliances) of Parent, other than the Spinco Business.
Parent Common Stock: as defined in the Recitals hereto.
Parent Group: Parent and its subsidiaries other than members of the Spinco Group.
Parent Indemnitees: Parent, each affiliate of Parent and each of their respective Representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
Parent Liabilities: all of the Liabilities of Parent and its subsidiaries, other than the Spinco Liabilities.
Person: an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization or a government or any department or agency thereof.
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Record Date: the close of business on the date to be determined by the Board of Directors of Parent as the record date for determining shareholders of Parent entitled to receive shares of Spinco Common Stock in the Distribution.
Registration Statement : Spincos final registration statement on Form 10 filed with the U.S. Securities and Exchange Commission in connection with the Distribution.
Representative: with respect to any Person, any of such Persons directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives.
Separation: as defined in the Recitals to this Agreement.
Spinco: as defined in the Recitals hereto.
Spinco Assets: except as expressly provided in this Agreement or in the Ancillary Agreements,
(1) all Assets reflected on the Spinco Balance Sheet as set forth in the Registration Statement or the accounting records supporting the Spinco Balance Sheet and all Assets of either the Parent Group or the Spinco Group acquired between December 31, 2007 and the Assumption Time that would have been included on the Spinco Balance Sheet had they been owned on December 31, 2007, excluding any Assets sold or otherwise disposed of on or prior to the Assumption Time;
(2) all Assets primarily related to or used by the Spinco Business that are owned, leased, licensed or held by any member of either Group at the Assumption Time;
(3) all equity interests in any of Spincos subsidiaries and other equity interests and similar arrangements primarily related to the Spinco Business, including those shares of capital stock and other interests listed on Schedule 1.1(a) ;
(4) all hedge and option arrangements entered into by Parent in respect of the Spinco Business;
(5) all rights held of Spinco set forth in Section 9.14 ; and
(6) all of the Assets listed on Schedule 1.1(b) ; provided that:
(a) Intellectual Property Rights shall be Spinco Assets only in the form and to the extent provided in Section 2.1(b) ;
(b) cash shall be a Spinco Asset only to the extent set forth in Section 2.6 hereof;
(c) the leased real property at 200 E. Randolph Drive, Suite 6600, Chicago, Illinois shall not be a Spinco Asset or a Spinco Liability, but the Parties shall enter into a sublease agreement substantially in the form of Exhibit H with respect to such leased property;
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(d) pension assets shall be transferred to Spinco only in the amounts, to the extent and in the manner set forth in Section 2.7; and
(e) Spinco Assets shall not include the Assets set forth on Schedule 1.1(c) .
Spinco Balance Sheet: the audited combined balance sheet of Spinco as of December 31, 2007, and the notes thereto, as set forth in the Registration Statement.
Spinco Business: all businesses, operations or products (including related joint ventures and alliances) of the FoodTech and Airport Systems businesses of Parent and its subsidiaries and affiliates (whether or not currently owned, used or occupied by the Parent and its subsidiaries or affiliates).
Spinco Common Stock: as defined in the Recitals to this Agreement.
Spinco Group: Spinco and its subsidiaries.
Spinco Indemnitees: Spinco, each affiliate of Spinco and each of their respective Representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
Spinco Liabilities: all Liabilities related to or arising out of the Spinco Assets or the Spinco Business or otherwise specified as Spinco Liabilities in this Agreement or any Ancillary Agreement, including:
(1) except as expressly provided in the Ancillary Agreements, all Liabilities reflected on the Spinco Balance Sheet as set forth in the Registration Statement or the accounting records supporting such Spinco Balance Sheet and all Liabilities of either Group incurred or arising between December 31, 2007 and the Assumption Time which would have been included on the Spinco Balance Sheet had they been incurred or arisen on or prior to December 31, 2007, excluding those Liabilities (or portions thereof) that have been satisfied, paid or discharged prior to the Assumption Time;
(2) all Liabilities of any discontinued or closed business, operation or product that would have been part of the Spinco Business as of December 31, 2007 if such business, operation or product had not been discontinued or closed prior to such time; provided that, notwithstanding such general rule, any discontinued or closed business, operation or product listed on Schedule 1.1(d)-(2) shall be the obligation and liability of Spinco and/or Parent as specified on such Schedule 1.1(d)-(2) ;
(3) all environmental Liabilities primarily related to the Spinco Business or any environmental Liability to the extent arising out of or resulting from the use by Spinco Business of any property owned, operated, used or leased in the course of operating any Spinco Business at any time or any other property where the Spinco Business contracted or arranged for disposal at any time; provided that, notwithstanding such general rule, environmental Liabilities for the facilities set forth on Schedule 1.1(d)-(3) shall be the obligation and liability of Spinco and/or Parent as specified on such Schedule 1.1(d)-(3) . With respect to environmental Liabilities arising from any facility
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that was jointly used by Spinco and Parent, except as otherwise specified on Schedule 1.1(d)-(3) , if one party was the primary or predominant user of the property, that party shall be responsible to administer any Action related thereto, including providing any required defense, and the other party shall cooperate in the administration and defense. Liabilities associated with any such Action shall be shared equally by Parent and Spinco unless there is another allocation methodology that more accurately and reasonably reflects the appropriate allocation of responsibility as between Parent and Spinco (including, for the avoidance of doubt, a reasonable estimation of relative fault or cause of the Liabilities);
(4) all Liabilities related to or incurred in the manufacture of products of the Spinco Business sold to third parties by any member of either the Parent Group or the Spinco Group;
(5) Liabilities for Taxes specifically allocated to Spinco under the Tax Sharing Agreement; and
(6) all Liabilities with respect to the various claims and potential claims set forth on Schedule 1.1(d)-(6) .
To the extent any third party has purchased products or services from business units of the Energy Processing or Energy Production divisions of Parent prior to the Distribution Date through (i) formal or informal distribution arrangements between the FoodTech or Airport Systems businesses, on the hand, and any such Energy Processing or Energy Production business units, on the other hand, or (ii) contracts executed by legal entities operating as FoodTech or Airport Systems businesses whose ownership is transferred to Spinco in the Contribution, any Liabilities resulting from such arrangements are Parent Liabilities and will not be considered to be Spinco Liabilities; provided that, to the extent that any such Liability arises out of or relates to the actions or inactions of Spinco or any person acting on behalf of Spinco or the FoodTech or Airport Businesses in a manner inconsistent with the applicable arrangement with the Energy Processing or Energy Production divisions of Parent, such Liabilities shall be Spinco Liabilities.
Tax: as defined in the Tax Sharing Agreement.
Tax Sharing Agreement: the Tax Sharing Agreement between Parent and Spinco, substantially in the form of Exhibit A hereto.
Trademark License Agreement: the Trademark License Agreement between Parent and Spinco, substantially in the form of Exhibit F .
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ARTICLE II
THE CONTRIBUTION
SECTION 2.1 Contribution .
(a) On or prior to the Assumption Time, Parent shall assign and transfer to a member of the Spinco Group to be selected by Spinco, all of Parents and its subsidiaries respective rights, title and interests in all Spinco Assets except as otherwise specified in this Agreement. Except to the extent of any later transfers described in Section 2.3 , the transfers described in this Section will become effective at the Assumption Time. In partial consideration for the transfers described above, Spinco shall deliver to Parent all of the shares of Spinco Common Stock.
(b) Effective as of the Assumption Time, Spinco shall assume and discharge in due course all of the Spinco Liabilities in accordance with their respective terms.
(i) Separation of Assets . The Spinco Assets (other than Intellectual Property Rights, which will be licensed or assigned only as set forth in Section 2.1(b)(ii) ) shall, to the extent reasonably practicable (including taking into account the costs of any actions taken), be separated from the Parent Assets so that members of the Spinco Group will own and control the Spinco Assets at the Assumption Time and members of the Parent Group will own and control the Parent Assets at the Assumption Time. Such separation shall be effected in a manner that does not unreasonably disrupt either the Spinco Business or the Parent Business and minimizes, to the extent practicable, current and future costs (and losses of Tax or other economic benefits) of the respective businesses. With respect to any Asset that cannot reasonably be separated or otherwise allocated as provided above (A) all right, title and interest of the Parent Group shall be allocated to the party as to which such Asset is primarily used or held for use or primarily relates and (B) the other party shall have a right to use such Asset in its business in a manner consistent with past practice for a period which is coterminous with the life of the Asset described in (A) (and the obligation to pay its allocable share of any costs or expenses related to such Asset based on the methodology historically used by Parent); provided that if any Ancillary Agreement provides a more specific allocation or methodology with respect to any such Asset, the more specific treatment provided in the Ancillary Agreement shall prevail. To the extent the separation of Assets cannot be achieved in a reasonably practicable manner, the parties will enter into appropriate arrangements regarding such shared Asset.
(ii) Intellectual Property. In connection with the Contribution, any Intellectual Property Rights of Parent or any of its subsidiaries shall be licensed or assigned to Spinco, as the case may be, as follows:
(1) | With respect to Intellectual Property Rights (other than any Intellectual Property Rights described in the Trademark License Agreement, which shall remain assets of Parent other than as set forth in the Trademark License Agreement) used or held for use primarily in connection with the Spinco Business ( Spinco Group IP ), including the Intellectual Property Rights listed in Schedule 2.1(b) , Spinco shall have full ownership (to the extent of Parents rights therein) of such rights. |
(2) |
Except as otherwise provided in Schedule 2.1(b) , with respect to Spinco Group IP used or held for use in both the Spinco Business and the Parent Business on or before the Assumption Time, the Parent |
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Group shall have a non-exclusive, worldwide, fully-paid, perpetual, royalty-free license, with the right to grant sublicenses in the ordinary course of an on-going business, to all rights therein only to the extent it was used or held for use by the Parent Business at or before the Assumption Time. Parent and Spinco shall jointly determine the most cost-efficient means of obtaining and using software that is used by the Parent corporate staff prior to the Assumption Time and shall evenly divide the cost of obtaining new licenses for or copies of existing software that both Groups will require to operate their respective corporate staffs. |
(3) | Except as otherwise provided in Schedule 2.1(b) , with respect to Intellectual Property Rights other than Spinco Group IP that are used or held for use in both the Spinco Business and the Parent Business on or before the Assumption Time, title to such rights shall be owned by the Parent Group, and the Spinco Group shall have a non-exclusive, worldwide, fully-paid, perpetual, royalty-free license, with the right to grant sublicenses in the ordinary course of an ongoing business, to all rights in the Intellectual Property Rights only to the extent it was used or held for use by the Spinco Business on or before the Assumption Time; provided that to the extent any such Intellectual Property Rights are of the kind covered by the Trademark License Agreement or the Trademark Assignment and Coexistence Agreement in substantially the form set forth on Exhibit G , the terms of the Trademark License Agreement or Trademark Assignment and Coxistence Agreement, as applicable, shall prevail and the license rights described in this paragraph shall not apply. |
(4) | The licenses specified in this Section shall not restrict the subsequent transfer or license by the licensee (within the applicable field of use) of the Intellectual Property Rights, other than as specified in the Trademark License Agreement. |
(5) | Notwithstanding anything to the contrary in this Agreement, the Intellectual Property Rights described in the Trademark Assignment and Coexistence Agreement in substantially the form set forth on Exhibit G shall be transferred to Spinco only to the extent set forth in such agreement, and the terms of such agreement shall prevail with respect to any Intellectual Property Rights described in such agreement. |
SECTION 2.2 Conditions Precedent to Completion of the Contribution .
The obligations of the parties to complete the Contribution shall be conditioned on the satisfaction, or waiver by Parent, of the following conditions:
(a) Final approval of the Contribution shall have been given by the Board of Directors of Parent in its sole discretion; and
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(b) The conditions to the completion of the Distribution set forth in Section 3.6 hereof shall have been satisfied or waived pursuant to such Section 3.6 .
SECTION 2.3 Transfers Not Effected Prior to the Separation; Transfers Deemed Effective at the Assumption Time .
To the extent that any transfers contemplated by this Article II shall not have been completed at the Assumption Time, the parties shall cooperate and use reasonable efforts to effect such transfers as promptly following the Assumption Time as shall be practicable. Nothing in this Agreement shall be deemed to require the transfer of any Assets or the assumption of any Liabilities which by their terms or operation of law cannot be transferred or assumed; provided , however , that Parent and Spinco shall cooperate and use reasonable efforts to obtain any necessary consents or approvals for the transfer of all Assets and Liabilities contemplated to be transferred pursuant to this Article II . In the event that any such transfer of Assets or Liabilities has not been completed effective as of and after the Assumption Time, the party retaining such Asset or Liability shall thereafter hold such Asset for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto) and retain such Liability for the account of the party by whom such Liability is to be assumed pursuant hereto, and take such other action as may be reasonably requested by the party to which such Asset is to be transferred, or by whom such Liability is to be assumed, as the case may be, in order to place such party, insofar as reasonably possible, in the same position as would have existed had such Asset or Liability been transferred as contemplated by this Agreement. As and when any such Asset or Liability becomes transferable, such transfer shall be effected promptly. The parties agree that, at the Assumption Time, each Party shall be deemed to have acquired complete and sole beneficial ownership over all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such party is entitled to acquire or required to assume pursuant to the terms of this Agreement.
SECTION 2.4 Ancillary Agreements .
Parent and Spinco shall, on or prior to the Assumption Time, enter into the Ancillary Agreements in connection with the Separation, including (i)(A) such bills of sale, stock powers, capital contribution agreements, certificates of title, assignments of contracts and other instruments of transfer and assignment as and to the extent necessary to evidence the transfer and assignment of all of Parents and its respective subsidiaries right, title and interest in and to the Spinco Assets to Spinco or any subsidiary thereof and (B) such bills of sale, stock powers, capital contribution agreements, certificates of title, assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Spinco Liabilities by Spinco or any subsidiary thereof, and (ii) agreements with respect to (A) transition services (including shared facilities) pursuant to the Transition Services Agreement between Parent and Spinco, substantially in the form of Exhibit B , (B) intellectual property licenses as contemplated by Section 2.1(b) , (C) each other Ancillary
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Agreement and (D) other matters as may be advisable. The Ancillary Agreements (or, in the case of the forms of agreement attached hereto, any amendments thereto) shall be on terms reasonably acceptable to Parent and Spinco.
SECTION 2.5 Certificate of Incorporation; By-laws; Rights Plan .
Prior to the completion of the Distribution, Parent and Spinco shall take all action necessary so that (i) the Amended and Restated Certificate of Incorporation and the Amended and Restated By-laws, each as previously finalized as set forth on Exhibits C and D , respectively, shall remain in full force and effect on the Distribution Date, and (ii) the Preferred Share Purchase Rights Agreement of Spinco, in substantially the form of Exhibit E hereto, shall become effective upon the Distribution.
SECTION 2.6 Dividend and Cash .
(a) On or before the Distribution Date,
(i) Spinco shall cause to be received from the Credit Agreement and the Note Purchase Agreement, each dated on or before the Distribution Date, in substantially the forms reviewed by Parent prior to the Distribution Date, an amount not less than that necessary to enable Spinco to pay the Initial Dividend Amount to Parent on or before the Distribution Date
(ii) Spinco and Parent shall jointly determine the Initial Dividend Amount, which amount shall be based on the parties best estimate of the expected pro forma accounts of the Spinco Business as of the Distribution Date; and
(iii) Spinco shall cause to be paid to Parent an amount equal to the estimate of the Dividend Amount (such amount actually paid to Parent on or before the Distribution Date, the Initial Dividend Amount).
(b) Unless otherwise specified in this Agreement or any exhibit or schedule hereto, for purposes of calculating the Initial Dividend Amount, the Final Dividend Amount and the After Tax Operating Cash Flow of the Spinco Business, those certain one time expenses, restructuring expenses (including tax costs associated with foreign transfers) and deal related costs specified in Section 9.2 are to be paid by Parent, including reimbursement to Spinco for any such costs incurred.
(c) Settlement of inter-company loans will not create any third party indebtedness for borrowed money.
(d) Within 60 days after the Distribution Date, Spinco shall determine the final Dividend Amount (such amount, subject to adjustment for any dispute settled as set forth in this Section 2.6(d), the Final Dividend Amount) and shall deliver to Parent the calculation of the Final Dividend Amount, along with all relevant documents used to determine the Final Dividend Amount. At Parents reasonable request, Spinco shall promptly deliver or make available to Parent all books and records used or useful in Parents review of the Final Dividend Amount. Parent shall have 30 days to review the Final Dividend Amount delivered by Spinco, and shall bring any dispute to Spincos attention by written notice within such 30 day review period. If
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Parent agrees to the Final Dividend Amount and such amount is less than the Initial Dividend Amount, Parent shall pay the difference to Spinco not later than 10 business days after Parents written agreement to such amount (or 10 business days after the expiration of the 30-day review period, if earlier). If the Final Dividend Amount is greater than the Initial Dividend Amount, Spinco shall pay the excess to Parent not later than 10 business days after Spincos delivery of the Final Dividend Amount (provided that Parent shall still have 30 days from the date of its receipt of such books and records to dispute that the Final Dividend Amount should have been greater). In the event of a dispute of the Final Dividend Amount by Parent, Parent shall give notice thereof no later than 30 days after delivery of the certificate of the Final Dividend Amount from Spinco; provided that, if the Final Dividend Amount is less than the Initial Dividend Amount and the Parent agrees with the calculation of that shortfall, then Parent shall pay such undisputed amount to Spinco not later than 10 business days after Parents written agreement to such amount (or 10 business days after the expiration of the 30-day review period, if earlier). The parties shall cooperate in an effort to resolve any such dispute. If they are unable to resolve any such dispute within 30 days after the expiration of Parents 30-day review period, either party may submit the matter for resolution to PricewaterhouseCoopers (or if PricewaterhouseCoopers is not willing or able to serve, to Ernst & Young, or if Ernst and Young is not willing or able to serve, to any other nationally recognized independent accounting firm). The decision of such firm shall be final and binding upon the parties and shall thereafter represent the Final Dividend Amount for purposes hereof. Within 5 business days after the earlier of Parent and Spinco mutually agreeing to the Final Dividend Amount or the final determination of the independent accountant, (i) Parent shall pay to Spinco any previously unpaid amount by which the Initial Dividend Amount exceeds the Final Dividend Amount or (ii) Spinco shall pay to Parent any previously unpaid amount by which the Final Dividend Amount exceeds the Initial Dividend Amount. The fees and expenses of the firm shall be borne equally by Parent and Spinco.
SECTION 2.7 Pension Asset Transfers .
(a) Prior to the date hereof, the FMC Technologies Employees Retirement Program was applicable to both employees who have become, or will become on the Distribution Date, employees of Spinco or its subsidiaries. Subsequent to June 30, 2008, the JBT Defined Benefit Retirement Trust will bear the allocated assets and liabilities of the employees of Spinco, retirees from Spinco businesses or locations and terminated vested employees from Spinco businesses or locations. The parties hereto agree that the total amount that Parent shall cause to be transferred from the trust funding the FMC Technologies Employees Retirement Program to the JBT Defined Benefit Retirement Trust will be an amount equal to the portion of the total assets of the FMC Technologies Employees Retirement Plan that Mercer (who shall be engaged by Parent to make such determination) shall determine is allocable to the JBT Defined Benefit Retirement Trust in accordance with a Section 4044 of ERISA asset allocation of the current FMC Technologies Employees Retirement Program as of June 30, 2008. This allocation will be completed prior to December, 31, 2008.
Prior to the date hereof, Parent has caused or will cause the FMC Technologies Employees Retirement Program to transfer to the trustee of the JBT Defined Benefit Retirement Trust an amount in cash equal to $10,000,000. Parent shall cause the trustee of the trust funding the FMC Technologies Employees Retirement Program to make a subsequent asset transfer to the trustee of the JBT Defined Benefit Retirement Trust prior to December 31, 2008 in an
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aggregate amount equal to the sum of (a) (i) the Section 4044 asset allocation at June 30, 2008 attributable to the JBT Defined Benefit Retirement Trust as determined by Mercer, minus (ii) $10,000,000, and (b) (i) the investment performance gain or loss percentage of the FMC Technologies Employees Retirement Program from June 30, 2008 to the funding date times (ii) the Section 4044 asset allocation at June 30, 2008 attributable to the JBT Defined Benefit Retirement Trust as determined by Mercer at June 30, 2008 minus $10,000,000. Investment performance will be calculated monthly and compounded, including all investment management fees and asset based trustee fees, excluding contributions and benefit payments. For administrative purposes, the investment performance will be estimated at the funding date and trued up to actual performance within 30 days, with the true up payment bearing interest at one-month Treasury bill rates. Parent and Spinco shall cooperate with Mercer as is reasonably requested by it or the other party hereto in order to assist Mercer with its tasks hereunder. Additionally, Parent shall consult with Spinco for all major changes to the investments of the FMC Technologies Employees Retirement Program during the period from June 30, 2008 to the funding date.
(b) Prior to the Distribution Date, Parent will cause the transfer from the FMC Technologies Employees Savings and Investment Plan and FMC Technologies Employees Non-qualified Savings and Investment Plan the liabilities and assets associated with current Spinco employees, retirees from Spinco businesses or locations, and terminated vested former employees from Spinco businesses or locations to the John Bean Technologies Corporation Savings and Investment Plan and the John Bean Technologies Corporation Non-qualified Savings and Investment Plan.
(c) In Brazil, Parents subsidiary converted its defined benefit retirement plan to a defined contribution plan. All employees were converted to the defined contribution plan with the exception of approximately 22 current and term vested employees. The Brazilian retirement plan will be split between the Parent and Spinco as follows in (i)-(iii).
(i) The vested defined benefit retirement liabilities for all term vested employees will remain with the Parent along with the defined contribution liabilities for employees, terminated vested employees, and retirees associated with the Parents remaining business. Except for the vested defined benefit retirement plan liabilities retained by the Parent, Spinco will assume the liabilities of employees, terminated vested employees, and retirees associated with Spincos businesses. Towers Perrin, the plan actuary, will perform an actuarial valuation at June 30, 2008 of the defined benefit and the defined contribution plans. After that valuation, a sufficient amount of assets to provide for payment of the vested defined benefit retirement liability will be allocated to the Parents plan. These assets will be invested in a manner to match the benefit payments and defined benefit liability. Defined contribution assets associated with the defined contribution plans will be allocated to Parent or Spincos defined contribution plans based on whether the employee is or was at retirement a Parent or Spinco employee. After the allocation described above and other actuarial adjustments, the actuarial gain or loss from the valuation will be distributed to the Parent and Spinco plans in proportion to the defined contribution and defined benefit liabilities. For the avoidance of doubt, the actuarial valuation gain or loss referenced in this section comes from the calculation on page 18 in the Towers Perrin March 2008 presentation of the actuarial valuation as of June 2007.
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(ii) Parent will compensate Spinco in the Initial Dividend Amount and Final Dividend Amount by an amount equal to the estimated difference between 50% of the total actuarial gain or loss of the combined plans and the amount of actuarial gain or loss estimated to remain in the Parents plan multiplied by 1 minus the applicable Brazilian tax rate. For purposes of the estimation, the difference between 50% of the total actuarial gain or loss and the amount of actuarial gain or loss estimated to remain in the Parents plan will be $702,632 ( Brazilian Reais 1,147,750@ 1.6335 Brazilian Reais/$). This portion of the Initial Dividend Amount and Final Dividend Amount will be adjusted to actual after the completion of the June 30, 2008 actuarial valuation but not later than December 30, 2008 based on the actual difference between 50% of the total actuarial gain or loss and the amount of actuarial gain or loss remaining in the Parents Plan times 1 minus the applicable Brazilian tax rate.
(iii) Spinco agrees to indemnify Parent for ten (10) years for 50% of any change in the difference between actuarial liability associated with the retained defined benefit retirement liability and the assets invested to match that liability. Every two years Parents actuary will furnish Spinco an annual report in reasonable detail showing both the components and change in the retained defined benefit retirement liabilities and invested matched assets. Within 30 days of the report, Spinco will make indemnifying payments to Parent such that the indemnifying amount will equal 50% of the shortfall in matched asset market values from the actuarial liability. Parent will cause Parents Brazilian subsidiary to contribute 100% of the identified shortfall to the Brazilian retirement plan within 30 days of the Spinco payment. No indemnification payment will be due if assets in the matched asset account are greater than the actuarial liability.
SECTION 2.8 Foreign Exchange Forward Instruments .
Parent and Spinco agree that certain foreign exchange forward instruments related to the Spinco Business may not be assigned to Spinco due to counterparty constraints. Within 60 days after the Distribution Date Parent shall terminate the instruments not assigned to Spinco in such a manner that Spinco may replace the instruments contemporaneously with their selected financial institutions. Parent shall transfer to Spinco all cash proceeds as a result of the termination of the instruments and pay to Spinco within 10 business days of cash receipt. If Parent is required to submit cash proceeds to the institutions those amounts will be communicated to Spinco and Spinco shall pay to Parent within 10 businesses days.
ARTICLE III
THE DISTRIBUTION
SECTION 3.1 Record Date and Distribution Date .
Subject to the satisfaction of the conditions set forth in Section 3.6 , the Board of Directors of Parent shall establish the Record Date and the Distribution Date, as applicable, and any appropriate procedures to be followed in connection with a Distribution.
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SECTION 3.2 The Agent .
Prior to the Distribution Date, Parent shall enter into an agreement with a distribution agent providing for, among other things, the completion of the Distribution in accordance with this Article III .
SECTION 3.3 Delivery of Shares to the Agent .
Prior to the Distribution Date, Parent shall deliver to the distribution agent a share certificate representing (or authorize the related book-entry transfer of) all of the outstanding shares of Spinco Common Stock to be distributed in connection with the completion of the Distribution. After the Distribution Date, upon the request of the distribution agent, Spinco shall provide all certificates for shares (or book-entry transfer authorizations) of Spinco Common Stock that the distribution agent shall require in order to effectuate the Distribution.
SECTION 3.4 Actions Prior to the Distribution .
(a) Parent and Spinco shall prepare and mail to holders of Parent Common Stock such information concerning Spinco and its business, operations and management, the Distribution and such other matters as Parent shall reasonably determine and as may be required by law, including the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, in each case together with the rules and regulations promulgated thereunder, if applicable (the Information Statement ). Parent and Spinco will prepare, and, to the extent required under applicable law, file with the U.S. Securities and Exchange Commission such Information Statement and any requisite no-action request letters which Parent determines are necessary or desirable to effectuate the Distribution and Parent and Spinco shall use their reasonable best efforts to obtain any necessary approvals from the U.S. Securities and Exchange Commission with respect thereto as soon as practicable.
(b) Parent and Spinco shall take all such action as Parent may determine necessary or appropriate under state securities or blue sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution.
SECTION 3.5 The Distribution .
(a) Subject to the terms and conditions of this Agreement, each holder of Parent Common Stock on the Record Date (or such holders designated transferee or transferees) will be entitled to receive 0.216 Spinco Shares for every share of Parent Common Stock held by such holder on the Record Date.
(b) No fractional shares of Spinco Common Stock shall be distributed in the Distribution. Parent shall direct the distribution agent to determine, as soon as practicable, the sum of fractional shares of Spinco Common Stock that would have been issued in the Distribution and sell the nearest number of whole shares equal to such sum in open market transactions or otherwise, in each case at then prevailing trading prices. The distribution agent shall then cause to be distributed to the holders of Parent Common Stock entitled to receive such proceeds in lieu of fractional shares an amount in cash equal to such holders ratable share of the proceeds of such sale, without interest, after making appropriate deductions of the amount required to be withheld for federal income tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale.
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SECTION 3.6 Conditions to Obligations .
The following conditions must be satisfied (or waived by Parent) prior to the Parties becoming obligated to complete the Distribution:
(a) Final approval of the Distribution shall have been given by the Board of Directors of Parent in its sole discretion.
(b) The actions and filings necessary or appropriate under federal and state securities laws and state blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the Distribution (including, if applicable, any actions and filings relating to the Information Statement) shall have been taken and, where applicable, have become effective or been accepted.
(c) The Spinco Common Stock to be issued in the Distribution shall have been accepted for listing on the New York Stock Exchange, Inc., subject to official notice of issuance.
(d) No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the completion of the Separation, the Contribution or the Distribution or any of the other transactions contemplated by this Agreement or any Ancillary Agreement shall be in effect.
(e) A private letter ruling from the Internal Revenue Service, in form and substance satisfactory to Parent, shall have been obtained, and shall continue in effect, to the effect that no gain or loss will be recognized by Parent, Spinco, or Parents or Spincos shareholders for federal income tax purposes as a result of the Distribution or the Contribution.
(f) All required consents and approvals in connection with the transactions contemplated hereby shall have been received or provided, except where the failure to obtain such consents or approvals would not have a material adverse effect on either (A) the ability of the parties to complete the transactions contemplated by this Agreement and the Ancillary Agreements or (B) the business, assets, liabilities, financial condition or results of operations of Spinco and its subsidiaries, taken as a whole.
(g) This Agreement shall not have been terminated.
ARTICLE IV
SURVIVAL AND INDEMNIFICATION
SECTION 4.1 Survival of Agreements .
All covenants and agreements of the parties contained in this Agreement shall survive each of the Contribution, the Separation and the Distribution.
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SECTION 4.2 Indemnification .
(a) Except as specifically otherwise provided in the Ancillary Agreements and without regard as to when any transfer is completed, from and after the Assumption Time the Parent Group shall indemnify, defend and hold harmless the Spinco Indemnitees from and against all Indemnifiable Losses relating to, arising out of or resulting from (i) the failure of any member of the Parent Group to pay or otherwise promptly discharge any Parent Liabilities, whether such Indemnifiable Losses relate to events, occurrences or circumstances occurring or existing, or whether such Indemnifiable Losses are asserted, before or after the Distribution Date, (ii) the failure of any member of the Parent Group to perform any of its obligations under this Agreement and (iii) the Parent Business or any Parent Liability (unless this Agreement specifically allocates such liability to Spinco).
(b) Except as specifically otherwise provided in the Ancillary Agreements and without regard as to when any transfer is completed, from and after the Assumption Time, the Spinco Group shall indemnify, defend and hold harmless the Parent Indemnitees from and against (i) all Indemnifiable Losses relating to, arising out of or resulting from the failure of any member of the Spinco Group (A) to pay or otherwise promptly discharge any Spinco Liabilities, whether such Indemnifiable Losses relate to events, occurrences or circumstances occurring or existing, or whether such Indemnifiable Losses are asserted, before or after the Distribution Date or (B) to perform any of its obligations under this Agreement; and (ii) all Indemnifiable Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact, or omission or alleged omission to state a material fact required to be stated, in any portion of the Registration Statement or the Information Statement (or any preliminary or final form thereof or any amendment thereto), or necessary to make the statements in the Registration Statement or the Information Statement not misleading.
(c) If any indemnity payment required to be made hereunder or under any Ancillary Agreement is denominated in a currency other than United States dollars, such payment shall be made in United States dollars and the amount thereof shall be computed using the closing exchange rate at which United States dollars may be exchanged for such currency (as quoted in the Wall Street Journal) on the payment date for such currency.
SECTION 4.3 Procedures for Indemnification for Third-Party Actions .
(a) Parent or Spinco, as applicable, shall notify the other in writing promptly after learning of any third-party Action for which any indemnitee intends to seek indemnification from the other under this Agreement. The failure of any indemnitee to give such notice shall not relieve any indemnifying party of its obligations under this Article IV except to the extent that such indemnifying party or its affiliate is actually prejudiced by such failure to give notice. Such notice shall describe such third-party Action in reasonable detail considering the information provided to the indemnitee.
(b) An indemnifying party may, by notice to the indemnitee and to Parent, if Spinco is the indemnifying party, or to the indemnitee and Spinco, if Parent is the indemnifying party, within 30 days after receipt by such indemnifying party of such indemnitees notice of a third-party Action (or sooner, if the nature of such third-party Action so requires), undertake the defense or settlement of such third-party Action. The indemnifying party shall not have the right to assume the defense of a third-party Action (i) seeking material non-monetary remedies (such
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as criminal or material injunctive relief) or (ii) for which the indemnitee reasonably determines that the indemnifying party and the indemnitee have different legal defenses available which make it inappropriate for the indemnifying party to assume such defense, and in each case such third-party Actions may be defended by the indemnitee at the indemnifying partys expense; provided that the indemnitee shall use reasonable efforts to keep the indemnifying party apprised of the status of such matter(s) (provided that the failure to do so shall not affect the amount owed by the indemnifying party with respect to such third-party Action). If an indemnifying party undertakes the defense of any third-party Action, such indemnifying party shall thereby admit its obligation to indemnify the indemnitee against such third-party Action, and such indemnifying party shall control the investigation and defense or settlement thereof, and the indemnitee may not settle or compromise such third-party Action, except that such indemnifying party shall not (x) require any indemnitee, without its prior written consent, to take or refrain from taking any action in connection with such third-party Action, or make any public statement, which such indemnitee reasonably considers to be against its interests, or (y) without the prior written consent of the indemnitee and of Parent, if the indemnitee is a Parent Indemnitee, or the indemnitee and of Spinco, if the Indemnitee is a Spinco Indemnitee, consent to any settlement that does not include as a part thereof an unconditional release of the indemnitees from liability with respect to such third-party Action or that requires the indemnitee or any of its Representatives or affiliates to make any payment that is not fully indemnified under this Agreement or to be subject to any non-monetary remedy. Subject to the indemnifying partys control rights, the indemnitees may, at its expense, participate in the investigation and defense of any third-party Action assumed by the indemnifying party. Following the provision of notices to the indemnifying party, until such time as an indemnifying party has undertaken the defense of any third-party Action as provided in this Agreement, such indemnitee shall control the investigation and defense or settlement thereof at the cost and expense of the indemnifying party, without prejudice to its right to seek indemnification hereunder.
(c) In no event shall an indemnifying party be liable for the costs, fees and expenses of more than one law firm for all indemnitees (in addition to its own counsel, if any) in connection with any one action, or separate but similar or related actions, in the same jurisdiction arising out of the same general allegations or circumstances.
(d) Spinco and Parent shall make available to each other, their counsel and other Representatives, all information and documents reasonably available to them which relate to any third-party Action, and otherwise cooperate as may reasonably be required in connection with the investigation, defense and settlement thereof, subject to the terms and conditions of a mutually acceptable joint defense agreement. Any joint defense agreement entered into by Spinco or Parent with any third party relating to any third-party Action shall provide that Spinco or Parent may, if requested, provide information obtained through any such agreement to the Spinco Indemnitees and/or the Parent Indemnitees.
(e) The provisions of Section 4.3 (other than this Section 4.3(e) ) and Section 4.4 shall not apply to Taxes (which are covered by the Tax Sharing Agreement).
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SECTION 4.4 Additional Matters .
(a) Any claim on account of a Liability which does not result from a third-party Action shall be asserted by written notice given by the indemnitee to the indemnifying party. Such indemnifying party may, within 30 days after receipt by such indemnifying party of such indemnitees notice of such claim (or sooner, if the nature of such claim so requires), undertake the defense or settlement of such claim. If such indemnifying party does not respond within such 30-day period or rejects such claim in whole or in part, such indemnitee shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements.
(b) In the event of payment by or on behalf of any indemnifying party to or on behalf of any indemnitee in connection with any third-party Action, such indemnifying party shall be subrogated to and shall stand in the place of such indemnitee as to any events or circumstances in respect of which such indemnitee may have any right, defense or claim relating to such third-party Action against any claimant or plaintiff asserting such third-party Action or against any other person. Such indemnitee shall cooperate with such indemnifying party in a reasonable manner, and at the cost and expense (including allocated costs of in-house counsel and other personnel) of such indemnifying party, in prosecuting any subrogated right, defense or claim.
SECTION 4.5 Survival of Indemnities .
(a) The indemnity and contribution agreements contained in this Article IV shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee; (ii) the knowledge by the indemnitee of Indemnifiable Losses for which it might be entitled to indemnification or contribution hereunder; or (iii) any termination of this Agreement.
(b) The rights and obligations of each Party and their respective indemnitees under this Article IV shall survive the sale or other transfer by any Party or its respective subsidiaries of any Assets or businesses or the assignment by it of any Liabilities.
SECTION 4.6 Remedies Cumulative .
The remedies provided in this Article IV shall be cumulative and shall not preclude assertion by any indemnitee of any other rights or the seeking of any other remedies against any indemnifying party. However, the procedures set forth in Section 4.3 and Section 4.4 shall be the exclusive procedures governing any indemnity action brought under this Agreement, except as otherwise specifically provided in any of the Ancillary Agreements.
ARTICLE V
CERTAIN ADDITIONAL COVENANTS
SECTION 5.1 Cooperation; Notices to Third Parties .
(a) In addition to the actions described in Section 5.2 , the members of the Parent Group and the Spinco Group shall cooperate and use reasonable best efforts to make all other filings and give notice to and obtain any consents and waivers (including those from or to
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any governmental or regulatory authority) that may reasonably be required (both before and after the Assumption Time), and to take any other actions that may be required, to (i) complete and effectuate the transactions, provisions and purposes contemplated by this Agreement and the Ancillary Agreements (including completing any required employee or employee-related communications required by law or contract) and (ii) operate its business after the Assumption Time. On or prior to the Assumption Time, Parent and Spinco shall take all actions as may be necessary to approve the stock-based employee benefit plans of Spinco in order to satisfy any applicable requirement, including Rule 16b-3 under the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder, Section 162(m) of the Internal Revenue Code of 1986, as amended and the rules and regulations of the New York Stock Exchange, Inc. If either party identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in connection with the completion of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the parties will cooperate in determining whether there is a mutually acceptable arms-length basis on which the other party will provide such service.
(b) After the Assumption Time, except in the case of an Action by one Party against the other Party (which shall be governed by such discovery rules as may be applicable thereto), each Party shall use its reasonable best efforts to make available to each other party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting party shall bear all out-of-pocket costs, fees and expenses (including allocated costs of in-house counsel and other personnel) in connection therewith.
(c) Without limiting any provision of this Section 5.1 , each of the parties agrees to cooperate with each other in the defense of any infringement or similar claim with respect any Intellectual Property Rights and shall not claim to acknowledge, or permit any member of its respective Group to claim to acknowledge, the validity or infringing use of any intellectual property of a third Person in a manner that would hamper or undermine the defense of such infringement or similar claim.
(d) In connection with any matter contemplated by this Section 5.1 , the parties will enter into a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work product immunity of any member of any Group.
SECTION 5.2 Intercompany Agreements and Accounts .
(a) All contracts, commitments or other arrangements between any member of the Parent Group and any member of the Spinco Group in existence at the Assumption Time, pursuant to which any member of either Group makes payments in respect of Taxes to any
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member of the other Group or provides to any member of the other Group goods or services (including management, administrative, legal, financial, accounting, data processing, insurance or technical support), or the use of any Assets of any member of the other Group, or the secondment of any employee, or pursuant to which rights, privileges or benefits are afforded to members of either Group as affiliates of the other Group, shall terminate effective at the Assumption Time, except as specifically provided in this Agreement or in the Ancillary Agreements. From and after the Assumption Time, no member of either Group shall have any rights under any such contract, commitment or arrangement with any member of the other Group, except as specifically provided in this Agreement or in the Ancillary Agreements.
(b) After the Assumption Time, the parties shall be obligated to pay only those intercompany accounts between members of the Spinco Group and members of the Parent Group that arose in connection with transfers of goods and services in the ordinary course of business, consistent with past practices (which the parties shall use reasonable best efforts to settle prior to the Assumption Time), and all other intercompany accounts shall be settled by the transfer of financial assets at the Assumption Time, except as otherwise contemplated by this Agreement.
SECTION 5.3 Guarantee Obligations .
(a) Prior to and from and after the Assumption Time, Parent and Spinco shall use their respective reasonable best efforts to cause Parent and each member of the Parent Group to be released, effective from and after the Assumption Time, from any obligations to guarantee or otherwise support any liabilities or obligations of any member of the Spinco Group, including guarantee of performance (the Guarantees ), including through the substitution of such Guarantees by Parent or such members of the Parent Group with replacement guarantees by Spinco (or, if acceptable to the beneficiary of such a Guarantee, another member of the Spinco Group). Without limiting the foregoing, Spinco agrees that it shall cause Parent and each member of the Parent Group to be released from all such Guarantees not later than 24 months after the Assumption Time, including by way of termination of the applicable contract, but only if such release and termination is permitted without liability under such applicable contract.
(b) From and after the Assumption Time, (i) neither Parent nor any member of the Parent Group shall have any obligation to extend, renew or increase the principal amount of any Guarantee or create or enter into any new or additional Guarantee, and (ii) Spinco shall not increase the amount of any Guarantee by Spinco or any other member of the Spinco Group, extend any expiration date of any such Guarantee, extend the period of time for presentation of documents or demands under any such Guarantee, agree to any substitution of any such Guarantee, or agree to any creation, amendment, supplement, waiver or other modification of any such Guarantee provided that the limitations in clause (ii) shall not apply in the event that a member of the Spinco Group obtains a letter of credit from a financial institution reasonably acceptable to Parent and for the benefit of Parent with respect to such obligation of the Parent Group.
(c) Spinco shall reimburse and otherwise indemnify and hold harmless Parent for the full amount of all payments made or products or services delivered to third parties under any Guarantee not terminated prior to the Assumption Time, which reimbursement shall be made
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by wire transfer of immediately available funds in the full amount of any such payment or delivery. Any such reimbursement shall be made within ten (10) days after written demand by Parent.
SECTION 5.4 Qualification as Tax-Free Distribution .
After the Assumption Time, neither Parent nor Spinco shall take, or permit any member of its respective Group to take, any action which could reasonably be expected to prevent the Distribution from qualifying as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code of 1986, as amended or any other transaction contemplated by this Agreement or any Ancillary Agreement which is intended by the parties to be tax-free from failing so to qualify.
SECTION 5.5 Non-Solicitation and Non-Hire .
(a) Neither Parent nor Spinco shall, or shall permit any member of its respective group to, for a period of 18 months following the Assumption Time, directly or indirectly, solicit for employment any employee of the other partys Group; provided , however , that the foregoing shall not apply (i) to solicitations made by job opportunity advertisements and headhunter searches directed to the general public rather than targeting any employees of the other partys Group or (ii) with respect to any employee who has been terminated by such other party prior to (or has voluntarily left his or her employment more than six months prior to) such solicitation.
(b) Neither Parent nor Spinco shall, or shall permit any member of its respective group to, for a period of 18 months following the Assumption Time, directly or indirectly, hire any employee of the other (or any person who has been employed by the other at any time during the three months prior to the date of hire); provided that such hiring restriction shall not apply to employees of the other entity who were terminated as part of a reduction in force or for any other reason other than for cause.
ARTICLE VI
ACCESS TO INFORMATION
SECTION 6.1 Agreement for Exchange of Information .
(a) Parent and Spinco agree to provide to the other Group, as soon as reasonably practicable after written request therefor, any Information in the possession or under the control of such respective Group which the requesting party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities or Tax laws) by a governmental or regulatory authority having jurisdiction over the requesting party including in connection with any Registration Statement, (ii) for use in any other judicial, regulatory, administrative, Tax or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation, Tax or other similar requirements, or (iii) to comply with its obligations under this Agreement or any Ancillary Agreement; provided , however , that in the event that any party determines that any such provision of Information could be commercially detrimental, violate any law or agreement, or
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waive any attorney-client privilege, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. Parent and Spinco intend that any transfer of Information that would otherwise be within the attorney-client privilege shall not operate as a waiver of any potentially applicable privilege. Each party shall make its employees and facilities available during normal business hours and on reasonable prior notice to provide explanation of any Information provided hereunder.
(b) After the Assumption Time, Spinco shall provide, or cause to be provided, to Parent in such form as Parent shall request, at no charge to Parent, all Information as Parent determines necessary or advisable in order to prepare Parent financial statements and reports or filings with any governmental or regulatory authority.
SECTION 6.2 Ownership of Information .
Any Information owned by one Group that is provided to a requesting party pursuant to Section 6.1 shall be deemed to remain the property of the providing party. Unless specifically set forth in this Agreement, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.
SECTION 6.3 Compensation for Providing Information .
The party requesting such Information agrees to reimburse the other party for the reasonable out-of-pocket costs, fees and expenses, if any, of creating, gathering and copying such information, to the extent that such costs, fees and expenses are incurred for the benefit of the requesting party, provided that reasonable detail of such costs, fees and expenses have been provided.
SECTION 6.4 Record Retention .
To facilitate the possible exchange of information pursuant to this Article VI and other provisions of this Agreement after the Assumption Time, the parties agree to use their reasonable best efforts to retain all Information in their respective possession or control at the Assumption Time in accordance with the policies of Parent as in effect at the Assumption Time.
SECTION 6.5 Limitation of Liability .
No party shall have any Liability to any other party in the event that any Information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate, in the absence of willful misconduct or fraud by the party providing such information. No party shall have any Liability to any other party if any Information is destroyed after reasonable best efforts by such party to comply with the provisions of Section 6.4 .
SECTION 6.6 Confidentiality .
(a) Subject to Section 6.7 , each of Parent and Spinco, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that such party then uses with
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respect to its own confidential and proprietary information, all Information concerning each such other Group that is either in its possession (including information in its possession prior to any of the date hereof, the Assumption Time or the Distribution Date) or furnished by any such other Group or its respective Representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such information has been (i) in the public domain through no fault of such party or any member of such Group or any of their respective Representatives, (ii) later lawfully acquired from other sources by such party (or any member of such partys Group) which sources are not themselves bound by a confidentiality obligation, or (iii) independently generated without reference to any proprietary or confidential information of the other party.
(b) Each party agrees not to release or disclose, or permit to be released or disclosed, any such Information to any other Person, except its Representatives who need to know such information (who shall be advised of their obligations hereunder with respect to such information), except in compliance with Section 6.7 . Without limiting the foregoing, when any Information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each party will promptly after request of the other party either return to the other party all Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon).
SECTION 6.7 Protective Arrangements .
In the event that any party or any member of its Group either determines on the advice of its counsel that it is required to disclose any Information pursuant to applicable law or receives any demand under lawful process or from any governmental or regulatory authority to disclose or provide information of any other party (or any member of any other partys Group) that is subject to the confidentiality provisions hereof, such party shall notify the other party prior to disclosing or providing such information and shall cooperate at the expense of the requesting party in seeking any reasonable protective arrangements requested by such other party. Subject to the foregoing, the Person that received such request may thereafter disclose or provide Information to the extent required by such law (as so advised by counsel) or by lawful process or such governmental or regulatory authority.
ARTICLE VII
NO REPRESENTATIONS OR WARRANTIES
SECTION 7.1 No Representations or Warranties .
Except as expressly set forth in this Agreement or in any other Ancillary Agreement, Spinco understands and agrees that no member of the Parent Group is, in this Agreement or in any other agreement or document, representing or warranting to Spinco or any member of the Spinco Group in any way as to the Spinco Assets, the Spinco Business or the Spinco Liabilities, it being agreed and understood that Spinco and each member of the Spinco Group shall take all of the Spinco Assets as is, where is. Except as expressly set forth in this
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Agreement or in any other Ancillary Agreement, Spinco and each member of the Spinco Group shall bear the economic and legal risk that the Spinco Assets shall prove to be insufficient or that the title of any member of the Spinco Group to any Spinco Assets shall be other than good and free from encumbrances. The foregoing shall be without prejudice to any rights to indemnification under Section 4.2 or to the covenants otherwise contained in this Agreement or any other Ancillary Agreement.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by Mutual Consent .
This Agreement may be terminated at any time prior to the Distribution Date at the sole determination of Parent.
SECTION 8.2 Effect of Termination .
(a) In the event of any termination of this Agreement prior to completion of the Distribution, no party to this Agreement (or any of its directors or officers) shall have any Liability or further obligation to any other party.
(b) In the event of any termination of this Agreement on or after the completion of the Distribution, only the provisions of Article III (the Distribution) and Section 5.4 (Qualification as Tax-Free Distribution) will terminate and the other provisions of this Agreement and each Ancillary Agreement shall remain in full force and effect.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Complete Agreement; Corporate Power .
(a) This Agreement, the Exhibits and Schedules hereto and the Ancillary Agreements shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.
(b) Parent represents on behalf of itself and each other member of the Parent Group and Spinco represents on behalf of itself and each other member of the Spinco Group as follows:
(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform each of this Agreement and each other Ancillary Agreement to which it is a party and to complete the transactions contemplated hereby and thereby; and
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(ii) this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.
SECTION 9.2 Expenses .
Except as expressly set forth in or limited by Schedule 9.2 or elsewhere in this Agreement or in any Ancillary Agreement, all third party fees, costs and expenses paid or incurred prior to the Distribution in connection with the transactions contemplated by this Agreement and the Ancillary Agreements will be paid by the Parent. If the Separation and Distribution do not occur, then the Parent shall bear all fees, costs and expenses paid or incurred in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 9.3 Governing Law .
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (other than the laws regarding choice of laws and conflicts of laws that would apply the substantive laws of any other jurisdiction) as to all matters, including matters of validity, construction, effect, performance and remedies.
SECTION 9.4 Notices .
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by standard form of telecommunications, by courier, or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to Parent or any member of the Parent Group:
FMC Technologies, Inc.
1803 Gears Road
Houston, Texas 77067
Attention: General Counsel
Fax: (281) 591-4102
If to Spinco or any member of the Spinco Group:
John Bean Technologies Corporation
200 E. Randolph Dr.
Chicago, IL 60601
Attention: General Counsel
or to such other address as any Party may have furnished to the other Party by a notice in writing in accordance with this Section 9.4 .
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SECTION 9.5 Amendment and Modification .
This Agreement may be amended, modified or supplemented only by a written agreement signed by all of the Parties.
SECTION 9.6 Successors and Assigns; No Third-Party Beneficiaries .
This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by any Party without the prior written consent of the other Party or except in connection with a merger or similar business combination involving a Party if the successor under applicable law expressly assumes all rights and obligations of such party hereunder and under each Ancillary Agreement as if it were such Party. Except for the provisions of Sections 4.2 and 4.3 relating to indemnities, which are also for the benefit of the indemnitees, this Agreement is solely for the benefit of the Parties and their subsidiaries and affiliates and is not intended to confer upon any other Persons any rights or remedies hereunder.
SECTION 9.7 Counterparts .
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
SECTION 9.8 Interpretation .
The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement.
SECTION 9.9 Severability .
If any provision of this Agreement or the application thereof to any person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party.
SECTION 9.10 References; Construction .
References to any Article, Exhibit, Schedule or Section, without more, are to Articles, Exhibits, Schedules and Sections to or of this Agreement. Unless otherwise expressly stated, clauses beginning with the term including set forth examples only and in no way limit the generality of the matters thus exemplified. To the extent any provision of this Agreement requires action or cooperation by the Parent, such requirement shall be deemed to include a requirement to cause the other members of the Parent Group and/or the Parent Indemnitees to take such action or to so cooperate unless the context requires otherwise, and to the extent any provision of this Agreement requires action or cooperation by Spinco, such requirement shall be deemed to include a requirement to cause the other members of the Spinco Group and/or the Spinco Indemnitees to take such action or to so cooperate unless the context requires otherwise
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SECTION 9.11 Specific Performance .
In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the party or parties who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived. Each Party hereby submits to the exclusive jurisdiction of Delaware for purposes of all legal proceedings for equitable relief arising out of or relating to this Agreement or the transactions contemplated hereby. Each Party irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. EACH PARTY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
SECTION 9.12 Conflict with Ancillary Agreements .
Except to the extent Section 4.2 , 4.3 or 10.1 conflict with the Tax Sharing Agreement, in which case the Tax Sharing Agreement shall govern, the provisions of this Agreement shall govern in the event of any conflict between the provisions of any Ancillary Agreement and this Agreement.
SECTION 9.13 Joint Defense Cost Sharing Agreement .
Spinco hereby acknowledges and agrees that it has received a copy of the joint defense agreement between Parent and FMC Corporation, dated April 1, 2003, pursuant to which Parent and FMC Corporation agreed to the joint defense of certain matters (including mass tort litigation where both such entities are named as defendants). Spinco and Parent hereby agree that, beginning on the Distribution Date, Spinco shall promptly (and in any event within 10 business days after notice of such costs) reimburse and pay to Parent twenty percent (20%) of Parents portion of the legal fees and other costs incurred by Parent in connection with the joint defense agreement between Parent and FMC Corporation, dated April 1, 2003. Parent shall provide Spinco with access to all information related to the administration of the joint defense agreement between Parent and FMC Corporation, dated April 1, 2003, including access to the records maintained in the Parents matter management system related to such joint defense agreement.
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SECTION 9.14 Insurance Sharing .
(a) For all policies incepted on or after the Distribution Date, Parent and Spinco shall be completely responsible for managing all aspects of its own claims, at its own expense, including formal notification to insurers, interacting with insurance brokers, making payments to third-party administrators and shall in general make its own decisions regarding settlement of claims based on its own business judgment. However, for all claims related to or covered by insurance policies bound prior to the Distribution Date, the FMC Risk Management Department shall have the responsibility of formal notification to insurers and Parent and Spinco shall be responsible to coordinate its legal position with the other party and seek to avoid legal positions that may be in conflict with the legal position of the other party. To the extent a conflict in position cannot be avoided after discussion between the Parties, the issue shall be resolved pursuant to the dispute resolution procedure required by Article X of this Agreement.
(b) Responsibility for claims management and/or indemnity obligations, and any related claim for insurance coverage, shall belong to the party associated with the loss, except where the other party has assumed responsibility for that specific liability or type of liability in this Agreement or any schedule or exhibit hereto, in which case such responsibility and obligations shall belong to such other party. Neither this provision nor any other aspect of this Section 9.14 is intended to increase: (a) the burden on or the financial exposure to the insurers under the subject policies or (b) the benefits to the parties under those policies. Instead, it is the intent of Parent and Spinco to reflect the reality of which each such party is financially responsible for the alleged liability resulting from the subject claim(s) and to provide that the insurance benefits applicable to the claim(s) are available to the financially responsible party.
(c) If Spinco submits a claim under a policy in effect prior to the Distribution Date which is rejected in whole or in part by an insurer because Spinco is not a named insured on the policy, and if it is determined by Spinco and Parent that the claim would otherwise be covered if that claim were assumed and submitted by Parent, and to the extent such claim is payable and paid by insurance, then to that extent, Parent shall re-assume responsibility (only to the extent insurance proceeds are actually recovered) for that claim and present it to the insurer in its own name. In such event, Spinco shall, on an on-going monthly basis, hold harmless and indemnity Parent for all loss, cost and expense not covered by insurance. In such event, the re-assumed claim and any payment received from an insurer, shall be treated as belonging to Spinco.
(d) Where a third party presents a claim against both Parent and Spinco in error (Third Party Error) and it is jointly agreed by the Parent and Spinco that only one Parent or Spinco should be involved, the involved party shall be responsible for claim management and promptly take all necessary actions to have the uninvolved party dismissed from the claim. To the extent Parent and Spinco are unable to agree on whether a claim represents a Third Party Error, the issue shall be resolved pursuant to the dispute resolution procedure required by Article X of this Agreement. Third Party Errors shall be deemed to include any action or claim against a party who, as between Parent and Spinco, is not responsible for such action or claim by operation of this Agreement, even though the party may be potentially responsible to the third party by operation of law.
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(e) Regarding policies in effect at the Distribution Date, Parent and Spinco agree to waive subrogation against the other party following the settlement or other resolution of any action which involves such insurance policy. In addition, Parent agrees that Spinco should be deemed and treated as an insured entitled to benefits under such policies based upon its historical business and activities covered under those policies when part of Parent, but only to the extent such policy is an occurrence-based policy.
(f) Parent and Spinco shall bear the cost of the applicable per occurrence deductible or self-insured retention as their claims occur. The burden created by the insolvency of any insurer in any layer of insurance shall be borne by the party or parties (on a pro rata basis) that incurred the loss and which resulted in the inability to collect the insurance because of insolvency of the insurer. For example, if both Parent and Spinco had claims that should have been covered by a layer of insurance, the lack of recovery would be split based on the relative losses incurred by Parent and Spinco in that layer. If only one of Parent or Spinco incurs losses that are not recoverable, that party shall bear the loss. If one of Parent or Spinco collects on a claim for a layer of insurance, the carrier becomes insolvent and then the other party incurs a claim, the insurance recoveries of the party that had recovered insurance proceeds will be shared pro rata (based on relative losses suffered within such layer of insurance by Parent and Spinco) with the other party.
(g) If both Parent and Spinco losses exceed an aggregate deductible then the insurance recoveries shall be shared by Parent and Spinco on a pro rata basis based on loss claims from each such party.
ARTICLE X
DISPUTE RESOLUTION
SECTION 10.1 Dispute Resolution .
(a) Except for any claims for equitable relief in connection with the failure of any party to perform its covenants hereunder and except with respect to disputes under Section 2.6(d) , in the event of any dispute or disagreement between any member of the Parent Group and any member of the Spinco Group as to the interpretation of any provision of this Agreement (or the performance of obligations hereunder), the parties shall promptly meet in a good faith effort to resolve the dispute. Should such good faith effort fail to resolve the dispute within fifteen (15) days after first meeting to resolve the dispute and upon the written request of Parent or Spinco, the dispute shall be referred to either the Chief Financial Officers (for matters that are deemed financial in nature) or the Chief Executive Officers (for each other matter) of the parties for decision. If the officers do not agree upon a decision within thirty (30) days after reference of the matter to them, each of Parent and Spinco shall submit any controversy, dispute or claim arising out of or relating in any way to this Agreement or the transactions arising hereunder for arbitration in the City of Chicago, Illinois, and such arbitration shall be the sole remedy for such monetary claims. Such arbitration shall be administered by the Center for Public Resources Institute for Dispute Resolutions in accordance with its then prevailing Rules for Non-Administered Arbitration of Business Disputes (except as otherwise provided in this Agreement), by an arbitrator or arbitrators as selected and described in Section 10.1(b) . The
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arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. § 1 et seq. The award rendered by the arbitrator(s) shall be final and not subject to judicial review and judgment thereon may be entered in any court of competent jurisdiction.
(b) For all disputes for which the aggregate disputed dollar amount is equal to or less than $3,000,000, then Parent and Spinco shall agree upon a single arbitrator to oversee the dispute. If Parent and Spinco cannot agree on such arbitrator within 20 days after submitting the dispute for arbitration, then the dispute shall be managed by a single independent arbitrator to be chosen by the Center for Public Resources Institute for Dispute Resolutions. For all disputes for which the aggregate disputed dollar amount exceeds $3,000,000, such dispute shall be managed and ruled upon by a panel of three arbitrators. Parent and Spinco shall each name one of the arbitrators, and the third arbitrator shall be chosen by Parent and Spinco or, if Parent and Spinco cannot agree on such arbitrator within 20 days after submitting the dispute for arbitration, then the third arbitrator shall be an independent arbitrator selected by the Center for Public Resources Institute for Dispute Resolutions.
(c) The fees and expenses of the Center for Public Resources Institute for Dispute Resolution and the arbitrator(s) shall be shared equally by Parent and Spinco.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.
FMC TECHNOLOGIES, INC. | ||
By: |
|
|
Name: | ||
Title: | ||
JOHN BEAN TECHNOLOGIES CORPORATION | ||
By: |
|
|
Name: | ||
Title: |
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Exhibit 4.1
[FACE OF CERTIFICATE]
PAR VALUE $.01
COMMON STOCK
Logo
COMMON STOCK
NUMBER
SHARES
JBT
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE
EITHER IN CLEVELAND, OH OR
IN NEW YORK, NY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 477839 10 4
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF THE COMMON STOCK OF
JOHN BEAN TECHNOLOGIES CORPORATION
transferable in person or by duly authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby are subject to all the provisions of the Certificate of
Incorporation and all Amendments thereto and Supplements thereof. This Certificate is not valid unless
countersigned by a Transfer Agent and registered by a Registrar.
Witness the facsimile signatures of its duly authorized officers.
Dated:
[SIGNATURE]
SECRETARY
[SEAL]
[SIGNATURE]
CHAIRMAN, PRESIDENT AND CEO
COUNTERSIGNED AND REGISTERED:
NATIONAL CITY BANK
(CLEVELAND, OHIO) TRANSFER AGENT
AND REGISTRAR,
BY
AUTHORIZED SIGNATURE
[REVERSE OF CERTIFICATE]
JOHN BEAN TECHNOLOGIES CORPORATION
John Bean Technologies Corporation will furnish without charge to each stockholder who so requests, a statement in full of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof of John Bean Technologies Corporation, and the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the Secretary of John Bean Technologies Corporation.
This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement between John Bean Technologies Corporation and National City Bank, dated as of July 31, 2008, as it may be amended from time to time (the Rights Agreement), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of John Bean Technologies Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights (as defined in the Rights Agreement) will be evidenced by separate certificates and will no longer be evidenced by this certificate. John Bean Technologies Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor.
As set forth in the Rights Agreement, Rights beneficially owned by any Person (as defined in the Rights Agreement) who becomes an Acquiring Person (as defined in the Rights Agreement) become null and void.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COMas tenants in common
TEN ENTas tenants by the entireties
JT TENas joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT |
Custodian | |||||
(Cust) | (Minor) |
under Uniform Gifts to Minors
Act_________________________
(State)
UNIF TRF MIN ACT ____________ Custodian (until age _____________ )
(Cust)
_____________ under Uniform Transfers
(Minor)
to Minors Act _____________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney to transfer the said stock on the books of John Bean Technologies Corporation with full power of substitution in the premises.
Dated
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED
By
The signature should be guaranteed by a brokerage firm or a financial institution that is a member of a
securities approved Medallion program, such as Securities Transfer Agents Medallion Program
(STAMP), Stock Exchange Medallion Program (SEMP) or New York Stock Exchange, Inc. Medallion
Signature Program (MSP).
Exhibit 4.2
Form of
John Bean Technologies Corporation
Rights Agreement
Dated as of July 31, 2008
TABLE OF CONTENTS
Page | ||||
1. |
Definitions | 1 | ||
2. |
Appointment of Rights Agent | 4 | ||
3. |
Issue of Right Certificates | 4 | ||
4. |
Form of Right Certificates | 5 | ||
5. |
Countersignature and Registration | 6 | ||
6. |
Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates |
6 | ||
7. |
Exercise of Rights; Purchase Price; Expiration Date of Rights | 7 | ||
8. |
Cancellation and Destruction of Right Certificates | 8 | ||
9. |
Availability of Preferred Shares | 8 | ||
10. |
Preferred Shares Record Date | 9 | ||
11. |
Adjustment of Purchase Price, Number of Shares or Number of Rights | 10 | ||
12. |
Certificate of Adjusted Purchase Price or Number of Shares | 16 | ||
13. |
Consolidation, Merger or Sale or Transfer of Assets or Earning Power | 16 | ||
14. |
Fractional Rights and Fractional Shares | 17 | ||
15. |
Rights of Action | 18 | ||
16. |
Agreement of Right Holders | 19 | ||
17. |
Right Certificate Holder Not Deemed a Stockholder | 19 | ||
18. |
Concerning the Rights Agent | 19 | ||
19. |
Merger or Consolidation or Change of Name of Rights Agent | 20 | ||
20. |
Duties of Rights Agent | 20 | ||
21. |
Change of Rights Agent | 22 | ||
22. |
Issuance of New Right Certificates | 23 |
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23. |
Redemption | 23 | ||
24. |
Exchange | 24 | ||
25. |
Notice of Certain Events | 25 | ||
26. |
Notices | 26 | ||
27. |
Supplements and Amendments | 26 | ||
28. |
Successors | 27 | ||
29. |
Benefits of this Agreement | 27 | ||
30. |
Severability | 27 | ||
31. |
Governing Law | 27 | ||
32. |
Counterparts | 27 | ||
33. |
Descriptive Headings | 27 | ||
34. |
Book-Entry Account Statements | 28 |
Exhibit A | Form of Certificate of Designations |
Exhibit B | Form of Right Certificate |
Exhibit C | Summary of Rights to Purchase Preferred Shares |
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Rights Agreement, dated as of July 31, 2008, between John Bean Technologies Corporation, a Delaware corporation (the Company), and National City Bank, as rights agent (the Rights Agent).
The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a Right) for each Common Share (as hereinafter defined) of the Company outstanding on July 31, 2008 (the Record Date), each Right representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
1. | Definitions. For purposes of this Agreement, the following terms have the meanings indicated: |
(a) | Acquiring Person shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or any Subsidiary of the Company or (iv) any entity holding Common Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an Acquiring Person as the result of an acquisition of Common Shares by the Company which, by reducing the number of Common Shares of the Company outstanding, increases the proportionate number of Common Shares of the Company beneficially owned by such Person to 15% or more of the Common Shares of the Company then outstanding; provided, however, that, if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company, then such Person shall be deemed to be an Acquiring Person. Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an Acquiring Person for any purposes of this Agreement. |
(b) | Affiliate shall have the meaning ascribed to such term in Rule12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement. |
(c) | Associate shall have the meaning ascribed to such term in Rule12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement. |
(d) | A Person shall be deemed the Beneficial Owner of and shall be deemed to beneficially own any securities: |
(i) which such Person or any of such Persons Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Persons Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Persons Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Persons Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B) hereof) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase then outstanding, when used with reference to a Persons Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.
(e) | Business Day shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of Illinois are authorized or obligated by law or executive order to close. |
(f) | Close of Business on any given date shall mean 5:00 P.M., Chicago time, on such date; provided, however, that, if such date is not a Business Day, it shall mean 5:00 P.M., Chicago time, on the next succeeding Business Day. |
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(g) | Common Shares when used with reference to the Company shall mean the shares of common stock, par value $.01 per share, of the Company. Common Shares when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. |
(h) | Distribution Date shall have the meaning set forth in Section 3(a) hereof. |
(i) | Exchange Act shall mean the Securities Exchange Act of 1934, as amended. |
(j) | Exchange Ratio shall have the meaning set forth in Section 24(a) hereof. |
(k) | Final Expiration Date shall have the meaning set forth in Section 7(a) hereof. |
(l) | NASDAQ shall mean the National Association of Securities Dealers, Inc. Automated Quotation System. |
(m) | Person shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. |
(n) | Preferred Shares shall mean shares of Series A Junior Participating Preferred Stock, par value $.01 per share, of the Company having the rights and preferences set forth in the Form of Certificate of Designations attached to this Agreement as Exhibit A. |
(o) | Purchase Price shall have the meaning set forth in Section 4 hereof. |
(p) | Record Date shall have the meaning set forth in the second paragraph hereof. |
(q) | Redemption Date shall have the meaning set forth in Section 7(a) hereof. |
(r) | Redemption Price shall have the meaning set forth in Section 23(a) hereof. |
(s) | Right shall have the meaning set forth in the second paragraph hereof. |
(t) | Right Certificate shall have the meaning set forth in Section 3(a) hereof. |
(u) | Shares Acquisition Date shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such. |
(v) | Subsidiary of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. |
(w) | Summary of Rights shall have the meaning set forth in Section 3(b) hereof. |
(x) | Trading Day shall have the meaning set forth in Section 11(d) hereof. |
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2. | Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall, prior to the Distribution Date, also be the holders of the Common Shares of the Company) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. |
3. | Issue of Right Certificates. |
(a) | Until the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares of the Company for or pursuant to the terms of any such plan) of a tender or exchange offer the consummation of which would result in any Person becoming the Beneficial Owner of Common Shares of the Company aggregating 15% or more of the then outstanding Common Shares of the Company (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the Distribution Date), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares of the Company registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares of the Company. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares of the Company as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a Right Certificate), evidencing one Right for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. |
(b) |
On the Record Date, or as soon as practicable thereafter, the Company will make available upon request a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of Exhibit C hereto (the Summary of Rights) to each record holder of Common Shares as of the Close of Business on the Record Date. With respect to certificates for Common Shares of the Company outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof. Until the Distribution Date (or the earlier of the Redemption Date or the Final |
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Expiration Date), the surrender for transfer of any certificate for Common Shares of the Company outstanding on the Record Date shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby. |
(c) | Certificates for Common Shares which become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend: |
This certificate also evidences and entitles the holder hereof to certain rights as set forth in an Agreement between John Bean Technologies Corporation and National City Bank, dated as of July 31, 2008, as it may be amended from time to time (the Agreement), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of John Bean Technologies Corporation. Under certain circumstances, as set forth in the Agreement, such Rights (as defined in the Agreement) will be evidenced by separate certificates and will no longer be evidenced by this certificate. John Bean Technologies Corporation will mail to the holder of this certificate a copy of the Agreement without charge after receipt of a written request therefor. As set forth in the Agreement, Rights beneficially owned by any Person (as defined in the Agreement) who becomes an Acquiring Person (as defined in the Agreement) become null and void.
With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Shares of the Company represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby. In the event that the Company purchases or acquires any Common Shares of the Company after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares of the Company shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares of the Company which are no longer outstanding.
4. | Form of Right Certificates. The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto, and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any applicable rule or regulation made pursuant thereto or with any applicable rule or |
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regulation of any stock exchange or the National Association of Securities Dealers, Inc., or to conform to usage. Subject to the provisions of Section 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one one-hundredths of a Preferred Share as shall be set forth therein at the price per one one-hundredth of a Preferred Share set forth therein (the Purchase Price), but the number of such one one-hundredths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein. |
5. | Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, any of its Vice Presidents or its Treasurer, either manually or by facsimile signature, shall have affixed thereto the Companys seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the individual who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any individual who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such individual was not such an officer. |
Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.
6. | Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates entitling the registered holder to purchase a like number of one one-hundredths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or |
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Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Companys request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
7. | Exercise of Rights; Purchase Price; Expiration Date of Rights. |
(a) | The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein), in whole or in part, at any time after the Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on July 31, 2018 (the Final Expiration Date), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the Redemption Date), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof. |
(b) | The Purchase Price for each one one-hundredth of a Preferred Share purchasable pursuant to the exercise of a Right shall initially be $72.00, and shall be subject to adjustment from time to time as provided in Section 11 or 13 hereof, and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. |
(c) |
Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashiers check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes any such transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent of the Preferred Shares with such depositary agent) and the Com directs such depositary agent to comply with such |
7
request; (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof; (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder; and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. |
(d) | In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to registered holder of such Right Certificate or to such holders duly authorized assigns, subject to the provisions of Section 14 hereof. |
8. | Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Right Certificates, and, in such case, shall deliver a certificate of destruction thereof to the Company. |
9. | Availability of Preferred Shares. |
(a) | The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7 hereof. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. |
(b) |
The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights |
8
surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Companys reasonable satisfaction that no such tax is due. |
(c) | The Company further covenants and agrees, for so long as the Preferred Shares (and, following the date any Person becomes an Acquiring Person, shares of Common Stock and/or other securities) issuable upon the exercise of Rights may be listed on any United States national securities exchange or quoted on any automated quotation system, to use its best efforts to cause, from and after the time that the Rights become exercisable, all such shares and/or other securities reserved for such issuance to be listed on such exchange or quoted on such automated quotation system upon official notice of issuance. |
(d) | The Company shall (i) as soon as practicable after any Person becomes an Acquiring Person (or such earlier time following the Distribution Date as may be required by law), prepare and file a registration statement on an appropriate form under the Securities Act with respect to the securities purchasable upon exercise of the Rights, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company shall also take such action as may be necessary or appropriate under, or to ensure compliance with, the securities or blue sky laws of the various states in connection with the exercise of the Rights. The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in clause (i) of the first sentence of this Section 9(d), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall make a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted by applicable law or a registration statement shall not have been declared effective. |
10. | Preferred Shares Record Date. Each Person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, |
9
and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. |
11. | Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. |
(a) | (i) | In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. | ||
(ii) | Subject to Section 24 hereof, in the event any Person becomes an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of the Company (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the |
10
event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights. |
From and after the occurrence of such event, any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void, and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be cancelled.
(iii) | In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with subparagraph (ii) above, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable upon exercise of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share as of the date of issuance of such Preferred Shares or fraction thereof. |
(b) |
In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (equivalent preferred shares)) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) |
11
would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and, in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. | ||||||
(c) | In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then-current per share market price of the Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such then-current per share market price of the Preferred Shares on such record date; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and, in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. | |||||
(d) | (i) | For the purpose of any computation hereunder, the current per share market price of any security (a Security for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days |
12
immediately prior to such date; provided, however, that, in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or Securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, reported at or prior to 4:00 P.M. Eastern time or, in case no such sale takes place on such day, the average of the bid and asked prices, regular way, reported as of 4:00 P.M. Eastern time, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price reported at or prior to 4:00 P.M. Eastern time or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported as of 4:00 P.M. Eastern time by NASDAQ or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term Trading Day shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business, or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day. |
(ii) | For the purpose of any computation hereunder, the current per share market price of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If the Preferred Shares are not publicly traded, the current per share market price of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, current per share market price shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. |
13
(e) | No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-millionth of a Preferred Share or one ten-thousandth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights. |
(f) | If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and the provisions of Sections 7, 9, 10 and 13 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares. |
(g) | All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. |
(h) | Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one- millionth of a Preferred Share) obtained by (A) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (B) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. |
(i) |
The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall |
14
become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such a Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein, and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. |
(j) | Irrespective of any adjustment or change in the Purchase Price or in the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder. |
(k) | Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price. |
(l) | In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holders right to receive such additional shares upon the occurrence of the event requiring such adjustment. |
15
(m) | Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it, in its sole discretion, shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to in Section 11(b) hereof, hereafter made by the Company to holders of the Preferred Shares shall not be taxable to such stockholders. |
(n) | In the event that, at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares, or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then, in any such case, (A) the number of one one-hundredths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (B) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. |
12. | Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares and the Securities and Exchange Commission a copy of such certificate and (c) if such adjustment occurs at any time after the Distribution Date, mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. |
13. | Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event, directly or indirectly, at any time after a Person has become an Acquiring Person, (a) the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or |
16
any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one- hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term Company shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the Common Shares of the Company thereafter deliverable upon the exercise of the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless, prior thereto, the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing. The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. |
14. | Fractional Rights and Fractional Shares. |
(a) |
The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported in the principal consolidated transaction |
17
reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. |
(b) | The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. |
(c) | The holder of a Right, by the acceptance of the Right, expressly waives such holders right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above). |
15. |
Rights of Action . All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in such holders own behalf and for |
18
such holders own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holders right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement, and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. |
16. | Agreement of Right Holders . Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: |
(a) | prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; |
(b) | after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and |
(c) | the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. |
17. | Right Certificate Holder Not Deemed a Stockholder . No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. |
18. | Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder, and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other |
19
disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. |
The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.
19. | Merger or Consolidation or Change of Name of Rights Agent . Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. |
In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
20. | Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the |
20
Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: |
(a) | The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. |
(b) | Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. |
(c) | The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct. |
(d) | The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. |
(e) | The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. |
(f) |
The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and |
21
other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. |
(g) | The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. |
(h) | The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. |
(i) | The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided that reasonable care was exercised in the selection and continued employment thereof. |
21. | Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days notice in writing mailed to the Company and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by (i) first-class mail or (ii) by disclosure in a periodic report of the Company required to be filed under the Exchange Act, any permitted report under the Exchange Act, a press release of the Company or in any proxy or other communication by the Company to its stockholders. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (which holder shall, with such notice, submit such holders Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing |
22
business under the laws of the United States or of the State of Illinois (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of Illinois), in good standing, having an office in the State of Illinois, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and either (i) mail a notice thereof in writing to the registered holders of the Right Certificates or (ii) disclose such appointment in a periodic report of the Company required to be filed under the Exchange Act, any permitted report under the Exchange Act, a press release of the Company or in any proxy or other communication by the Company to its stockholders. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. |
22. | Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by the Board of Directors of the Company to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. |
23. | Redemption |
(a) | The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the Redemption Price). The redemption of the Rights by the Board of Directors of the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company, in its sole discretion, may establish. |
(b) |
Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days |
23
after such action of the Board of Directors of the Company ordering the redemption of the Rights, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date. |
24. | Exchange. |
(a) | The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any adjustment in the number of Rights pursuant to Section 11(i) (such exchange ratio being hereinafter referred to as the Exchange Ratio). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding. |
(b) |
Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected, and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than |
24
Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. |
(c) | In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share as of the date of issuance of such Preferred Shares or fraction thereof. |
(d) | The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this paragraph (d), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. |
25. | Notice of Certain Events. |
(a) |
In case the Company shall, at any time after the Distribution Date, propose (i) to pay any dividend payable in stock of any class to the holders of the Preferred Shares or to make any other distribution to the holders of the Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of the Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of the Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such |
25
proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and, in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier. |
(b) | In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall, as soon as practicable thereafter, give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof. |
26. | Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: |
John Bean Technologies Corporation
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
National City Bank
629 Euclid Avenue, Suite 635-L0C 01-3116
Cleveland, Ohio 44144
Attention: Shareholder Services Administration
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
27. | Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other |
26
provisions with respect to the Rights which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however, that, from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights. Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Section 1(a) and 3(a) hereof to not less than 10% (the Reduced Threshold); provided, however, that no Person who beneficially owns a number of Common Shares equal to or greater than the Reduced Threshold shall become an Acquiring Person unless such Person shall, after the public announcement of the Reduced Threshold, increase its beneficial ownership of the then outstanding Common Shares (other than as a result of an acquisition of Common Shares by the Company) to an amount equal to or greater than the greater of (x) the Reduced Threshold or (y) the sum of (i) the lowest beneficial ownership of such Person as a percentage of the outstanding Common Shares as of any date on or after the date of the public announcement of such Reduced Threshold plus (ii) .001%. |
28. | Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. |
29. | Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares). |
30. | Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. |
31. | Governing Law . This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state. |
32. | Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. |
33. | Descriptive Headings . Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. |
27
34. | Book-Entry Account Statements. Except where the context otherwise indicates, (a) if at any time or from time to time the Company determines that shares of Common Stock shall be evidenced by book-entry account statements or similar instruments or documents (Book-Entry Account Statements), then all references in this Agreement to certificates for Common Stock or certificates for shares of Common Stock shall be deemed to include such Book-Entry Account Statements which evidence such shares of Common Stock, (b) if at any time or from time to time the Company determines that after the Distribution Date the Rights shall be evidenced by Book-Entry Account Statements, then all references in this Agreement to certificates for Rights or Rights Certificates shall be deemed to include such Book-Entry Account Statements which evidence such Rights and (c) if at any time or from time to time the Company determines that shares of Preferred Shares issued upon the exercise of Rights shall be evidenced by Book-Entry Account Statements, then all references in this Agreement to certificates for such shares of Preferred Shares shall be deemed to include such Book-Entry Account Statements which evidence such shares of Preferred Shares. |
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written.
Attest: | John Bean Technologies Corporation | |||||||
By | By | |||||||
Name: Title: |
Name: Title: |
|||||||
Attest: | National City Bank | |||||||
By | By | |||||||
Name: Title: |
Name: Title: |
29
Exhibit A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
JOHN BEAN TECHNOLOGIES CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
John Bean Technologies Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the Corporation), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on July 12, 2008:
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the Board of Directors or the Board) in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, par value $.01 per share, of the Corporation (the Preferred Stock), and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount . The shares of such series shall be designated as Series A Junior Participating Preferred Stock (the Series A Preferred Stock) and the number of shares constituting the Series A Preferred Stock shall be 1,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions .
(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share (the Common Stock), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount
A-1
per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
A-2
Section 3 . Voting Rights . The holders of shares of Series A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions .
(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
A-3
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares . Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on
A-4
the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7 . Consolidation, Merger, etc . In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption . The shares of Series A Preferred Stock shall not be redeemable.
Section 9 . Rank . The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporations Preferred Stock.
Section 10 . Amendment . The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.
A-5
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Chief Executive Officer and attested by its Secretary this 31st day of July, 2008.
Chief Executive Officer
Attest:
Secretary
A-6
Exhibit B
Form of Right Certificate
Certificate No. R- | Rights |
NOT EXERCISABLE AFTER JULY 31, 2018 OR
EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT.
Right Certificate
John Bean Technologies Corporation
This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of July 31, 2008 (the Agreement), between John Bean Technologies Corporation, a Delaware corporation (the Company), and National City Bank (the Rights Agent), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Agreement) and prior to 5:00 P.M., Chicago time, on July 31, 2018 at the principal office of the Rights Agent, or at the office of its successor as Rights Agent, one one-hundredth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, par value $.01 per share, of the Company (the Preferred Shares), at a purchase price of $72.00 per one one-hundredth of a Preferred Share (the Purchase Price), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of one one-hundredths of a Preferred Share which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of July 31, 2008, based on the Preferred Shares as constituted at such date. As provided in the Agreement, the Purchase Price and the number of one one-hundredths of a Preferred Share which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and conditions of the Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Agreement are on file at the principal executive offices of the Company and the offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.
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Subject to the provisions of the Agreement, the Rights evidenced by this Right Certificate (i) may be redeemed by the Company at a redemption price of $.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares or shares of the Companys Common Stock, par value $.01 per share.
No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), but, in lieu thereof, a cash payment will be made, as provided in the Agreement.
No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Agreement.
This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of , .
ATTEST: | John Bean Technologies Corporation | |||||||
By: | By: | |||||||
Name: Title: Countersigned: National City Bank |
Name: Title: |
By: | ||
Name: Title: |
Form of Reverse Side of Right Certificate
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.
Dated:
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Signature
Signature Guaranteed:
All Guarantees must be made by a financial institution (such as a bank or broker) which is a participant in the Securities Transfer Agents Medallion Program (STAMP), the New York Stock Exchange, Inc. Medallion Signature Program (MSP), or the Stock Exchanges Medallion Program (SEMP) and must not be dated. Guarantees by a notary public are not acceptable.
The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Agreement).
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Signature
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Form of Reverse Side of Right Certificatecontinued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: John Bean Technologies Corporation
The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number:
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:
(Please print name and address)
Dated:
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Signature
Signature Guaranteed:
All Guarantees must be made by a financial institution (such as a bank or broker) which is a participant in the Securities Transfer Agents Medallion Program (STAMP), the New York Stock Exchange, Inc. Medallion Signature Program (MSP), or the Stock Exchanges Medallion Program (SEMP) and must not be dated. Guarantees by a notary public are not acceptable.
B-4
The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Agreement).
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Signature
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Agreement) and such Assignment or Election to Purchase will not be honored.
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Exhibit C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
Introduction
On July 31, 2008, the Board of Directors of our Company, John Bean Technologies Corporation, a Delaware corporation, declared a dividend of one preferred share purchase right (a Right) for each outstanding share of common stock, par value $.01 per share. The dividend is payable on July 31, 2008 to the stockholders of record on July 31, 2008.
Our Board has adopted this Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group which acquires 15% or more of our outstanding common stock without the approval of our Board. The Rights Agreement should not interfere with any merger or other business combination approved by our Board.
For those interested in the specific terms of the Rights Agreement as made between our Company and National City Bank, as the Rights Agent, on July 31, 2008, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which has been filed with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form 10 dated April 30, 2008, as amended. A copy of the agreement is available free of charge from our Company.
The Rights. Our Board authorized the issuance of a Right with respect to each outstanding share of common stock on July 12, 2008. The Rights will initially trade with, and will be inseparable from, the common stock. The Rights are evidenced only by certificates that represent shares of common stock. New Rights will accompany any new shares of common stock we issue after July 31, 2008 until the Distribution Date described below.
Exercise Price. Each Right will allow its holder to purchase from our Company one one-hundredth of a share of Series A Junior Participating Preferred Stock (Preferred Share) for $72.00, once the Rights become exercisable. This portion of a Preferred Share will give the stockholder approximately the same dividend, voting, and liquidation rights as would one share of common stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.
Exercisability. The Rights will not be exercisable until 10 days after the public announcement that a person or group has become an Acquiring Person by obtaining beneficial ownership of 15% or more of our outstanding common stock, or, if earlier, 10 business days (or a later date determined by our Board before any person or group becomes an Acquiring Person) after a person or group begins a tender or exchange offer which, if completed, would result in that person or group becoming an Acquiring Person.
We refer to the date when the Rights become exercisable as the Distribution Date. Until that date, the common stock certificates will also evidence the Rights, and any transfer of shares of common stock will constitute a transfer of Rights. After that date, the Rights will
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separate from the common stock and be evidenced by book-entry credits or by Rights certificates that we will mail to all eligible holders of common stock. Any Rights held by an Acquiring Person are void and may not be exercised.
Our Board may reduce the threshold at which a person or group becomes an Acquiring Person from 15% to not less than 10% of the outstanding common stock.
Consequences of a Person or Group Becoming an Acquiring Person.
Flip In. If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person may, for $72.00, purchase shares of our common stock with a market value of $144.00, based on the market price of the common stock prior to such acquisition.
Flip Over. If our Company is later acquired in a merger or similar transaction after the Rights Distribution Date, all holders of Rights except the Acquiring Person may, for $72.00, purchase shares of the acquiring corporation with a market value of $144.00 based on the market price of the acquiring corporations stock, prior to such merger.
Preferred Share Provisions.
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Each one one-hundredth of a Preferred Share, if issued: |
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will not be redeemable. |
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will entitle holders to quarterly dividend payments of $.01 per share, or an amount equal to the dividend paid on one share of common stock, whichever is greater. |
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will entitle holders upon liquidation either to receive $1 per share or an amount equal to the payment made on one share of common stock, whichever is greater. |
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will have the same voting power as one share of common stock. |
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if shares of our common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of common stock. |
The value of one one-hundredth interest in a Preferred Share should approximate the value of one share of common stock.
Expiration. The Rights will expire on July 31, 2018.
Redemption. Our Board may redeem the Rights for $.01 per Right at any time before any person or group becomes an Acquiring Person. If our Board redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $.01 per Right. The redemption price will be adjusted if we have a stock split or stock dividends of our common stock.
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Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common stock, our Board may extinguish the Rights by exchanging one share of common stock or an equivalent security for each Right, other than Rights held by the Acquiring Person.
Anti-Dilution Provisions. Our Board may adjust the purchase price of the Preferred Shares, the number of Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, a reclassification of the Preferred Shares or common stock. No adjustments to the Exercise Price of less than 1% will be made.
Amendments. The terms of the Rights Agreement may be amended by our Board without the consent of the holders of the Rights. However, our Board may not amend the Rights Agreement to lower the threshold at which a person or group becomes an Acquiring Person to below 10% of our outstanding common stock. In addition, the Board may not cause a person or group to become an Acquiring Person by lowering this threshold below the percentage interest that such person or group already owns. After a person or group becomes an Acquiring Person, our Board may not amend the agreement in a way that adversely affects holders of the Rights.
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Exhibit 10.1
FORM OF
TAX SHARING AGREEMENT
by and among
FMC TECHNOLOGIES, INC.
AND ITS AFFILIATES
and
JOHN BEAN TECHNOLOGIES CORPORATION
AND ITS AFFILIATES
TABLE OF CONTENTS
Page | ||||||
ARTICLE | I | |||||
DEFINITIONS | 1 | |||||
ARTICLE | II | |||||
RESPONSIBILITY FOR TAXES | 8 | |||||
2.1 | Responsibility and Indemnification for Taxes | 8 | ||||
2.2 | Income Taxes | 8 | ||||
2.3 | Other Taxes | 9 | ||||
2.4 | Allocation of Certain Income Taxes and Income Tax Items | 9 | ||||
2.5 | Payment for Use of Net Operating Losses | 10 | ||||
2.6 | Payment for Use of Foreign Tax Credits | 10 | ||||
2.7 | Audit Adjustments | 11 | ||||
2.8 | Tax Refunds | 13 | ||||
2.9 | Carrybacks | 13 | ||||
2.10 | Timing of Certain Payments | 14 | ||||
2.11 | Treatment of Restricted Stock, Stock Options, and Deferred Compensation | 14 | ||||
2.12 | Successor Employer Status | 15 | ||||
ARTICLE | III | |||||
TAX RETURNS AND INFORMATION EXCHANGE | 15 | |||||
3.1 | Tax Return Preparation Responsibility; Payment of Taxes Shown Thereon | 15 | ||||
3.2 | Review of Tax Returns | 16 | ||||
3.3 | Certain Items Related to Tax Return Preparation | 16 | ||||
3.4 | Tax Information Exchanges and Tax Services | 17 | ||||
ARTICLE | IV | |||||
TAX TREATMENT OF THE DISTRIBUTION | 18 | |||||
4.1 | Representations | 18 | ||||
4.2 | Covenants | 18 | ||||
4.3 | Supplemental Rulings and Restrictions on Spinco | 21 | ||||
4.4 | Liability for Undertaking Certain Actions | 22 | ||||
4.5 | Cooperation | 23 | ||||
4.6 | Enforcement | 23 | ||||
ARTICLE | V | |||||
COOPERATION AND EXCHANGE OF INFORMATION | 24 | |||||
5.1 | Cooperation | 24 |
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5.2 | Contest Provisions | 25 | ||||
5.3 | Information for Shareholders | 26 | ||||
ARTICLE | VI | |||||
DISPUTE RESOLUTION | 26 | |||||
6.1 | Dispute Resolution | 26 | ||||
ARTICLE | VII | |||||
MISCELLANEOUS | 26 | |||||
7.1 | Effectiveness | 26 | ||||
7.2 | Indemnification for Inaccurate, Incomplete or Untimely Information | 27 | ||||
7.3 | Breach | 27 | ||||
7.4 | Disclaimers | 27 | ||||
7.5 | Payments | 27 | ||||
7.6 | Changes in Law | 28 | ||||
7.7 | Notices | 28 | ||||
7.8 | Complete Agreement; Corporate Power | 29 | ||||
7.9 | Governing Law | 29 | ||||
7.10 | Successors and Assigns | 29 | ||||
7.11 | Joint and Several Liability | 30 | ||||
7.12 | Parties in Interest | 30 | ||||
7.13 | Legal Enforceability; Waiver of Default | 30 | ||||
7.14 | Action by Affiliates | 30 | ||||
7.15 | Expenses | 30 | ||||
7.16 | Confidentiality | 30 | ||||
7.17 | Amendments and Modification | 31 | ||||
7.18 | No Implied Waivers; Cumulative Remedies; Writing Required | 31 | ||||
7.19 | Limitation on Damages | 31 | ||||
7.20 | Severability | 31 | ||||
7.21 | Specific Performance | 31 | ||||
7.22 | Construction | 32 | ||||
7.23 | Counterparts | 32 | ||||
7.24 | Delivery by Facsimile and Other Electronic Means | 32 | ||||
7.25 | Consent by Affiliates | 32 |
ii
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT , dated as of , 2008, by and among FMC TECHNOLOGIES, INC. ( Parent ), a Delaware corporation, by and on behalf of itself and each Affiliate of Parent, and JOHN BEAN TECHNOLOGIES CORPORATION ( Spinco ), a Delaware corporation and currently a direct, wholly owned subsidiary of Parent, by and on behalf of itself and each Affiliate of Spinco. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in Article I hereof.
RECITALS
WHEREAS, the Board of Directors of Parent has determined that it is in the best interests of Parent and its stockholders to separate Parents existing businesses into two independent companies (the Separation );
WHEREAS, to effect the Separation, Parent intends to cause the transfer to Spinco of certain assets of Parent and its subsidiaries, and the assumption by Spinco of certain liabilities of Parent and its subsidiaries associated with the assets being transferred, all of which are primarily related to the Spinco Business (the Contribution ) as contemplated by Separation and Distribution Agreement dated as of July [ ] , 2008 (the Separation Agreement ) and the Ancillary Agreements;
WHEREAS, in connection with the Separation, the Board of Directors of Parent has determined that it would be advisable and in the best interests of Parent and its stockholders for Parent to distribute to the holders of the issued and outstanding shares of common stock of Parent (the Parent Common Stock ) as of the Record Date 100% of the issued and outstanding shares of common stock of Spinco (the Spinco Common Stock ), together with the associated preferred stock purchase rights (each share of such stock, together with the associated preferred stock purchase right, a Spinco Share ), on the basis of 0.216 Spinco Shares for every share of Parent Common Stock (the Distribution );
WHEREAS, the Contribution and Distribution are intended to qualify as a tax-free reorganization and distribution under Sections 368(a)(1)(D) and 355 of the Code; and
WHEREAS, in contemplation of the Distribution, Parent and Spinco desire to set forth their agreement on the rights and obligations of Parent and Spinco and their respective Affiliates with respect to the responsibility, handling and allocation of federal, state, local, and foreign Taxes, and various other Tax matters.
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants, and provisions of this Agreement, Parent, Spinco, and their respective Affiliates mutually covenant and agree as follows:
ARTICLE I
DEFINITIONS
Affiliate means any corporation, partnership, limited liability company, or other entity directly or indirectly Controlled by the entity in question. For purposes of this Agreement, an Affiliate of Parent shall not include Spinco or any entity that is also an Affiliate of Spinco.
After Tax Amount means any additional amount necessary to reflect (through a gross-up mechanism) the hypothetical Tax consequences of the receipt or accrual of any payment required to be made under this Agreement (including payment of an additional amount or amounts hereunder and the effect of the deductions available for interest paid or accrued and for Taxes such as state and local Income Taxes), determined by using the applicable corporate Tax rate (or rates, in the case of an item that affects more than one Tax) for the relevant taxable jurisdiction and period (or portion thereof).
Agreement means this Tax Sharing Agreement, including any schedules, exhibits, and appendices attached hereto.
Cash Acquisition Merger means a merger of a newly-formed subsidiary of Spinco with a corporation, limited liability company, limited partnership, general partnership or joint venture (in each case, not previously owned, directly or indirectly, by Spinco) solely for cash pursuant to which Spinco acquires such corporation, limited liability company, limited partnership, general partnership or joint venture and no Equity Securities of Spinco or any Spinco Affiliate are issued, sold, redeemed, or acquired, directly or indirectly.
Code means the Internal Revenue Code of 1986 (or, if relevant, the Internal Revenue Code of 1954), as amended, or any successor thereto, as in effect for the taxable period in question.
Combined Jurisdiction means, for any taxable period, any jurisdiction with respect to which a Combined Return is filed for United States federal, state, local, or foreign Income Tax purposes.
Combined Return means any combined, unitary, or consolidated Tax Return or report, or any Tax Return or report for a single entity that operated a Spinco Business for any portion of the relevant Tax period (and which is not otherwise a Spinco Separate Tax Return), used in the determination of a United States federal, state, local, or foreign Income Tax liability.
Contribution has the meaning prescribed in the recitals to this Agreement.
Control means the ownership of stock or other securities possessing at least 50 percent of the total combined voting power of all classes of securities entitled to vote.
Deferred Tax Assets means, as of a given date, the amount of deferred tax benefits (including deferred tax consequences attributable to deductible temporary differences and carryforwards) that would be recognized as assets on a business enterprises balance sheet computed in accordance with GAAP, but without regard to valuation allowances.
Deferred Tax Liabilities means, as of a given date, the amount of deferred tax liabilities (including deferred tax consequences attributable to deductible temporary differences) that would be recognized as liabilities on a business enterprises balance sheet computed in accordance with GAAP, but without regard to valuation allowances.
Deferred Taxes means, as of a given date, the amount of Deferred Tax Assets, less the amount of Deferred Tax Liabilities. Deferred Taxes may be a net negative or positive amount, and shall be computed without regard to any payments to be made pursuant to Section 2.10.
Distribution has the meaning prescribed in the preamble to this Agreement.
Distribution Date means the date on which the Spinco stock is distributed by Parent to its shareholders in a transaction intended to qualify as a tax-free distribution under Sections 355 and 368(a)(1)(D) of the Code.
Employee Restricted Stock means either Parent Restricted Stock or Spinco Restricted Stock.
Employee Stock Option means either a Parent Stock Option or a Spinco Stock Option.
Equity Securities means any stock or other equity securities treated as stock for Tax purposes, or options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.
Estimated Spinco Separate Tax Liability has the meaning prescribed in Section 2.2(e).
Filing Party has the meaning prescribed in Section 3.2(b).
Final Determination shall mean the final resolution of liability for any Tax for a taxable period, including any related interest, penalties or other additions to tax, (i) by Internal Revenue Service Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the IRS, or by a comparable form under the laws of other jurisdictions; except that a Form 870 or 870-AD or comparable form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Taxing Authority to assert a further deficiency with respect to a Tax Item shall not constitute a Final Determination with respect to such Tax Item; (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under Section 7121 or Section 7122 of the Code, or comparable agreements under the laws of other jurisdictions; (iv) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; or (v) by any other final disposition, including by reason of the expiration of the applicable statute of limitations.
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GAAP means United States generally accepted accounting principles as in effect on the Distribution Date.
Income Taxes means all federal, state, local, and foreign income Taxes or other Taxes based on income or net worth, and any other franchise or similar Taxes.
IRS means the United States Internal Revenue Service or any successor thereto, including, but not limited to its agents, representatives, and attorneys.
Liability Issue has the meaning prescribed in Section 5.1(c).
Non-filing Party has the meaning prescribed in Section 3.2(b).
Non-preparing Party has the meaning prescribed in Section 3.4(a).
Option means an option to acquire common stock, or other equity-based incentives the economic value of which is designed to mirror that of an option, including non-qualified stock options, discounted non-qualified stock options, cliff options to the extent stock is issued or issuable (as opposed to cash compensation), and tandem stock options to the extent stock is issued or issuable (as opposed to cash compensation).
Other Taxes means all taxes other than Income Taxes, including (but not limited to) transfer, sales, use, payroll, property, and unemployment Taxes.
Owed Party has the meaning prescribed in Section 7.5.
Owing Party has the meaning prescribed in Section 7.5.
Parent has the meaning prescribed in the preamble to this Agreement.
Parent Common Stock has the meaning prescribed in the recitals to this Agreement.
Parent Consolidated Group means the affiliated group of corporations (within the meaning of Section 1504 of the Code) of which Parent is the common parent prior to the Distribution Date.
Parent Employee means an employee of Parent or any Parent Affiliate immediately after the Distribution.
Parent Group means the group of corporations that, immediately after the Distribution Date, are members of the affiliated group of corporations of which Parent is the common parent (within the meaning of Section 1504 of the Code).
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Parent Representation Letter means an officers certificate in which certain representations, warranties and covenants are made on behalf of Parent and its Affiliates in connection with the issuance of a Tax Opinion or Tax Ruling.
Parent Restricted Stock means Parent common stock received by a Parent or Spinco Employee in connection with his or her employment, which stock has not yet been included in the income of such Employee as of the Distribution Date.
Parent Separate Tax Return means any Tax Return for any Tax period that includes one or more members of the Parent Group, but does not include any members of the Spinco Group.
Parent Stock Option means an Option to acquire Parent common stock received by a Parent or Spinco Employee in connection with his or her employment, which Option has not yet been exercised as of the Distribution Date.
Person means any natural person, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, proprietorship, trust, association, union, governmental authority or other entity, enterprise, authority or organization.
Post-Distribution Tax Period means, with respect to a given entity, any taxable period (or portion thereof) for which a Tax Return is filed, if such period begins after the Distribution Date.
Pre-Distribution Tax Period means, with respect to a given entity, any taxable period (or portion thereof) for which a Tax Return is filed, if such period ends on or before the Distribution Date.
Preparing Party has the meaning prescribed in Section 3.4(a).
Reportable Transaction means a reportable or listed transaction as defined in Section 6011 of the Code or Treasury Regulations thereunder.
Representation Letter means the Spinco Representation Letter and the Parent Representation Letter.
Responsible Party has the meaning prescribed in Section 5.2.
Restriction Period means the period beginning on the date hereof and ending on the second anniversary of the Distribution Date.
Ruling Documents means the Ruling Request, the appendices, attachments and exhibits thereto, and any additional or supplemental information submitted to the IRS in connection with the Ruling Request.
Ruling Request means the private letter ruling request filed by Parent with the IRS dated March 20, 2008 pertaining to certain Tax aspects of the Contribution and the Distribution.
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Separation Agreement has the meaning prescribed in the recitals to this Agreement.
Spinco has the meaning prescribed in the preamble to this Agreement.
Spinco Available FTCs has the meaning prescribed in Section 2.6(a).
Spinco Allocated FTCs has the meaning prescribed in Section 2.6(a).
Spinco Available NOLs has the meaning prescribed in Section 2.5(a).
Spinco Allocated NOLs has the meaning prescribed in Section 2.5(a).
Spinco Assets has the meaning prescribed in Section 1.1 of the Separation Agreement.
Spinco Business has the meaning prescribed in Section 1.1 of the Separation Agreement.
Spinco Common Stock has the meaning prescribed in the recitals to this Agreement.
Spinco Employee means an employee of Spinco or any Spinco Affiliate immediately after the Distribution.
Spinco Group means the group of corporations that, immediately after the Distribution Date, will be members of the affiliated group of corporations of which Spinco is the common parent (within the meaning of Section 1504 of the Code). For purposes of this definition, it is assumed that Spinco will elect to file consolidated federal income tax returns with Spinco as the common parent for the taxable year beginning immediately after the Distribution.
Spinco Representation Letter means an officers certificate in which certain representations, warranties and covenants are made on behalf of Spinco and its Affiliates in connection with the issuance of a Tax Opinion or Tax Ruling.
Spinco Restricted Stock means Spinco common stock received by a Spinco Employee or Parent Employee in connection with his or her employment, which stock has not yet been included in the income of such Employee as of the Distribution Date.
Spinco Separate Tax Liability means an amount equal to the Tax liability that Spinco and all Spinco Affiliates would have incurred on a consolidated, combined, unitary or separate basis (as applicable) as if at all times on or before the Distribution Date (a) each Spinco Asset transferred to Spinco or a Spinco Affiliate in connection with the Separation had at all relevant times been owned by such transferee entity, and the Spinco Business had been conducted solely and entirely by Spinco and the Spinco Affiliates, and (b) Spinco had been the common parent of an affiliate group (as defined in section 1504(a) of the Code without regard to Section 1504(b) of the Code) that was (i) separate from the members of the Parent Group and (ii) consisted solely of Spinco and the Spinco Affiliates.
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Spinco Separate Tax Return means any Tax Return for any Tax period that includes one or more members of the Spinco Group, but does not include any members of the Parent Group.
Spinco Share has the meaning prescribed in the recitals to this Agreement.
Spinco Stock Option means an Option to acquire Spinco common stock received by a Spinco Employee or Parent Employee in connection with his or her employment, which Option has not yet been exercised as of the Distribution Date.
Straddle Period means, with respect to a given entity, any state, local, or foreign taxable period beginning on or before the Distribution Date and ending after the Distribution Date;
Supplemental Ruling means any IRS private letter ruling issued in connection with the Contribution and/or the Distribution other than the Ruling Request.
Supplemental Ruling Documents means the Supplemental Ruling Request, the appendices, attachments and exhibits thereto, and any additional or supplemental information submitted to the IRS in connection with the Supplemental Ruling Request.
Supplemental Ruling Request means the Supplemental Ruling request filed by Parent with the IRS pertaining to certain Tax aspects of the Contribution and/or the Distribution.
Tax and Taxes mean any form of taxation, whenever created or imposed, and whenever imposed by a Taxing Authority, and without limiting the generality of the foregoing, shall include any net income, alternative or add-on minimum tax, gross income, sales, use, ad valorem, gross receipts, value added, franchise, profits, license, transfer, recording, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profit, custom duty, annual report, or other tax, government fee, or other like assessment or charge, of any kind whatsoever, together with any related interest, penalties, or other additions to tax, or additional amount imposed by any such Taxing Authority.
Tax Asset means any Tax Item that has accrued for Tax purposes (including a net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable contribution deduction, credit related to alternative minimum tax and any other Tax credit), that could reduce a Tax in the taxable period in which it accrued, but which is available to reduce a Tax in a later taxable period.
Taxing Authority means any national, municipal, governmental, state, federal, foreign, or other body, or any quasi-governmental or private body, having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).
Tax Benefit means, without double counting, the sum of (i) the amount of the reduction in the Tax liability of an entity (or of the consolidated or combined group of which it is a member), whether temporary or permanent, for any taxable period that arises, or may arise in the future, as a result of any adjustment to, or addition or deletion of, a Tax Item in the computation of the Tax liability of the entity (or the consolidated or combined group of which it
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is a member), and (ii) the amount by which the entitys (or consolidated or combined group of which it is a member) Deferred Taxes are increased as a result of such adjustment, addition, or deletion.
Tax Controversy has the meaning prescribed in Section 5.2(a).
Tax Detriment means, without double counting, the sum of (i) the amount of the increase in the Tax liability of an entity (or of the consolidated or combined group of which it is a member), whether temporary or permanent, for any taxable period that arises, or may arise in the future, as a result of any adjustment to, or addition or deletion of, a Tax Item in the computation of the Tax liability of the entity (or the consolidated or combined group of which it is a member), and (ii) the amount by which the entitys (or consolidated or combined group of which it is a member) Deferred Taxes are decreased as a result of such adjustment, addition, or deletion.
Tax-Free Status means the qualification of the Contribution and the Distribution as a tax-free reorganization (i) described in Sections 355(a) and 368(a)(1)(D) of the Code, (ii) in which the stock distributed thereby is qualified property for purposes of Section 361(c) of the Code, (iii) in which each of Parent, the Parent Affiliates, Spinco, and the Spinco Affiliates recognize no income or gain other than intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code, and (iv) in which no gain or loss is recognized by (and no amount is included in the income of) holders of Parent common stock upon the receipt of Spinco common stock pursuant to the Contribution and Distribution, other than cash in lieu of fractional shares.
Tax Item means any item of income, gain, loss, deduction, credit, recapture of credit, or any other item (including the basis or adjusted basis of property) which increases or decreases Income Taxes paid or payable in any taxable period.
Tax Opinion means an opinion issued to Parent by a law firm or an accounting firm with respect to the qualification of the Separation and the Distribution for treatment under Sections 355 and 368(a)(1)(D) of the Code.
Tax Package means the information and documents in the possession of the Non-preparing Party and its Affiliates that are reasonably necessary for the preparation of a Tax Return by the Preparing Party and its Affiliates with respect to a Combined Return, assembled in all material respects in accordance with the standards that Parent has heretofore applied to divisions and Affiliates of Parent.
Tax Return means any return, filing, questionnaire or other document required to be filed, including requests for extensions of time, filings made with estimated Tax payments, claims for refund or amended returns, that may be filed for any taxable period with any Taxing Authority in connection with any Tax or Taxes (whether or not a payment is required to be made with respect to such filing).
Tax Ruling means the IRS private letter ruling issued to Parent on July [ ] , 2008 in connection with the Ruling Request.
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Trademark Agreement means the Trademark Assignment and Co-Existence Agreement, dated as of July [ ], 2008, between Parent and Spinco.
Treasury Regulations means the final and temporary (but not proposed) income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
ARTICLE II
RESPONSIBILITY FOR TAXES
2.1 Responsibility and Indemnification for Taxes .
(a) From and after the Distribution Date, without duplication, each of Parent and Spinco shall be responsible for, and shall pay its respective share of, the liability for Taxes of Parent, Spinco, and their respective Affiliates as provided in this Agreement. Parent and its Affiliates shall indemnify and hold harmless Spinco and its Affiliates from any Taxes for which Parent is responsible pursuant to this Agreement. Spinco and its Affiliates shall indemnify and hold harmless Parent and its Affiliates from any Taxes for which Spinco is responsible pursuant to this Agreement.
(b) Payments to Taxing Authorities and between the parties, as the case may be, shall be made in accordance with the provisions of this Agreement.
2.2 Income Taxes .
(a) Subject to the limitations set forth in Section 2.7, Spinco shall be responsible for all Income Taxes (i) incurred on any Combined Return for any Tax period which includes the Distribution Date in any Combined Jurisdiction to the extent such Taxes constitute a Spinco Separate Tax Liability, excluding (A) any Income Taxes attributable to the Foreign Transfers (as defined in the Separation Agreement) and (B) any Income Taxes resulting from the application of Treasury Regulation Sections 1.1502-13 and 1.1502-19 to the Separation, (ii) incurred on any Spinco Separate Tax Return for any Tax period, (iii) incurred on any Combined Return for any Tax period ending before the Distribution Date in any Combined Jurisdiction to the extent such Income Taxes constitute a Spinco Separate Tax Liability and are paid after the Distribution Date, including but not limited to, any Income Taxes resulting from a Final Determination, and (iv) of Parent and its Affiliates attributable to acts or omissions of Spinco or its Affiliates taken after the Distribution (other than acts or omissions in the ordinary course of business or otherwise contemplated by the Separation Agreement).
(b) Parent shall be responsible for all Income Taxes (i) incurred on any Combined Return in any Combined Jurisdiction for any Tax period which are not the responsibility of Spinco pursuant to Section 2.2(a), (ii) incurred on any Parent Separate Tax Return, and (iii) imposed under Treasury Regulation Section 1.1502-6 or under any comparable or similar provision of state, local or foreign laws or regulations on Spinco or its Affiliates as a result of such company being a member of a consolidated, combined, or unitary group with Parent or any Parent Affiliate during any Tax period.
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(c) Notwithstanding anything in Section 2.2(a) or 2.2(b) to the contrary, any Income Taxes (including, but not limited to, any Income Taxes resulting from a Final Determination) incurred on any Combined Return in any Combined Jurisdiction that are directly attributable to the Trademark Agreement shall be borne 50% by Parent and 50% by Spinco.
(d) Not later than 90 days following the Distribution Date, any Spinco Separate Tax Liability related to Section 2.2(a)(i) shall be computed by Spinco (i) assuming Spinco and each Spinco Affiliate use the same accounting methods and elections as the Parent Group uses in filing its relevant consolidated or combined Tax Return, (ii) applying the applicable corporate Income Tax rate in effect for the relevant Tax period in the relevant jurisdiction, (iii) with respect to any U.S. federal income Tax, excluding any Spinco Available NOLs (as computed in accordance with Section 2.5(a)) or Spinco Available FTCs (as computed in accordance with Section 2.6(a)), (iv) with respect to any U.S. state and local Taxes using overall apportionment factors, and (v) in a manner consistent with past practice, if any. Any Spinco Separate Tax Liability related to Section 2.2(a)(iii) shall be computed by Parent, but otherwise consistent with this Section 2.2(d).
(e) Not later than 45 days following the Distribution Date, with respect to any Spinco Separate Tax Liability related to Section 2.2(a)(i), Spinco shall determine and pay to Parent an amount equal to the Estimated Spinco Separate Tax Liability. For each relevant jurisdiction, the Estimated Spinco Separate Tax Liability shall equal the product of (x) audited GAAP earnings before interest and Taxes generated by the Spinco Business (and reported on the relevant Combined Return), and (y) the applicable corporate Income Tax rate in effect for the relevant Tax period. Any amount of Estimated Spinco Separate Tax Liability paid under this Section 2.2(e) shall be a credit against any final payment required to be made by Spinco with respect to the relevant Combined Return.
2.3 Other Taxes .
(a) Spinco shall be responsible for all Other Taxes attributable to Spinco and its Affiliates or to the Spinco Business for all Tax periods.
(b) Parent shall be responsible for all Other Taxes attributable to Parent and its Affiliates (other than Spinco and its Affiliates) and to its business activities other than the Spinco Business, or resulting from the Contribution and Distribution, for all Tax periods.
2.4 Allocation of Certain Income Taxes and Income Tax Items .
(a) If Parent, Spinco or any of their respective Affiliates is permitted but not required under applicable U.S. federal, state, local or foreign Tax laws to treat the Distribution Date as the last day of a taxable period, then the parties shall treat such date as the last day of a taxable period under such applicable Tax law, and shall file any elections necessary or appropriate to such treatment; provided that this Section 2.4(a) shall not be construed to require Parent to change its taxable year.
(b) Transactions occurring, or actions taken, on the Distribution Date but after the Distribution outside the ordinary course of business by, or with respect to, Spinco or any of its Affiliates shall be deemed subject to the next day rule of Treasury Regulation Section
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1.1502-76(b)(1)(ii)(B) (and under any comparable or similar provision under state, local or foreign laws or regulations, provided that if there is no comparable or similar provision under state, local or foreign laws or regulations, then the transaction will be deemed subject to the next day rule of Treasury Regulation Section 1.1502-76(b)(1)(ii)(B)) and as such shall for purposes of this Agreement be treated (and consistently reported by the parties) as occurring in a Post-Distribution Tax Period of Spinco or a Spinco Affiliate, as appropriate, and reported on a Spinco Separate Tax Return.
(c) Tax attributes determined on a consolidated or combined basis for taxable periods ending before or including the Distribution Date shall be allocated to Parent and its Affiliates, and Spinco and its Affiliates, in accordance with the Code and the Treasury Regulations (and any applicable state, local, or foreign law or regulation). Parent shall reasonably determine the amounts and proper allocation of such attributes, and the Tax basis of the assets and liabilities transferred to Spinco in connection with the Contribution and Distribution, as of the Distribution Date; provided that Spinco shall be entitled to participate in such determination. Parent and Spinco agree to compute their Tax liabilities for taxable periods after the Distribution Date consistent with that determination and allocation, and treat the Tax Assets and Tax Items as reflected on any federal (or applicable state, local or foreign) Income Tax Return filed by the parties as presumptively correct.
2.5 Payment for Use of Net Operating Losses .
(a) Not later than 30 days following the filing of the 2008 U.S. federal income Tax Return for the Parent Consolidated Group, Parent shall determine the following amounts: (i) the aggregate amount of U.S. federal net operating loss carryforwards available to the Parent Consolidated Group as of January 1, 2008 which are attributable to the Spinco Business (based on the same principles used to allocate net operating losses to Spinco pursuant to Section 2.4(c)), (ii) the aggregate amount of U.S. federal net operating losses generated by the Spinco Business from January 1, 2008 up to and including the Distribution Date that are available to the Parent Consolidated Group (the sum of (i) and (ii) shall be considered the Spinco Available NOLs), and (iii) the amount of the Spinco Available NOLs that are allocable to the Spinco Group as of the day after the Distribution Date in accordance with Section 2.4(c) hereof (the Spinco Allocated NOLs).
(b) If the amount of Spinco Available NOLs exceeds the amount of Spinco Allocated NOLs, then Parent shall pay an amount to Spinco equal to the product of (i) the applicable corporate Income Tax rate and (ii) such excess. Such amount shall be paid by Parent not later than 45 days following the filing of the 2008 U.S. federal income Tax Return for the Parent Consolidated Group.
2.6 Payment for Use of Foreign Tax Credits .
(a) Not later than 30 days following the filing of the 2008 U.S. federal income Tax Return for the Parent Consolidated Group, Parent shall determine the following amounts: (i) the aggregate amount of foreign tax credit carryforwards available to the Parent Consolidated Group as of January 1, 2008 which are attributable to the Spinco Business (based on the same principles used to allocate foreign tax credits to Spinco pursuant to Section 2.4(c)), (ii) the
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aggregate amount of foreign tax credits generated by the Spinco Business from January 1, 2008 up to and including the Distribution Date that are available to the Parent Consolidated Group (the sum of (i) and (ii) shall be considered the Spinco Available FTCs ), and (iii) the amount of the Spinco Available FTCs that are allocable to the Spinco Group as of the day after the Distribution Date in accordance with Section 2.4(c) hereof (the Spinco Allocated FTCs ).
(b) If the amount of Spinco Available FTCs exceeds the amount of Spinco Allocated FTCs, then Parent shall pay an amount to Spinco equal to such excess. Such amount shall be paid by Parent not later than 45 days following the filing of the 2008 U.S. federal income Tax Return for the Parent Consolidated Group.
2.7 Audit Adjustments .
(a) Temporary Items.
i) Not later than 30 days after any Final Determination is made with respect to any Combined Return for any Tax period for which Parent or any Parent Affiliate is the Preparing Party, Parent shall determine the amount of any Tax Detriment or Tax Benefit attributable to the adjustment of any temporary Tax Items reported (or required to be reported) on such Combined Return. If, and to the extent, the amount of any such Tax Detriment or Tax Benefit so determined i) relates to an adjustment of Income Taxes that constitute a Spinco Separate Tax Liability, and ii) results in (or can reasonably be expected to result in) a Tax Benefit or Tax Detriment to Spinco or any Spinco Affiliate in a Post-Distribution Period attributable to a corresponding increase or decrease in the tax basis of any Spinco or Spinco Affiliate asset or liability, then not later than 45 days after such Final Determination is made, Spinco shall pay to Parent the amount of any such Tax Detriment, or Parent shall pay to Spinco the amount of any such Tax Benefit, as appropriate.
ii) Not later than 30 days after any Final Determination is made with respect to any Combined Return for any Tax period for which Spinco or any Spinco Affiliate is the Preparing Party, Spinco shall determine the amount of any Tax Detriment or Tax Benefit attributable to the adjustment of any temporary Tax Items reported (or required to be reported) on such Combined Return. If, and to the extent, the amount of any such Tax Detriment or Tax Benefit so determined i) relates to an adjustment of Income Taxes that do not constitute a Spinco Separate Tax Liability, and ii) results in (or can reasonably be expected to result in) a Tax Benefit or Tax Detriment to Parent or any Parent Affiliate in a Post-Distribution Period attributable to a corresponding increase or decrease in the tax basis of any Parent or Parent Affiliate asset or liability, then not later than 45 days after such Final Determination is made, Parent shall pay to Spinco the amount of any such Tax Detriment, or Spinco shall pay to Parent the amount of any such Tax Benefit, as appropriate.
(b) Permanent Items.
i) Not later than 30 days after any Final Determination is made with respect to any Combined Return for any Tax period for which Parent or any Parent
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Affiliate is the Preparing Party, Parent shall determine the amount of any Tax Detriment or Tax Benefit attributable to the adjustment of any permanent Tax Items reported (or required to be reported) on such Combined Return. If, and to the extent, the amount of any such Tax Detriment or Tax Benefit so determined relates to an adjustment of Income Taxes that constitute a Spinco Separate Tax Liability, then not later than 45 days after such Final Determination is made, Spinco shall pay to Parent the amount of any such Tax Detriment, or Parent shall pay to Spinco the amount of any such Tax Benefit, as appropriate.
ii) Not later than 30 days after any Final Determination is made with respect to any Combined Return for any Tax period for which Spinco or any Spinco Affiliate is the Preparing Party, Spinco shall determine the amount of any Tax Detriment or Tax Benefit attributable to the adjustment of any permanent Tax Items reported (or required to be reported) on such Combined Return. If, and to the extent, the amount of any such Tax Detriment or Tax Benefit so determined relates to an adjustment of Income Taxes that do not constitute a Spinco Separate Tax Liability, then not later than 45 days after such Final Determination is made, Parent shall pay to Spinco the amount of any such Tax Detriment, or Spinco shall pay to Parent the amount of any such Tax Benefit, as appropriate.
iii) A Party shall be required to make payment under this Section 2.7(b) only to the extent the cumulative amount of all payments otherwise required to be made by such Party under Sections 2.7(b)(i) and 2.7(b)(ii), net of the cumulative amount of all payments such Party is otherwise entitled to receive from the other Party under Sections 2.7(b)(i) and 2.7(b)(ii), exceeds the greater of a) $2,000,000 or, b) the sum of $2,000,000 and the net amount (after the application of Section 2.7(b)(iv) below) of all payments previously made by such Party under this Section 2.7(b).
iv) If subsequent to the time a Party makes a payment under this Section 2.7(b), a Final Determination is made with respect to any Combined Return which would have had the effect of reducing the required amount of such payment if such Final Determination were made prior to such payment, then the other Party which received such payment shall make a payment to such Party in an amount equal to such reduction.
(c) Calculation.
i) For purposes of Section 2.7, the Parties agree that the extent to which any Tax Detriment or Tax Benefit is treated as being attributable to either a permanent adjustment or a temporary adjustment shall be made in a manner consistent with past historical practice of the Parent Consolidated Group.
ii) For purposes of determining any amount due under this Section 2.7, any foreign Taxes shall be translated into U.S. dollars using the same exchange rate as is used for purposes of translating the income statement of the relevant entity for the month in which the Tax is assessed.
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iii) Any Tax Detriment or Tax Benefit determined under this Section 2.7 shall be calculated by applying the applicable corporate Income Tax rate in effect for the relevant Tax period in the relevant jurisdiction.
2.8 Tax Refunds . Except as provided in Section 2.9 and subject to the limitations set forth in Section 2.7:
(a) Parent shall be entitled to all refunds (including refunds paid by means of a credit against other or future Tax liabilities) and credits with respect to any Tax for which Parent is responsible under Section 2.1. Spinco shall be entitled to all refunds (including refunds paid by means of a credit against other or future Tax liabilities) and credits with respect to any Tax for which Spinco is responsible under Section 2.1.
(b) Spinco and Parent shall each forward to the other party, or reimburse such other party for, any refunds received by the first party and due to such other party pursuant to this Section 2.8. Where a refund is received in the form of a credit against other or future Tax liabilities, reimbursement with respect to such refund shall be due in each case on the due date for payment of the Tax against which such refund has been credited. All payments made pursuant to this Section 2.8 shall describe in reasonable detail the basis for the calculation of the amount being paid.
(c) If one party reasonably so requests, the other party (at the first partys expense) shall file for and pursue any refund to which the first party is entitled under this Section; provided that the other party need not pursue any refund on behalf of the first party unless the first party provides the other party a certification by an appropriate officer of the first party setting forth the first partys belief (together with supporting analysis) that the Tax treatment of the Tax Items on which the entitlement to such refund is based is more likely than not correct, and is not a Tax Item arising from a Reportable Transaction.
(d) If the other party pays any amount to the first party under this Section 2.8 and, as a result of a subsequent Final Determination, the first party is not entitled to some or all of such amount, the other party shall notify the first party of the amount to be repaid to the other party, and the first party shall then repay such amount to the other party, together with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Taxing Authority relating thereto.
2.9 Carrybacks .
(a) Notwithstanding anything in this Agreement, Spinco shall file (or cause to be filed) on a timely basis any available election to waive the carryback of net operating losses, Tax credits or other Tax Items by Spinco or any Affiliate from a Post-Distribution Tax Period to a Straddle Period or Pre-Distribution Tax Period. Such elections shall include, but not be limited to, the election described in Treasury Regulation Section 1.1502-21(b)(3)(ii)(B), and any analogous election under state, local, or foreign Income Tax laws, to waive the carryback of net operating losses for federal Income Tax purposes.
(b) If, notwithstanding the provisions of Section 2.9(a), Spinco is required to carryback losses or credits, Spinco shall be entitled to any refund of any Tax obtained by Parent
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or a Parent Affiliate as a result of the carryback of losses or credits of Spinco or its Affiliate from any Post-Distribution Tax Period to any Pre-Distribution Tax Period. Such refund is limited to the net amount received by Parent or a Parent Affiliate (by refund, offset against other Taxes, or otherwise), net of any Tax Detriment incurred by Parent or such Affiliate resulting from such refund. Upon request by Spinco, Parent shall advise Spinco of an estimate of any Tax Detriment Parent projects will be associated with any carryback of losses or credits of Spinco or its Affiliates as provided in this Section 2.9(b).
(c) If Spinco has a Tax Item that must be carried back to any Pre-Distribution Tax Period, Spinco shall notify in writing Parent that such Tax Item must be carried back. Such notification shall include a description in reasonable detail of the ground for the refund and the amount thereof, and a certification by an appropriate officer of Spinco setting forth Spincos belief (together with supporting analysis) that the Tax treatment of such Tax Item is more likely than not correct, and is not a Tax Item arising from a Reportable Transaction.
(d) If Parent pays any amount to Spinco under Section 2.9(b) and, as a result of a subsequent Final Determination, Spinco is not entitled to some or all of such amount, Parent shall notify Spinco of the amount to be repaid to Parent, and Spinco shall then repay such amount to Parent, together with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Taxing Authority relating thereto.
2.10 Timing of Certain Payments .
(a) Any payment required to be made pursuant to Article II (other than payments specified in Section 2.5(b), Section 2.6(b), or Section 2.7(c)(ii)) shall be made by the party obligated to make such payment (i) in the case of a refund of Tax, within fourteen (14) days after receipt (whether by way of payment, credit, or offset against any payments due or otherwise) of such refund or (ii) in the case of a payment of Tax, the later of (x) fourteen (14) days prior to the due date for payment of such Tax and (y) the delivery of written demand for the payment hereunder to the party obligated to make such payment hereunder.
(b) All payments and demands for payment shall be accompanied by a calculation setting forth in reasonable detail the basis for the amount paid or demanded.
2.11 Treatment of Restricted Stock, Stock Options, and Deferred Compensation .
(a) To the extent permitted by law, Parent (or the appropriate Parent Affiliate) shall claim all Tax deductions arising by reason of the grant or vesting of Employee Restricted Stock, and by reason of exercises of Employee Stock Options, at the time such Tax deduction can be claimed, provided that such Employee Restricted Stock or Employee Stock Option is then held by a Parent Employee. To the extent permitted by law, Spinco (or the appropriate Spinco Affiliate) shall claim all Tax deductions arising by reason of the grant or vesting of Employee Restricted Stock, and by reason of exercises of Employee Stock Options, at the time such Tax deduction can be claimed, provided that such Employee Restricted Stock or Employee Stock Option is then held by a Spinco Employee. To the extent permitted by law, Spinco (or the appropriate Spinco Affiliate) shall claim all Tax deductions arising by reason of the payment (or inclusion in income) of compensation the receipt of which was deferred by a Spinco Employee
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prior to the Distribution Date, the payment of which will occur after the Distribution Date, and the obligation to make such payment is assumed by Spinco in connection with the Contribution and Distribution.
(b) The party (or Affiliate thereof) initially claiming the Tax deduction described in Section 2.11(a) shall withhold applicable Taxes and satisfy applicable Tax reporting obligations with respect to the taxation of the Employee Restricted Stock, Employee Stock Options, or deferred compensation with respect to which the Tax deduction is claimed. The parties to this Agreement shall cooperate so as to permit the party initially claiming such deduction to discharge any applicable Tax withholding and Tax reporting obligations.
2.12 Successor Employer Status . Parent and Spinco shall, to the extent permitted by law, (i) treat Spinco and its Affiliates (as applicable) as a successor employer and Parent and its Affiliates (as applicable) as a predecessor, within the meaning of sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to employees of the Spinco Business that were employed by Spinco and its Affiliates starting on January 1, 2008 for purposes of Taxes imposed under the United States Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act and (ii) cooperate with each other to avoid the filing of more than one IRS Form W-2 with respect to each such employee for the calendar year in which the Distribution occurs.
ARTICLE III
TAX RETURNS AND INFORMATION EXCHANGE
3.1 Tax Return Preparation Responsibility; Payment of Taxes Shown Thereon .
(a) Parent shall prepare and file (i) all Combined Returns in any Combined Jurisdiction for which Parent (or an Affiliate of Parent) is the parent entity (including, but not limited to, all Tax Returns for the Parent Consolidated Group), (ii) all Parent Separate Tax Returns, and (iii) all Tax Returns pertaining to Other Taxes for which Parent is responsible pursuant to Section 2.1.
(b) Spinco shall prepare and file (i) all Combined Returns in any Combined Jurisdiction for which Spinco (or an Affiliate of Spinco) is the parent entity, (ii) all Spinco Separate Tax Returns, and (iii) all Tax Returns pertaining to Other Taxes for which Spinco is responsible pursuant to Section 2.1.
(c) Parent and its Affiliates shall be responsible for the remitting of payment of any Taxes shown on a Tax Return for which it is responsible for the preparation and filing thereof pursuant to Section 3.1(a). Spinco and its Affiliates shall be responsible for the payment of any Taxes shown on a Tax Return for which it is responsible for the preparation and filing thereof pursuant to Section 3.1(b).
(d) If Parent remits a Tax payment pursuant to Section 3.1(c), but Spinco is responsible pursuant to Article II for all or a portion of the Tax shown on the applicable Tax Return, then Spinco shall pay to Parent that portion of the Tax shown on such Tax Return for
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which Spinco is responsible pursuant to Article II. If Spinco remits a Tax payment pursuant to Section 3.1(c), but Parent is responsible pursuant to Article II for all or a portion of the Tax shown on the applicable Tax Return, then Parent shall pay to Spinco that portion of the Tax shown on such Tax Return for which Parent is responsible pursuant to Article II. Nothing in this Section 3.1(d) shall affect the allocation of responsibility for Taxes as set forth in Article II.
3.2 Review of Tax Returns . Parent, with respect to those Income Tax Returns prepared by Parent described in Sections 3.1(a)(i), and Spinco, with respect to those Income Tax Returns prepared by Spinco described in Sections 3.1(b)(i) (in each case, the Filing Party , and such other party the Non-filing Party ) shall prepare and file such Tax Returns in a manner consistent with past Tax reporting practices with respect to the Spinco Business. The Filing Party shall provide the Non-Filing Party with a draft of each such Income Tax Return at least 15 days prior to the due date for filing thereof. If such draft shows Tax for which the Non-Filing Party is responsible pursuant to this Agreement, the Non-Filing Party shall have the right to review and approve (which approval shall not be unreasonably withheld) each such Income Tax Return within 7 days following its receipt thereof. The Filing Party and Non-Filing Party shall attempt in good faith mutually to resolve any disagreements regarding such Income Tax Returns prior to the due date for filing thereof; provided , that the failure to resolve all disagreements prior to such date shall not relieve the Filing Party of its obligation to file (or cause to be filed) any such Income Tax Return.
3.3 Certain Items Related to Tax Return Preparation .
(a) Unless otherwise required by a Taxing Authority, the parties hereby agree to prepare and file all Tax Returns, and to take all other actions, in a manner consistent with this Agreement and the Separation Agreement and, to the extent not inconsistent with this Agreement, the Separation Agreement or applicable law, any Tax Ruling, Ruling Documents, Tax Opinion, or Representation Letter. All Tax Returns shall be filed on a timely basis (taking into account applicable extensions) by the party responsible for filing such Tax Returns under this Agreement; provided , that if a Tax Return is to be signed by an officer of a company different from the party responsible for filing such Tax Return, each party hereto shall have (or cause its Affiliate to have) the appropriate officer sign such Tax Return promptly after presentation thereof for signature.
(b) Except as otherwise specifically provided for in this Agreement, Parent shall have the exclusive right, in its reasonable discretion, with respect to any Tax Return for which it is responsible for the filing thereof pursuant to this Agreement, to determine (i) the manner in which such Tax Return shall be prepared and filed, including the accounting methods, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported; (ii) whether any extensions may be requested; (iii) the election(s) that will be made by Parent, any Parent Affiliate, Spinco, or any Spinco Affiliate on such Tax Return; (iv) whether any amended Tax Return(s) shall be filed; (v) whether any claim(s) for refund shall be made; (vi) whether any refund shall be paid by way of refund or credited against any liability for the related Tax; and (vii) whether to retain outside firms to prepare or review such Tax Returns; provided , that Parent shall (i) prepare all Tax Returns for which it has filing responsibility, to the extent such Tax Returns reflect activities of the Spinco Business, in a manner consistent with past Tax reporting practices with respect to the Spinco Business, except as required by law or
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regulation, and (ii) indemnify and hold harmless Spinco against any Tax Detriment to the extent such Tax Detriment is directly caused by any determination by Parent under this Section 3.3(b) which is inconsistent with past practice (if any).
(c) Within 10 days after filing the U.S. federal Income Tax Return for the Parent Consolidated Group for the tax year that includes the Distribution Date, at the written request of Spinco, Parent shall notify Spinco of the net operating loss, net capital loss, charitable contribution, and credit carryforwards associated with Spinco and each of its Affiliates, and the Tax bases of the assets and liabilities, transferred to Spinco in connection with the Contribution and Distribution. Any changes in such Tax attributes or Tax bases arising thereafter shall be communicated by Parent to Spinco within 10 days after such change is made or there is a Final Determination of such change.
(d) Parent and Spinco agree to take (or refrain from taking) any action reasonably requested by the other that would reasonably be expected to result in a Tax Benefit or avoid a Tax Detriment to the other, provided that such action does not result in any additional cost not fully compensated for by the requesting party. The parties hereby acknowledge that the preceding sentence is not intended to limit, and therefore shall not apply to, the rights of the parties with respect to matters otherwise covered by this Agreement.
(e) Nothing in this Agreement shall be construed as a guarantee or representation of the existence or amount of any loss, credit, carryforward, basis or other Tax Item or Tax Asset, whether past, present or future, of Parent, Spinco, or their respective Affiliates.
3.4 Tax Information Exchanges and Tax Services .
(a) Parent, with respect to those Income Tax Returns prepared by Spinco described in Sections 3.1(b)(i), and Spinco, with respect to those Income Tax Returns prepared by Parent described in Sections 3.1(a)(i) (in each case, the Non-preparing Party , and such other party the Preparing Party ) shall provide the Preparing Party, no later than 45 days after the Distribution Date, a Tax Package for the purpose of preparing such Tax Return. The Non-preparing Party shall timely furnish to the Preparing Party such additional information and documents as the Preparing Party may reasonably request. The parties acknowledge that such information may include materials regarding accounting, accounting records, income and expense, costs and cost production, background, research and development, comparables, marketing, suppliers and customers, and other information regarding the Non-preparing Partys business related to the Tax treatment of such business. Upon request by the Preparing Party, an appropriate officer of the Non-preparing Party shall provide written certification that, to such officers best knowledge and belief, all information provided pursuant to this Section 3.4 is accurate and complete in all material respects. The Non-preparing Party and its Affiliates shall also make available it employees and officers as the Preparing Party may reasonably request in connection with such Tax Return preparation by the Preparing Party. The Non-preparing Party shall be responsible for the cost (without reimbursement from the Preparing Party) of furnishing to the Preparing Party the Tax Package, additional information, documents and employees and officers provided for in this Section 3.4(a).
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(b) If the Non-Preparing Party fails to provide any information required by Section 3.4(a) within the time period specified, the Preparing Party (i) shall be permitted, upon 48 hours notice, to use its own employees or agents to view or obtain the materials contemplated in Section 3.4(a) from the Non-preparing Partys facilities, and (ii) may file the applicable Tax Return based on the information available to the Preparing Party at the time such Tax Return is due. The Non-preparing and its Affiliates shall (i) reimburse the Preparing Party for any internal or incremental costs incurred by the Preparing Party in having its employees or agents view or obtain such material, and (ii) be responsible for and shall indemnify and hold harmless the Preparing Party and its Affiliates from Taxes or other costs imposed on the Preparing Party or any of its Affiliates, to the extent resulting from the Non-preparing Party failure to provide such information in a timely manner.
ARTICLE IV
TAX TREATMENT OF THE DISTRIBUTION
4.1 Representations .
(a) Ruling Documents . Spinco hereby represents and warrants that (i) it has examined the Ruling Documents (including, without limitation, the representations to the extent that they relate to the plans, proposals, intentions, and policies of Spinco, the Spinco Affiliates, or the Spinco Business), and (ii) to the extent in reference to Spinco, the Spinco Affiliates, or the Spinco Business, the facts presented and the representations made therein are true, correct, and complete.
(b) Tax-Free Status . Spinco hereby represents and warrants that it has no plan or intention of taking any action, or failing or omitting to take any action, or knows of any circumstance, that could reasonably be expected to (i) cause the Contribution and/or the Distribution not to have Tax-Free Status or (ii) cause any representation or factual statement made in this Agreement, the Separation Agreement, the Tax Ruling, the Tax Opinion, or the Spinco Representation Letter to be untrue in a manner that would have an adverse effect on the Tax-Free Status of the Contribution and/or the Distribution.
(c) Plan or Series of Related Transactions . Spinco hereby represents and warrants that, to the knowledge of Spinco and the management of Spinco, neither the Contribution nor the Distribution are part of a plan (or series of related transactions) pursuant to which a Person will acquire stock representing a fifty-percent or greater interest (within the meaning of Sections 355(d) and (e) of the Code) in Spinco or any successor to Spinco.
4.2 Covenants .
(a) Actions Consistent with Representations and Covenants . Spinco shall not (and shall not permit any of its Affiliates or grant or permit any of its Affiliates to grant implicit or explicit permission to any other person to) take any action, and Spinco shall not (and shall not permit any of its Affiliates or grant or permit any of its Affiliates to grant implicit or explicit permission to any other person to) fail to take any action, where such action or failure to act would be inconsistent with or cause to be untrue any material, information, covenant, or
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representation in this Agreement, the Separation Agreement, the Tax Ruling, the Ruling Documents (including, without limitation, the representations to the extent that they relate to the plans, proposals, intentions, and policies of Spinco, the Spinco Affiliates, or the Spinco Business), the Tax Opinion, or the Spinco Representation Letter.
(b) Preservation of Tax-Free Status; Spinco Business . Spinco shall not take any action (including, but not limited to, any cessation, transfer or disposition of all or any portion of the Spinco Business; payment of extraordinary dividends to shareholders; and acquisitions or issuances of stock) or permit any Spinco Affiliate to take any such action, and Spinco shall not fail to take any such action or permit any Spinco Affiliate to fail to take any such action where such action or failure to act would have an adverse effect on the Tax-Free Status of the Contribution and/or the Distribution.
(c) Sales, Issuances and Redemptions of Equity Securities . Until the first day after the Restriction Period, neither Spinco nor any Spinco Affiliate shall, or shall agree to, sell or otherwise issue to any Person, or redeem or otherwise acquire from any Person, any Equity Securities of Spinco or any Spinco Affiliate; provided , however , that (i) Spinco may repurchase such Equity Securities to the extent that such repurchases meet the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to its modification by Revenue Procedure 2003-48), (ii) Spinco may issue such Equity Securities to the extent such issuances satisfy Safe Harbor VIII (relating to acquisitions in connection with a persons performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d), and (iii) Spinco may issue Equity Securities provided that such issuance does not, individually or when aggregated with other issuances and any transactions occurring in the four-year period beginning on the date which is two years before the Distribution Date, and with any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Distribution (excluding issuances of Equity Securities described in clause (ii) above, but including, for the avoidance of doubt, transactions described in Section 4.2(d) below), result in one or more Persons acquiring, directly or indirectly, (as determined under Section 355(e) of the Code, taking into account applicable constructive ownership rules) stock representing a 25% or greater interest, by vote or value, in Spinco (or any successor thereto).
(d) Tender Offers; Other Business Transactions . Until the first day after the Restriction Period, neither Spinco nor any Spinco Affiliate shall (i) solicit any Person to make a tender offer for, or otherwise acquire or sell, the Equity Securities of Spinco, (ii) participate in or support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the Equity Securities of Spinco, or (iii) approve or otherwise permit any proposed business combination or merger or any transaction which, in the case of clauses (i), (ii) or (iii), individually or when aggregated with any other transactions occurring within the four-year period beginning on the date which is two years before the Distribution Date, and with any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Distribution (excluding issuances of Equity Securities described in Section 4.2(c)(ii) above, but including, for the avoidance of doubt, issuances of Equity Securities described in Section 4.2(c)(i) and Section 4.2(c)(iii) above), results in one or more Persons acquiring, directly or indirectly, (as determined under Section 355(e) of the Code, taking into account applicable constructive ownership rules) stock representing a 25% or greater
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interest, by vote or value, in Spinco (or any successor thereto). In addition, neither Spinco nor any Spinco Affiliate shall at any time, whether before or subsequent to the expiration of the Restriction Period, engage in any action described in clauses (i), (ii) or (iii) of the preceding sentence if it is pursuant to an arrangement negotiated (in whole or in part) prior to the first anniversary of the Distribution, even if at the time of the Distribution or thereafter such action is subject to various conditions.
(e) Dispositions of Assets . Until the first day after the Restriction Period, neither Spinco nor any Spinco Affiliate shall, or shall agree to, sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 50% of the consolidated gross assets of Spinco, nor shall Spinco or any Spinco Affiliate sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 50% of the consolidated gross assets of the Spinco Group. The foregoing sentence shall not apply to sales, transfers, or dispositions of assets in the ordinary course of business. The percentages of gross assets or consolidated gross assets of Spinco or the Spinco Group, as the case may be, sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross assets of Spinco and the members of the Spinco Group as of the Distribution Date. For purposes of this Section 4.2(e), a merger of Spinco or one of its subsidiaries with and into any Person (other than Spinco or one of its subsidiaries) shall constitute a disposition of all of the assets of Spinco or such subsidiary.
(f) Liquidations, Mergers, Reorganizations . Until the first day after the Restriction Period, neither Spinco nor its subsidiaries shall, or shall agree to, voluntarily dissolve or liquidate or engage in any merger (except for a Cash Acquisition Merger), consolidation or other reorganization; provided , however , mergers of direct or indirect wholly-owned subsidiaries of Spinco solely with and into Spinco or with other direct or indirect wholly-owned subsidiaries of Spinco, and liquidations of Spincos subsidiaries, are not subject to this Section 4.2(f) to the extent not otherwise inconsistent with the Tax-Free Status of the Contribution and the Distribution; provided further that nothing in this Section 4.2(f) shall prohibit any merger involving Spinco or an Spinco Affiliate not otherwise prohibited by Section 4.2(d).
(g) Changes to Voting Rights . Until the first day after the Restriction Period, neither Spinco nor any Spinco Affiliate shall amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the relative voting rights of its separate classes of stock (including, without limitation, through the conversion of one class of stock into another class of stock), but only to the extent such change, if treated as an issuance of Equity Securities, would be prohibited by Section 4.2(c).
(h) Permitted Transactions . Notwithstanding the restrictions otherwise imposed by Sections 4.2(c) through 4.2(g), during the Restriction Period, Spinco may (i) issue Equity Securities of Spinco or any Spinco Affiliate in a transaction that would otherwise breach the covenant set forth in Section 4.2(c), (ii) approve, participate in, support or otherwise permit a proposed business combination or transaction that would otherwise breach the covenant set forth
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in Section 4.2(d), (iii) sell or otherwise dispose of the assets of the Spinco Group in a transaction that would otherwise breach the covenant set forth in Section 4.2(e), (iv) merge Spinco or any Spinco Affiliate with another entity without regard to which party is the surviving entity in a transaction that would otherwise breach the covenant set forth in Section 4.2(f), or (v) take any action affecting the relative voting rights of the separate classes of stock of Spinco or any Spinco Affiliate that would otherwise breach the covenant set forth in Section 4.2(g), if and only if such transaction or action would not violate Section 4.2(a) or Section 4.2(b) and Section 4.2(i) is satisfied.
(i) Supplemental Ruling; Tax Opinion ; Financial Guarantee. Prior to entering into any agreement contemplating a transaction or action described in clauses (i), (ii), (iii), (iv) or (v) of Section 4.2(h) and prior to consummating any such transaction or action: (A) Spinco shall request that Parent obtain a Supplemental Ruling in accordance with Section 4.3 of this Agreement to the effect that such transaction will not affect the Tax-Free Status of the Contribution and the Distribution and Parent shall have received such a Supplemental Ruling in form and substance satisfactory to Parent in its sole and absolute discretion or (B) Spinco shall provide Parent with an unqualified Tax Opinion from a nationally recognized independent tax advisor in form and substance satisfactory to Parent in its sole and absolute discretion (and in determining whether an opinion is satisfactory, Parent may consider, among other factors, the appropriateness of any underlying assumptions and managements representations if used as a basis for the opinion) providing that such transaction or action will not affect the Tax-Free Status of the Contribution and the Distribution. In addition, regardless of whether Spinco satisfies the requirement of this Section 4.2(i)(A) or Section 4.2(i)(B), Spinco shall also deliver to Parent an unconditional letter of credit or other financial guarantee, the form and terms of which (including, but not limited to, face amount, issuer, expiration date, terms of renewal, and drawdown rights) are acceptable to Parent, in its sole and exclusive judgment.
4.3 Supplemental Rulings and Restrictions on Spinco .
(a) Supplemental Rulings at Parent Request . Parent shall have the right to obtain a Supplemental Ruling in its sole and absolute discretion. If Parent determines to obtain a Supplemental Ruling, Spinco shall (and shall cause each Spinco Affiliate to) cooperate with Parent and take any and all actions reasonably requested by Parent in connection with obtaining the Supplemental Ruling (including, without limitation, by making any representation or covenant or providing any materials or information requested by any Tax Authority; provided that Spinco shall not be required to make (or cause any Spinco Affiliate to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control). Parent shall reimburse Spinco for all reasonable costs and expenses incurred by Spinco or its Affiliates in obtaining a Supplemental Ruling requested by Parent within ten (10) Business Days after receiving an invoice from Spinco therefor. In connection with obtaining a Supplemental Ruling pursuant to this Section 4.3(a), (A) Parent shall keep Spinco informed in a timely manner of all material actions taken or proposed to be taken by Parent in connection therewith; (B) Parent shall (1) reasonably in advance of the submission of any Supplemental Ruling Request, provide Spinco with a draft copy thereof, (2) reasonably consider Spincos comments on such draft copy, and (3) provide Spinco with a final copy of any Supplemental Ruling Request; and (C) Parent shall provide Spinco with notice reasonably in advance of, and Spinco shall have the right to attend, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such Supplemental Ruling.
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(b) Supplemental Rulings at Spincos Request . Parent agrees that at the reasonable request of Spinco pursuant to Section 4.2(i), Parent shall (and shall cause each Parent Affiliate to) cooperate with Spinco and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a Supplemental Ruling from the IRS for the purpose of confirming compliance on the part of Spinco or an Spinco Affiliate with its obligations under Section 4.2 of this Agreement. Further, in no event shall Parent be required to file any Supplemental Ruling Request under this Section 4.3(b) unless Spinco represents that (A) it has reviewed the Supplemental Ruling Documents and (B) all information and representations, if any, relating to Spinco or any Spinco Affiliate, contained in the Supplemental Ruling Documents are true, correct and complete in all material respects. Spinco shall reimburse Parent for all reasonable costs and expenses incurred by Parent or its Affiliates in obtaining a Supplemental Ruling requested by Spinco within ten (10) Business Days after receiving an invoice from Parent therefor. Spinco hereby agrees that Parent shall have sole and exclusive control over the process of obtaining a Supplemental Ruling, and that only Parent shall apply for a Supplemental Ruling. In connection with obtaining a Supplemental Ruling pursuant to this Section 4.3(b), (A) Parent shall keep Spinco informed in a timely manner of all material actions taken or proposed to be taken by Parent in connection therewith; (B) Parent shall (1) reasonably in advance of the submission of any Supplemental Ruling Request, provide Spinco with a draft copy thereof, (2) reasonably consider Spincos comments on such draft copy, and (3) provide Spinco with a final copy of any Supplemental Ruling Request; and (C) Parent shall provide Spinco with notice reasonably in advance of, and Spinco shall have the right to attend, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such Supplemental Ruling.
(c) Prohibition on Spinco . Spinco hereby agrees that neither it nor any Spinco Affiliate shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) concerning the Contribution or the Distribution (or the impact of any transaction on the Contribution or the Distribution).
4.4 Liability for Undertaking Certain Actions . Notwithstanding anything in this Agreement to the contrary, Spinco shall be responsible for, and shall indemnify and hold harmless Parent and each of its Affiliates from and against any liability for Taxes that are attributable to or result from (i) any act or failure to act by Spinco or any Spinco Affiliate, which action or failure to act breaches any of the representations or covenants contained in Article IV hereof (without regard to the exceptions or provisos set forth in such provisions), expressly including, for this purpose, any Permitted Transactions and any act or failure to act that breaches Section 4.2(a) or 4.2(b), regardless of whether such act or failure to act is permitted by Section 4.2(c) through 4.2(g), and (ii) Tax counsel withdrawing all or any portion of the Tax Opinion or any Tax Authority withdrawing all or any portion of a private letter ruling issued to Parent in connection with the Contribution and/or the Distribution because of a breach by Spinco or any Spinco Affiliate of a representation made in this Agreement (or made in connection with the Tax Opinion or any Supplemental Ruling contemplated by Section 4.3(e)).
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4.5 Cooperation .
(a) Without limiting the prohibition set forth in Section 4.3(c), until the first day after the Restriction Period, Spinco shall furnish Parent with a copy of any ruling request that Spinco or any Spinco Affiliate may file with the IRS or any other Tax Authority and any opinion received that in any respect relates to, or otherwise reasonably could be expected to have any effect on, the Tax-Free Status of any of the Contribution and the Distribution.
(b) Parent shall reasonably cooperate with Spinco in connection with any request by Spinco for an unqualified Tax Opinion pursuant to Section 4.2(i) and shall use its reasonable best efforts to assist Spinco in obtaining an unqualified Tax Opinion pursuant to Section 4.2(i).
(c) Until the first day after the Restriction Period, Spinco shall provide adequate advance notice to Parent in accordance with the terms of Section 4.5(d) of any action described in Sections 4.2(a) through 4.2(g) within a period of time sufficient to enable Parent to seek injunctive relief pursuant to Section 4.6 in a court of competent jurisdiction.
(d) Each notice required by Section 4.5(c) shall set forth the terms and conditions of any such proposed transaction, including, without limitation, (i) the nature of any related action proposed to be taken by the board of directors of Spinco, (ii) the approximate number of Equity Securities (and their voting and economic rights) of Spinco or any Spinco Affiliate (if any) proposed to be sold or otherwise issued, (iii) the approximate value of Spincos assets (or assets of any Spinco Affiliate) proposed to be transferred, and (iv) the proposed timetable for such transaction, all with sufficient particularity to enable Parent to seek such injunctive relief. Promptly, but in any event within 30 days, after Parent receives such written notice from Spinco, Parent shall notify Spinco in writing of Parents decision to seek injunctive relief pursuant to Section 4.6.
(e) From and after the date Parent first requests a Supplemental Ruling pursuant to Section 4.3 until the first day after the two-year anniversary of such date that Parent receives such Supplemental Ruling (pursuant to Section 4.3(a) or 4.3(b)), neither Spinco nor any Spinco Affiliate shall take (or refrain from taking) any action to the extent that such action or inaction would have caused a representation given by Spinco in connection with any such request for a Supplemental Ruling to have been untrue as of the relevant representation date, had Spinco or any Spinco Affiliate intended to take (or refrain from taking) such action on the relevant representation date.
4.6 Enforcement . The parties hereto acknowledge that irreparable harm would occur in the event that any of the provisions of this Article IV were not performed in accordance with their specific terms or were otherwise breached. The parties hereto agree that, in order to preserve the Tax-Free Status of the Contribution and the Distribution, injunctive relief is appropriate to prevent any violation of the foregoing covenants; provided , however , that injunctive relief shall not be the exclusive legal or equitable remedy for any such violation.
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ARTICLE V
COOPERATION AND EXCHANGE OF INFORMATION
5.1 Cooperation .
(a) Notwithstanding anything to the contrary in the Separation Agreement, Parent and Spinco shall cooperate (and shall cause each of their respective Affiliates to cooperate) fully at such time and to the extent reasonably requested by the other party in connection with the preparation and filing of any Tax Return or the conduct of any audit, dispute, proceeding, suit, or Tax action concerning any issues or any other matter contemplated hereunder. Such cooperation shall include, without limitation:
i) Compliance with the provisions of Section 3.4;
ii) The retention and provision on demand of books, records, documentation, information, or other materials relating to any Tax Return, or any supplemental information necessary or reasonably helpful to support any position taken therein, until the later of (x) the expiration of the applicable statute of limitation (giving effect to any extension, waiver, or mitigation thereof) and (y) in the event any claim has been made under this Agreement for which such information is relevant, the occurrence of a Final Determination with respect to such claim;
iii) Unless otherwise agreed to by the parties, the retention and provision on demand, of any books, records, documentation, information, or other materials necessary or reasonably helpful in sustaining any position (including, without limitation, any transfer pricing position) taken with any Taxing Authority including, without limitation, materials regarding accounting, income and expense, costs and cost production, background, research and development, comparables, marketing, suppliers and customers, and other information regarding the Spinco Business related to the Tax treatment of such business;
iv) The retention and provision of additional information with respect to an explanation of the manner in which any Tax Return or Tax Package was prepared and filed, and any additional information reasonably helpful in explaining the materials provided under clauses (ii) and (iii) of this Section 5.1 until the other party provides written notice that such material may be destroyed;
v) The execution of any document that may be necessary or reasonably helpful in connection with the filing of any Tax Return by Parent or its Affiliates or Spinco or its Affiliates, or in connection with any audit, proceeding, refund claim, suit, or action for any such Tax Return; and
vi) The use of the parties reasonable best efforts to obtain any documentation from a governmental authority or a third party that may be necessary or helpful in connection with the foregoing;
Each party shall make its employees and facilities available on a mutually convenient basis, without cost to the other party, to facilitate such cooperation. In addition, upon 48 hours notice, each party shall have the option to use its own employees or agents to view or obtain the materials contemplated in this Section 5.1 from the other partys facilities on a mutually convenient basis.
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(b) Any materials contemplated under Section 5.1(a) and Section 3.4 shall be provided whether or not such material is or may be confidential or proprietary. If, however, the providing party determines in good faith that any materials are confidential or proprietary, the providing party may require the requesting party to enter into a confidentiality agreement with respect to such materials, not inconsistent with the purposes for which the party made the request for information. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentially for its own similar information.
(c) Parent shall advise Spinco with respect to any Final Determination of Tax adjustments relating to the Parent Consolidated Group if such Final Determination of Tax adjustments may affect any Tax attribute of any member of the Spinco Group after the Distribution Date.
(d) Notwithstanding anything to the contrary in this Agreement, if a party materially fails to comply with any of its obligations set forth in this Section 5.1, upon reasonable request and notice by the other party, the non-performing party shall (i) reimburse the other party for any internal or incremental costs incurred by such other party in having its employees or agents view or obtain such material, and (ii) to the extent such failure results in the imposition of additional Taxes be liable in full for such additional Taxes.
5.2 Contest Provisions .
(a) The party responsible for preparation and filing Tax Returns under Section 3.1 (the Responsible Party ), shall have the exclusive right to control, contest, and represent the interests of Parent, Spinco and their respective Affiliates in any Tax controversy, including (without limitation) any audit, protest, or claim for refund to the Appeals Division of the IRS, competent authority proceeding and litigation in Tax Court or any other court of competent jurisdiction (a Tax Controversy ) related to such Tax Return. Subject to Section 5.2(c) hereof, such exclusive right shall include the right, in the Responsible Partys reasonable discretion, to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Tax Controversy. Such control rights shall extend to any matter pertaining to the management and control of a Tax Controversy, including execution of waivers, choice of forum, scheduling of conferences and the resolution of any Tax Item. Any costs incurred in the handling or contesting of a Tax Controversy shall be borne by the Responsible Party.
(b) Parent shall use reasonable efforts to keep Spinco advised as to the status of Tax audits and litigation involving any issue that relates to a Tax of Spinco or any Spinco Affiliate or that could give rise to a liability of Spinco or any Spinco Affiliate under this Agreement, and Spinco shall use reasonable efforts to keep Parent advised as to the status of Tax audits and litigation involving any issue that related to a Tax of Parent or any Parent Affiliate or could give rise to a liability of Parent or any Parent Affiliate under this Agreement (in each case, a Liability Issue ). Parent and Spinco shall promptly furnish each other copies of any inquiries or requests for information from any Taxing Authority or any other administrative, judicial, or other governmental authority concerning any Liability Issue pertaining to the other party. Without limiting the foregoing, Parent and Spinco, as the case may be, shall each promptly
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furnish to the other within 30 days of receipt a copy of the relevant section of the revenue agents report or similar report, notice of proposed adjustment, or notice of deficiency received by Parent or its Affiliate or by Spinco or its Affiliate, as the case may be, relating to any Liability Issue or any adjustment referred to in this Section 5.2(b).
(c) Notwithstanding Section 5.2(a),
i) To the extent resolution of any Tax Controversy could give rise to a material Tax Detriment or loss of a material Tax Benefit to the party responsible for such Taxes under Section 2.1 totaling at least $250,000, but such party is not the Responsible Party, then the Responsible Party shall provide such other party (at such other partys expense) reasonable participation rights with respect to so much of the Tax Controversy as relates to Taxes for which such other party may be responsible; and
ii) A Responsible Party shall not settle or otherwise voluntarily resolve or disclose any Tax Controversy which could give rise to a Tax Detriment or loss of a material Tax Benefit to the other party totaling at least $250,000 without such other partys consent, not to be unreasonably withheld
5.3 Information for Shareholders . Parent shall provide each shareholder that receives stock of Spinco pursuant to the Distribution with the information necessary for such shareholder to comply with the requirements of Section 355 of the Code and the Treasury regulations thereunder with respect to statements that such shareholders must file with their federal income tax returns demonstrating the applicability of Section 355 to the Distribution.
ARTICLE VI
DISPUTE RESOLUTION
6.1 Dispute Resolution . The parties desire that friendly collaboration will develop between them. Accordingly, they will try to resolve in an amicable manner all disputes and disagreements connected with their respective rights and obligations under this Agreement in accordance with Article X of the Separation Agreement; provided , however , that this Section 6.1 shall not apply to any (a) suits seeking injunctive relief or specific performance, or (b) dispute, controversy, or claim arising under Article IV of this Agreement (including any dispute, controversy, or claim relating to the breach, termination, or validity thereof).
ARTICLE VII
MISCELLANEOUS
7.1 Effectiveness . This Agreement shall become effective on the Distribution Date.
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7.2 Indemnification for Inaccurate, Incomplete or Untimely Information .
(a) Spinco and each Spinco Affiliate shall indemnify and hold harmless Parent and each Parent Affiliate from and against any liability, cost or expenses, including, without limitation, any fine, penalty, interest, charge or accountants fee, arising out of fraudulent or negligent information, workpapers, documents and other items prepared by Spinco or any Spinco Affiliate used in the preparation of any Tax Return or claim for refund filed by Parent or any Parent Affiliate for any period during which Spinco or any Spinco Affiliate was or has been a member of the Parent Consolidated Group, or arising out of the untimely provision of information required to provided under this Agreement.
(b) Parent and each Parent Affiliate shall indemnify and hold harmless Spinco and each Spinco Affiliate from and against any liability, cost or expense, including, without limitation, any fine, penalty, interest, charge or accountants fee, arising out of fraudulent or negligent preparation of any Tax Return or claim for refund filed by Parent or a Parent Affiliate for any period during which Spinco or any member of the Spinco Group was or has been a member of the Parent Consolidated Group, or arising out of the untimely provision of information required to provided under this Agreement.
7.3 Breach . Parent shall indemnify and hold harmless Spinco and each Spinco Affiliate, and Spinco shall indemnify and hold harmless Parent and each Parent Affiliate, from and against any payment required to be made under this Agreement as a result of the breach by Parent (or Parent Affiliate) or Spinco (or Spinco Affiliate), as the case may be, of any obligation under this Agreement.
7.4 Disclaimers .
(a) Parent disclaims all knowledge of or responsibility for the content or accuracy of any separate returns or filings made by or on behalf of Spinco or any Spinco Affiliate for any taxable period during which such company was not a member of the Parent Consolidated Group.
(b) Spinco disclaims all knowledge of or responsibility for the content or accuracy of any Tax Returns or filings made by or on behalf of the Parent Consolidated Group or any member thereof for any period except to the extent such Tax Returns or filings reflect items of the Spinco Business.
7.5 Payments . In the event that one party (the Owing Party ) is required to make a payment to another party (the Owed Party ) pursuant to this Agreement, then to the extent not otherwise provided for in this Agreement, such payment shall be made according to this Section 7.5.
(a) All payments shall be made to the Owed Party or to the appropriate Taxing Authority as specified by the Owed Party within the time prescribed for the payment in this Agreement, or if no period is prescribed, within 20 days after delivery of written notice of payment owing together with a computation of the amounts due.
(b) Unless otherwise required by any Final Determination, the parties agree that any payment made by one party to another party (other than payments of interest and payment of After Tax Amounts pursuant to Section 7.5(d)) pursuant to this Agreement shall be
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treated for all Tax and financial accounting purposes as payments with respect to stock (dividend distributions or capital contributions, as the case may be) made immediately prior to the Distribution.
(c) All actions required to be taken by any party under this Agreement shall be performed within the time prescribed for performance in this Agreement, or if no period is prescribed, such actions shall be performed promptly.
(d) If, pursuant to a Final Determination, it is determined that the receipt or accrual of any payment made under this Agreement (other than payments of interest) is subject to any Tax, the party making such payment shall be liable for (i) the After Tax Amount with respect to such payment, and (ii) interest at the rate described in 7.5(e) on the amount of such tax from the date such Tax is due through the date of payment of such After Tax Amount. A party making a demand for payment pursuant to this Agreement and for a payment of an After Tax Amount with respect to such payment shall separately specify and compute such After Tax Amount. However, a party may choose not to specify an After Tax Amount in a demand for payment pursuant to this Agreement without thereby being deemed to have waived its right subsequently to demand an After Tax Amount with respect to such payment.
(e) Any payment that is required to be made pursuant to this Agreement (i) by Spinco (or a Spinco Affiliate) to Parent (or a Parent Affiliate) or (ii) by Parent (or a Parent Affiliate) to Spinco (or a Spinco Affiliate), that is not made on or prior to the date that such payment is required to be made pursuant to this Agreement shall thereafter bear interest at the rate established for underpayments pursuant to Section 6621(a) (2) of the Code.
(f) Any payment that is required to be made pursuant to this Agreement (i) by Spinco (or a Spinco Affiliate) to Parent (or a Parent Affiliate) or (ii) by Parent (or a Parent Affiliate) to Spinco (or a Spinco Affiliate), shall be made by wire transfer of immediately available funds, provided that if the amount of any payment is less than $10,000, such payment may be made in a form other than a wire transfer.
7.6 Changes in Law . Any reference to a provision of the Code, Treasury Regulations, or a law of another jurisdiction shall include a reference to any applicable successor provision or law. If, due to any change in applicable law or regulations or their interpretation by any court of law or other governing body having jurisdiction subsequent to the date specified in the preamble to this Agreement, performance of any provision of this Agreement or any transaction contemplated hereby shall become impracticable or impossible, the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision.
7.7 Notices . All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by standard form of telecommunications, by courier, or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to Parent, at:
FMC Technologies, Inc.
1803 Gears Road
Houston, Texas 77067
Attention: General Counsel
Fax: (281) 591-4102
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If to Spinco, at:
John Bean Technologies Corporation
200 E. Randolph Dr.
Chicago, IL 60601
Attention: [ ]
Fax: [ ]
or to such other address as any party hereto may have furnished to the other parties by a notice in writing in accordance with this Section 7.7.
7.8 Complete Agreement; Corporate Power .
(a) This Agreement, the Exhibits and Schedules hereto, the Separation Agreement, and the Ancillary Agreements shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.
(b) Parent represents on behalf of itself and each of its Affiliates and Spinco represents on behalf of itself and each of it Affiliates as follows:
i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform each of this Agreement and each other Ancillary Agreement to which it is a party and to complete the transactions contemplated hereby and thereby; and
ii) this Agreement, the Separation Agreement, and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.
7.9 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (other than the laws regarding choice of laws and conflicts of laws that would apply the substantive laws of any other jurisdiction) as to all matters, including matters of validity, construction, effect, performance and remedies.
7.10 Successors and Assigns . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by any Party without the prior written consent of the other party or except in connection with a merger or similar business combination involving a party if the successor under applicable law expressly assumes all rights and obligations of such party hereunder and under each
29
Ancillary Agreement as if it were such party. Except for the provisions of Sections 4.2 and 4.3 relating to indemnities, which are also for the benefit of the indemnitees, this Agreement is solely for the benefit of the parties hereto and their subsidiaries and affiliates and is not intended to confer upon any other Persons any rights or remedies hereunder.
7.11 Joint and Several Liability . Spinco and each Spinco Affiliate shall have joint and several liability for any obligation of Spinco or a Spinco Affiliate arising pursuant to this Agreement. Parent and each Parent Affiliate shall have joint and several liability for any obligation of Parent or a Parent Affiliate arising pursuant to this Agreement.
7.12 Parties in Interest . Nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties, their respective Affiliates, and their respective successors and permitted assigns, any rights or remedies of any nature whatsoever under or by virtue of this Agreement.
7.13 Legal Enforceability; Waiver of Default .
(a) Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability without invalidating the remaining provisions. Any prohibition or unenforceability of any provision of this Agreement in any jurisdiction shall not invalidate or render unenforceable the provision in any other jurisdiction.
(b) Waiver by either party of any default by the other party of any provision of this Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of the other party.
7.14 Action by Affiliates . To the extent Spinco is obligated to take any action under this Agreement, and such action is more properly taken by a Spinco Affiliate, then Spinco shall cause such Affiliate to take such action. To the extent Spinco is obligated to refrain from taking any action under this Agreement, Spinco shall cause each of its Affiliates to refrain from taking such action. Parent shall be subject to similar rules regarding actions to be taken, or to be refrained from being taken, by it and its Affiliates.
7.15 Expenses . Unless otherwise expressly provided in this Agreement, each party shall bear any and all expenses that arise from their respective obligations under this Agreement.
7.16 Confidentiality .
(a) Each party shall hold and cause its consultants and advisors to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information written or oral concerning the other parties hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (a) previously known by the party to which it was furnished, (b) in the public domain through no fault of such party, or (c) later lawfully acquired from other sources by the party to which it was furnished), and each party shall not release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors who shall be
30
advised of the provisions of this Section 7.16. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if its exercises the same care as it takes to preserve confidentiality for its own similar information.
(b) Notwithstanding Section 7.16(a), the provisions regarding confidentiality set forth in Section 5.1 shall govern information required to be provided pursuant to Sections 3.4 and 5.1.
7.17 Amendments and Modification . This Agreement may be amended, modified or supplemented only by a written agreement signed by all of the parties hereto.
7.18 No Implied Waivers; Cumulative Remedies; Writing Required . No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that any party hereto would otherwise have. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement or any such waiver of any provision of this Agreement must satisfy the conditions set forth in Section 7.17 and shall be effective only to the extent in such writing specifically set forth.
7.19 Limitation on Damages . Each party irrevocably waives, and no party shall be entitled to seek or receive, consequential, special, indirect or incidental damages (including without limitation damages for loss of profits) or punitive damages, regardless of how such damages were caused and regardless of the theory of liability; provided that the foregoing shall not limit each partys indemnification obligations set forth in the Separation Agreement and the Ancillary Agreements.
7.20 Severability . If any provision of this Agreement or the application thereof to any person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party.
7.21 Specific Performance . In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the party or parties who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived. Each Party hereby submits to the exclusive jurisdiction of
31
Delaware for purposes of all legal proceedings for equitable relief arising out of or relating to this Agreement or the transactions contemplated hereby. Each Party irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. EACH PARTY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
7.22 Construction . The descriptive headings herein are inserted for convenience of reference only and are not intended to be a substantive part of or to affect the meaning or interpretation of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any agreement, document, or instrument means such agreement, document, or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. The use of the words include or including in this Agreement shall be by way of example rather than by limitation. The use of the words or, either or any shall not be exclusive. The parties have participated jointly in the negotiation and drafting of this Agreement, the Separation Agreement, and the Ancillary Agreements. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. The parties agree that prior drafts of this Agreement shall be deemed not to provide any evidence as to the meaning of any provision hereof or the intent of the parties hereto with respect hereto.
7.23 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
7.24 Delivery by Facsimile and Other Electronic Means . This Agreement, and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or other electronic transmission, shall be treated in all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person. At the request of any party, each other party shall re-execute original forms thereof and deliver them to all other parties. No party shall raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature was transmitted or communicated through the use of facsimile machine or other electronic means as a defense to the formation of a contract and each such party forever waives any such defense.
7.25 Consent by Affiliates . Each of Parent and Spinco shall cause each of its respective Affiliates (including any entity that becomes an Affiliate after the date hereof) to consent to, and be bound by, the terms, conditions, covenants, and provisions of this Agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.
FMC Technologies, Inc. | ||
By: |
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Title: |
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John Bean Technologies Corporation | ||
By: |
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Title: |
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Exhibit 10.2
FORM OF
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (this Trademark Agreement ) is made and entered into as of , 2008 (the Effective Date) by and between FMC Technologies, Inc., a Delaware corporation, having its principal place of business at 1803 Gears Road, Houston, Texas 77067 (FMCTI) and John Bean Technologies Corporation (formerly FMC FoodTech, Inc.), a Delaware corporation, having its principal place of business at 200 East Randolph Drive, Chicago, Illinois 60601 (JBT). FMCTI and JBT are referred to herein, collectively, as the Parties and, individually, as a Party .
RECITALS
WHEREAS , Pursuant to the Separation and Distribution Agreement between FMCTI and JBT of even date herewith (the SDA), FMCTI has contributed, transferred and conveyed to JBT certain of FMCTIs assets and JBT has assumed certain of FMCTIs liabilities;
WHEREAS , FMCTI is the exclusive, worldwide licensee of the FMC trademark (the FMC Trademark), pursuant to a certain Trademark License Agreement entered into by and between FMCTI and FMC Corporation on May, 31, 2001 (the FMC Trademark License Agreement), for use in connection with the assets being conveyed to JBT;
WHEREAS, FMCTI is the owner of certain derivative trademarks, including but not limited to those identified on attached Exhibit A (the FMC DERIVATIVES) (the FMC Trademark and FMC Derivatives will hereinafter be collectively referred to as the FMC Marks);
WHEREAS , it is a condition to the consummation of the transactions contemplated by the SDA that FMCTI and JBT execute and deliver this Agreement; and
WHEREAS , JBT desires to use the FMC Marks for a limited period of time in connection with its continued business operations including, without limitation, on or in association with certain assets acquired from FMCTI pursuant to the SDA on which the FMC Marks are affixed, including without limitation products (Products); labels, packaging and cartons (collectively Packaging); sales promotional materials, advertising materials and other ancillary marketing and sales materials; (collectively Sales Materials); signs used on real property, business cards, stationery, letterhead, other signage, invoices and other commercial documents and other current and similar incidental uses (collectively Incidental Uses).
NOW, THEREFORE, in consideration of the foregoing and the covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows.
Trademark License Agreement
1. | LICENSE. |
1.1. | License Grant . Subject to the terms and conditions of this Agreement, FMCTI hereby grants to JBT a limited, worldwide, royalty-free, non-exclusive, non-transferable and non-assignable license (with a limited right to sublicense only to Subsidiaries of JBT) to use the FMC Marks: |
a. | on JBTs inventory of Products, Packaging, and Sales Materials, in existence at the Effective Date, for the earlier of one (1) year after the Effective Date or the exhaustion of JBTs existing inventory of Products, Packaging, and Sales Materials in the ordinary course; |
b. | in a legend on JBTs Products, Packaging, Sales Materials and Incidental Uses to indicate JBTs former affiliation with FMCTI for a period of two (2) years after the Effective Date; and |
c. | on JBTs existing, installed base of leased Products, indefinitely. |
1.2. | Web Link. FMC Technologies shall provide, for a period of two (2) years after the Effective Date, a web site link from FMC Technologies web site to JBTs web site. |
1.3. | No Other Rights . Any rights not expressly granted to JBT under this Agreement are reserved by FMCTI. Other than as described in Sections 1.1 and 6.6 of this Agreement, JBT shall have no power or right to, and shall not, sell, assign, sublicense or otherwise transfer this Agreement or the license granted hereunder, to any third party. In using the FMC Marks pursuant to this Agreement, JBT shall in no way represent that it has any right, title or interest in the FMC Marks other than those expressly granted under the terms and conditions of this Agreement. |
1.4. | No Restriction on FMCTI . Subject to the terms of the SDA, nothing in this Agreement shall be construed to prevent FMCTI from using, or granting to third parties any other licenses for the use of, the FMC Marks on any products or for any purpose. |
2. | OWNERSHIP AND PROTECTION OF THE FMC MARKS. |
2.1. |
FMCTIs Ownership . JBT acknowledges and agrees that the JBT shall not, directly or indirectly, contest or challenge FMCTIs sole and exclusive rights in and to the FMC Marks or the validity thereof, including, without limitation, the goodwill associated therewith and all goodwill arising from the use of the FMC Marks shall inure solely to the benefit of FMCTI. Except for the right to use the FMC Marks in accordance with this Agreement, JBT shall acquire no right, title or interest in (or adopt, use, register or apply for registrations anywhere for) the FMC Marks (or any translations, variations, adaptations, derivations or |
2
Trademark License Agreement
combinations of the foregoing) or FMC Marks confusingly similar thereto as a result of exercise of any rights under this Agreement. |
2.2. | Quality Control . JBT shall only the the FMC Marks in connection with goods and services that meet or exceed the quality standards of FMCTI as of the date of this Agreement and such other quality standards as the parties may from time to time agree to in writing. In order to ensure continuing quality control, JBT shall, as reasonably requested by FMCTI, provide FMCTI with representative samples of or access to goods and information about the services in connection with which LICENSE uses the FMC Marks. |
2.3. | Notice of Infringement . JBT shall give FMCTI prompt written notice of any actual or threatened infringement of the FMC Marks by any third party after JBT has actual knowledge of such infringement or threatened infringement. Without regard to the manner in which an apparent infringement comes to FMCTIs attention, FMCTI shall in its sole discretion determine whether or not any official action shall be taken on account of any such apparent infringement. In no event shall JBT take any action in connection therewith unless expressly authorized to do so in writing by FMCTI or FMCTI fails to take any reasonable action requested by JBT. In the event of any claim that JBTs use of the FMC Marks infringes any proprietary rights of a third party, JBT shall promptly notify FMCTI thereof and FMCTI shall have the obligation (subject to Section 3.3 in the case of claims asserted by third parties arising out of JBTs use of the FMC Marks in accordance with the terms and conditions of this Trademark Agreement), and shall have the right, in its sole discretion (subject to Section 3.2 in the case of JBTs use of the FMC Marks in contravention of this Agreement) to defend and control such claim, including prosecution, defense and settlement thereof, and JBT shall cooperate fully with FMCTI, at FMCTIs expense, in the conduct thereof. |
2.4. | Notice of Regulatory Action . JBT shall promptly notify FMCTI if JBT receives, or if JBT becomes aware that, a citation has been issued or investigation commenced by any regulatory agency (federal, central government, state or local, no matter where in the world) for violation of any law that may have a reasonable likelihood of materially damaging the goodwill associated with the FMC Marks. |
2.5. | Protection of Rights in FMC Marks . Each party shall provide the other party with all commercially reasonable cooperation to assist the other party in protecting any of its rights in the FMC Marks affected by, or related to, JBTs use of the FMC Marks under this Trademark Agreement. |
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Trademark License Agreement
3. | USE OF FMC MARKS. |
3.1. | Compliance with Laws . In using the FMC Marks as permitted hereunder, JBT shall comply in all material respects with all applicable laws pertaining to the proper use and designation of the FMC Marks. |
3.2. | Indemnification . JBT shall defend, indemnify and hold harmless FMCTI, its affiliates and its and their shareholders, directors, officers, employees and agents from any claims, and all damages, liabilities, judgments, costs (including, without limitation, settlement costs) and expenses associated therewith (including, without limitation, reasonable attorneys fees) related to or arising from: (i) JBTs breach of this Trademark Agreement; or (ii) JBTs use of the FMC Marks in the operation of its business. |
3.3. | Indemnification . FMCTI shall defend, indemnify and hold harmless JBT, its affiliates and its and their shareholders, directors, officers, employees and agents from any claims, and all damages, liabilities, judgments, costs (including, without limitation, settlement costs) and expenses associated therewith (including, without limitation, reasonable attorneys fees) related to or arising from: (i) FMCTIs breach of this Agreement; or (ii) FMCTIs use of the FMC Marks in the operation of its business. |
4. | TERMINATION. |
4.1. | General Term . The term of this Agreement shall commence on the date hereof and shall remain in force and in effect for the time perods indicated in Section 1.1, unless sooner terminated pursuant to Section 4.2. |
4.2. | Termination . This Agreement and the licenses granted hereunder may be terminated by FMCTI or JBT without notice in the event that the other Party: (a) files a petition for insolvency, cessation of payments, bankruptcy or liquidation (or the substantial equivalent in any relevant jurisdiction) or the commencement of any such proceeding against either Party that is not discharged within ninety (90) days thereafter; (b) makes a general assignment for the benefit of its creditors; (c) ceases to conduct its business; or (d) has a receiver (or the substantial equivalent in any relevant jurisdiction) appointed for it or its business. This Agreement and the license granted hereunder may be terminated by FMCTI if there occurs a material breach by JBT of any provision of this Agreement that JBT fails to cure within thirty (30) days after receiving notice of such breach from FMCTI provided that such 30-day period shall continue to be extended so long as JBT is working in good faith to cure such breach. |
4.3. |
Effect of Termination . Upon termination of this Agreement, all rights of JBT to use the FMC Marks shall terminate immediately and shall revert to FMCTI. JBT shall thereafter claim no rights to the FMC Marks or make |
4
Trademark License Agreement
any further reference to them, whether directly or indirectly, in connection with its business or otherwise. |
4.4. | JBT Must Remove and Destroy Materials . Promptly following termination of this Agreement, JBT shall remove or destroy all Packaging, Sales Materials, business cards, signage, stationery, letterhead and any other commercial documents or otherwise in the possession of JBT that include the FMC Marks and, upon request by FMCTI, provide a written certification to FMCTI signed by an officer of JBT of such removal or destruction. To the extent that the FMC Marks are not removable or destroyable on an item, JBT shall place a stamp, sticker or other similar notice or marking on such item clearly indicating that the FMC Marks are owned by FMCTI. |
4.5. | Survival . The following provisions shall survive the termination of this Trademark Agreement for any reason: Sections 2.2, 3.2, 3.3 and 6. |
5. | ASSUMPTION OF TRADEMARK LICENSE AGREEMENT. |
5.1. | JBT agrees to be bound by all of the terms and condition of the FMC Trademark License Agreement as they pertain to the rights and obligations in the FMC Marks being licensed hereunder. A copy of the FMC Trademark License Agreement is attached hereto as Exhibit B. |
6. | DISCLAIMER OF WARRANTIES. |
JBT ACKNOWLEDGES AND AGREES THAT FMCTI IS LICENSING THE FMC MARKS AS IS . FMCTI HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT. FMCTI SHALL NOT BE LIABLE FOR ANY DIRECT, SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL DAMAGES (INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS) ARISING OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE AND CONTRACT), EVEN IF FMCTI HAS BEEN ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
7. | GENERAL PROVISIONS. |
7.1. |
Amendment/Waiver . No modification, amendment, supplement to or waiver of, any provision of this Trademark Agreement shall be binding upon either Party unless made in a writing signed by the Party against which such modification, amendment, supplement to or waiver, is sought |
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Trademark License Agreement
to be enforced. A failure of either Party to exercise any right provided for herein shall not be deemed to be a waiver of any such right hereunder. |
7.2. | Entire Agreement . This Trademark Agreement, together with the SDA, sets forth the entire agreement between the Parties as it relates to the subject matter hereof, and such document replaces and supersedes any and all prior agreements, promises, proposals, representations, understandings and negotiations, written or not, between the Parties relating to the subject matter hereof. |
7.3. | Order of Precedence . In the case of ambiguity or conflict between or among the terms and conditions of this Agreement and the terms and conditions of the SDA, the terms and conditions of this Agreement shall control with respect to the use of the FMC Marks. |
7.4. | Headings and Interpretation . The article and section headings used herein are for reference and convenience only, and shall not enter into the interpretation hereof. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement. |
7.5. | Governing Law . This Trademark Agreement shall be governed by, and construed in accordance with the substantive laws of the State of Texas (without giving effect to the principles of conflict of laws thereof) and, to the extent applicable, those United States laws, or the national laws of another country in which any of the Trademarks are used, whether or not registered or applied for and the appropriate rules and regulations governing trademarks in the respective countries.the internal laws of the State of Texas. |
7.6. | Assignment . FMCTI may assign or transfer this Agreement without the prior written consent of JBT, provided that FMCTI shall notify JBT of such assignment in writing prior to such assignment and FMCTI shall continue to be liable hereunder to the extent the assignee fails to perform its obligations hereunder. JBT shall not assign or transfer this Agreement without the prior written consent of FMCTI, which consent shall not be unreasonably withheld or delayed. This Agreement shall inure to the benefit of, and be binding upon, the Parties and their respective permitted successors and permitted assigns. |
7.7. |
Notices . All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by facsimile, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service and shall be deemed given |
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Trademark License Agreement
when so delivered by hand, or facsimile, or if mailed, three (3) days after mailing (one (1) business day in the case of express mail or overnight courier service), as follows: |
Notices to FMCTI :
FMC Technologies, Inc.
1803 Gears Road
Houston, Texas 77067
Facsimile No.(281) 591-4102
Attention: General Counsel
Notices to JBT :
John Bean Technologies Corporation
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile No.(312) 861-6176
Attention: General Counsel
7.8. | Relationship of the Parties . The relationship between the Parties to this Agreement is that of independent contractors. Under no circumstances shall either Party be deemed an agent or representative of the other Party. Neither Party shall have authority to act for or bind the other Party in any way, or represent that it is in any way responsible for acts of the other Party. Nothing in this Agreement shall be construed or interpreted to create a relationship between the Parties of partner, joint venturer, representative, principal and agent, or employer and employee. |
7.9. | Injunctive Relief . JBT acknowledges and agrees that the provisions of this Agreement are reasonable and necessary to protect FMCTIs rights and interests in the FMC Marks, that any breach of the provisions of this Agreement shall result in irreparable harm to FMCTI, and that the remedy at law for such breach may be inadequate. Accordingly, in the event of a breach of the provisions of this Agreement by JBT, FMCTI, in addition to any other relief available to it at law, in equity or otherwise, shall be entitled to seek attachment of assets and temporary and permanent injunctive relief restraining JBT from engaging in and/or continuing any conduct that constitutes a breach of this Agreement, without the necessity of proving irreparable harm or posting of a bond or other security. |
7.10. |
Severability . If any provision of this Agreement is held to be invalid or unenforceable, the meaning of such provision shall be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation shall save such provision, it shall be severed from the remainder of this Agreement, as appropriate. The remainder of this Agreement shall remain in full force and effect unless the severed |
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Trademark License Agreement
provision is essential and material to the rights or benefits received by either Party. In such event, the Parties shall use their best efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement, which most nearly effects the Parties intent in entering into this Agreement, as appropriate. |
7.11. | Counterparts; Facsimile Transmission . This Agreement may be executed in multiple counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same agreement. Each Party may rely on facsimile signature pages as if such facsimile pages were originals. |
IN WITNESS WHEREOF, each of the Parties hereto, by its duly authorized representative, has caused this Trademark Agreement to be executed as of the Effective Date.
FMC TECHNOLOGIES, INC. |
JOHN BEAN TECHNOLOGIES CORPORATION |
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By: | By: | |||||||
Name: | Name: | |||||||
Its: | Its: | |||||||
Date: | Date: |
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Exhibit 10.3
FORM OF
TRADEMARK ASSIGNMENT AND COEXISTENCE AGREEMENT
THIS TRADEMARK ASSIGNMENT AND COEXISTENCE AGREEMENT is made and entered into as of the day of , 2008, by and between John Bean Technologies Corporation (formerly FMC FoodTech, Inc.), a Delaware corporation with its principal place of business located at 200 East Randolph Drive, Chicago, Illinois 60601 (JBT) and FMC Technologies, Inc., a Delaware corporation, with its principal place of business located at 1803 Gears Road, Houston, Texas 77067 (FMCTI).
W I T NE S S E T H:
WHEREAS, JBT and FMC have entered into that certain Separation and Distribution Agreement of even date herewith (the SDA) pursuant to which FMCTI has agreed to distribute to JBT substantially all of the assets, business properties and rights of its food and transportation business units (Business);
WHEREAS, FMCTI has been using the marks and names BEAN and JOHN BEAN, and variations thereof in connection with various businesses including the development, manufacture, sale and servicing of equipment and apparatus for agricultural and horticultural material handling, fluid control, and pumps;
WHEREAS, the Trademark is subject to existing agreements between FMCTIs predecessor, FMC Corporation, and third parties, including but not limited to Snap-On, Inc., and FMCTI wishes to ensure that any obligations to such third parties are satisfied;
WHEREAS, as part of the SDA, FMCTI desires to sell its ownership interest in the Trademark as applied to the Business, and retain its ownership interest in the Trademark in connection with pumps manufactured, used, sold, leased or otherwise disposed of by the existing energy businesses of FMCTI and JBT desires to obtain ownership of the Trademark for use in connection with the Business, it therefore being the intention of the parties to set forth their rights to use the Trademark on their respective goods and services so that the Marks may coexist in the marketplace without confusion as to the source of the goods and services, as hereinafter set forth below.
NOW THEREFORE, for and in consideration of the promises, agreements and covenants herein contained, the adequacy, sufficiency and receipt of which are conclusively acknowledged, the parties hereto agree as follows:
1. | Definitions. |
1.1 | Trademark shall mean the JOHN BEAN, BEAN and JBT-related trademarks, including but not limited to the trademark registrations listed on Exhibit A. |
1.2 | Field shall mean pumps manufactured, used, sold, leased or otherwise disposed of by the existing energy businesses of FMCTI. |
Trademark Assignment and Coexistence Agreement
1.3 | Snap-On Coexistence Agreement shall mean the agreement entered into between FMC Technologies predecessor in interest, FMC Corporation and Snap-On, Inc., dated March 31, 1996, which was subsequently assigned by FMC Corporation to FMC Technologies pursuant to a Separation and Distribution Agreement, dated May 31, 2001. |
2. | Trademark Assignment and Retention of Rights. |
2.1 | FMCTI hereby sells and assigns to JBT, FMCTIs right, title and interest in and to the Trademark throughout the world, whether or not such Trademark has been registered prior to, on or after the date of this assignment, and any and all renewals and extensions thereof, together with the goodwill associated with such Trademark for JBTs exclusive use in connection with the Business, together with trademark registrations and applications identified on Exhibit A. |
2.2 | FMCTI hereby sells and assigns to JBT, all claims, demands and rights of action, both statutory and based upon common law, that FMCTI has or might have the right to assert against any third party by reason of any infringement of the Trademark, in connection with the Business, prior to, on or after the date of this assignment, together with the right to prosecute such claims, demands and rights of action in JBTs own name |
2.3 | FMCTI hereby assigns to JBT, all right, title and interest in and to the Snap-On Trademark Agreement. JBT hereby accepts all of FMCTIs obligations under the Trademark Agreements, including any obligations to register and maintain the Trademark. JBT agrees to defend, indemnify and hold FMCTI harmless from any claims in any way related to JBTs failure to satisfy FMCTIs obligations under the Snap-On Agreement subsequent to FMCTIs assignment to JBT hereby. |
2.4 | For the avoidance of doubt, FMCTI specifically retains all right, title and interest in and to the Trademark throughout the world, whether or not such Trademark has been prior to, on or after the date of this assignment, and any and all renewals and extensions thereof, together with the goodwill associated with such Trademark for FMCTIs exclusive use in connection with the Field, together with the trademark registrations and pending trademark applications identified on Exhibit B. |
3. | Further Assurances. |
3.1 | FMCTI agrees that it shall do, execute, acknowledge and deliver, at JBTs expense, all acts, agreements, instruments, notices and assurances as may be reasonably requested by JBT to further effect and evidence the transactions contemplated hereby. |
4. | The Parties Use of the Marks . |
4.1 | JBT agrees not to use the Trademark in connection with the Field; and |
2
Trademark Assignment and Coexistence Agreement
4.2 | FMC agrees to use the Trademark only in connection with the Field. |
5. | Authorized Manner of Use Company Name . FMC agrees not to object to JBTs use of the Trademark as a corporate, business and/or trade name in connection with the Business. |
6. | No Likelihood of Confusion . The parties acknowledge and agree that with the limitations on use set forth herein, and in view of the differences between the parties respective goods and channels of trade, confusion between the parties respective goods, services and business is unlikely. The parties further acknowledge and agree that if either party receives a direct inquiry related to the goods and/or services of the other authorized hereunder, the party receiving such inquiry will use its best reasonable efforts to direct that inquiry to the appropriate party and both parties will take reasonable mutually acceptable steps to prevent further instances of misdirected inquiries or confusion. |
7. | Representations and Warranties. |
7.1 | Each party hereby represents and warrants to the other that it has the power and authority to execute and deliver this Trademark Assignment and Coexistence Agreement and to carry out its provisions. |
8. | Notices. |
8.1 | Any notice, demand, waiver, consent, approval, or disapproval (collectively referred to as notice) required or permitted herein shall be in writing and shall be given personally, by messenger, by air courier, by facsimile transmission, or by prepaid registered or certified mail, with return receipt requested, addressed to the parties at their respective addresses set forth above or at such other address as a party may hereafter designate in writing to the other party. |
8.2 | A notice shall be deemed received on the date of receipt. |
9. | Enforceability. |
9.1 | If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, or as applied to any circumstance, under the laws of any jurisdiction which may govern for such purpose, then such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, either generally or as applied to such circumstance, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be. |
10. | Modification, Amendment, Supplement, or Waiver. |
3
Trademark Assignment and Coexistence Agreement
10.1 | No modification, amendment, supplement to or waiver of this Agreement or any of its provisions shall be binding upon the parties hereto unless made in writing and signed by the party against whom enforcement of any modification, amendment, supplement or waiver is sought. |
10.2 | A waiver by either party of any of the terms or conditions of this Agreement in any one instance shall not be deemed a waiver of such terms or conditions in the future. |
11. | No Third-Party Beneficiaries. Nothing expressed or implied in this Agreement is intended to confer upon any person, other than the parties hereto, or their respective successors or permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. |
12. | Governing Law. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Texas (without giving effect to the principles of conflict of laws thereof) and, to the extent applicable, those United States laws, or the national laws of another country in which any of the Trademarks are used, whether or not registered or applied for and the appropriate rules and regulations governing trademarks in the respective countries. |
13. | Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. |
14. | Entire Agreement. This Agreement, in conjunction with the SDA, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all previous agreements, promises, representations, understandings, and negotiations, whether written or oral. |
15. | Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but which together shall constitute one and the same agreement. |
IN WITNESS WHEREOF, the undersigned have executed the above and foregoing Trademark Assignment and Coexistence Agreement on the date first set forth above.
FMC TECHNOLOGIES, INC. a Delaware corporation |
JOHN BEAN TECHNOLOGIES CORPORATION a Delaware corporation |
|||||||
By | By | |||||||
Name | Name | |||||||
Title | Title |
4
Trademark Assignment and Coexistence Agreement
EXHIBIT A
To
TRADEMARK REGISTRATIONS AND APPLICATIONS BEING ASSIGNED TO JBT
Trademark |
Country | Status | Appl. Date | Appl. No. | Reg. Date | Reg. No. |
Next
Renewal |
|||||||
JBT |
United States | Pending | 2/7/2008 | 77/390,994 | ||||||||||
JBT (and Design) |
United States | Pending | 2/7/2008 | 77/391,100 | ||||||||||
JBT FOODTECH |
United States | Pending | 2/7/2008 | 77/390,967 | ||||||||||
JBT AEROTECH |
United States | Pending | 2/7/2008 | 77/391,069 | ||||||||||
JOHN BEAN TECHNOLOGIES CORPORATION |
United States | Pending | 2/7/2008 | 77/391,033 | ||||||||||
JOHN BEAN |
Brazil | Registered | 12/7/1995 | 818966904 | 9/1/1998 | 818966904 | 9/1/2008 | |||||||
JOHN BEAN |
Canada | Renewed | 9/18/1970 | 336348 | 1/7/1972 | 180478 | 1/7/2017 |
5
Trademark Assignment and Coexistence Agreement
EXHIBIT B
To
TRADEMARK REGISTRATIONS AND APPLICATIONS BEING RETAINED BY
FMCTI
Trademark |
Country | Status | Appl. Date | Appl. No. | Reg. Date | Reg. No. |
Next
Renewal |
|||||||
JOHN BEAN (STYLIZED) |
Argentina | Renewed | 12/20/2004 | 2516364 | 12/20/2004 | 2002766 | 12/20/2014 | |||||||
BEAN |
Argentina | Renewed | 1/12/1998 | 2125359 | 8/27/1998 | 1683798 | 8/27/2008 | |||||||
BEAN |
Benelux | Renewed | 7/27/1971 | 8509 | 7/27/1971 | 55464 | 7/27/2009 | |||||||
BEAN |
China P.R. | Pending | 5/8/2006 | 5335722 | ||||||||||
BEAN |
Colombia | Renewed | 12/7/1988 | 242622 | 12/27/1993 | 122515 | 12/27/2013 | |||||||
BEAN |
Mexico | Pending | 5/22/2007 | 855922 | ||||||||||
BEAN |
Mexico | Renewed | 9/3/1981 | 190120 | 9/3/1981 | 272154 | 9/3/2011 | |||||||
BEAN |
Spain | Renewed | 3/14/1973 | 706529 | 1/3/1977 | 706529 | 3/14/2013 | |||||||
BEAN |
United States | Registered | 10/17/1949 | 71/586,408 | 4/15/1952 | 557,505 | 4/15/2012 | |||||||
JOHN BEAN |
Brazil | Registered | 12/8/1995 | 818968761 | 9/1/1998 | 818968761 | 9/1/2008 | |||||||
JOHN BEAN |
Brazil | Registered | 12/8/1995 | 818968770 | 9/1/1998 | 818968770 | 9/1/2008 | |||||||
BEAN |
Chile | Renewed | 2/28/2002 | 389442 | 10/7/2002 | 644307 | 10/7/2012 | |||||||
BEAN |
Denmark | Renewed | 5/4/1950 | 97450 | 7/4/1953 | 1953 00785 | 7/4/2013 | |||||||
BEAN AND DESIGN |
Uruguay | Renewed | 262496 | 5/17/1993 | 347553 | 5/17/2013 |
6
Trademark Assignment and Coexistence Agreement
EXHIBIT C
To
TRADEMARK ASSIGNMENT AND COEXISTENCE AGREEMENT
Coexistence Agreement entered into by and between Snap-On Incorporated and FMC Technologies predecessor, FMC Corporation, dated March 31, 1996 (attached)
7
Exhibit 10.4
FORM OF
JOHN BEAN TECHNOLOGIES CORPORATION
INCENTIVE COMPENSATION AND STOCK PLAN
SECTION 1. PURPOSE
The purpose of the Plan is to give the Company a competitive advantage in attracting, retaining and motivating officers, employees, directors and consultants of the Company and its Affiliates.
SECTION 2. DEFINITIONS
2.1 General . For purposes of the Plan, the following terms are defined as set forth below:
(a) | Affiliate means a corporation or other entity controlled by, controlling or under common control with the Company, including, without limitation, any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent (50%) voting or profits interest is owned, directly or indirectly, by the Company or any successor to the Company. |
(b) | Annual Retainer means the retainer fee established by the Board and paid to a Non-Employee Director for services on the Board for a specified year. |
(c) | Award means a Management Incentive Award, Stock Option, Stock Appreciation Right, Performance Unit, Stock Unit, Restricted Stock or other award authorized under the Plan. |
(d) | Award Cycle means a period of consecutive fiscal years or portions thereof designated by the Committee over which Awards are to be earned. |
(e) | Board means the Board of Directors of the Company. |
(f) | Business Unit means a unit of the business of the Company or its Affiliates as determined by the Committee and the CEO. |
(g) | Capital Employed means operating working capital plus net property, plant and equipment. |
(h) |
Cause means (1) Cause as defined in any Individual Agreement to which the participant is a party, or (2) if there is no such Individual Agreement, or, if it does not define Cause: (A) the participant having been convicted of, or pleading guilty or nolo contendere to, a felony under federal or state law; (B) the willful and continued failure on the part of the participant to substantially perform his or her employment duties in any material respect (other than such failure resulting from Disability), after a written demand for substantial performance is delivered to the participant that specifically identifies the manner in which the Company |
believes the participant has failed to perform his or her duties, and after the participant has failed to resume substantial performance of his or her duties within thirty (30) days of such demand; or (C) willful and deliberate conduct on the part of the participant that is materially injurious to the Company or an Affiliate; or (D) prior to a Change in Control, such other events as will be determined by the Committee. The Committee will, unless otherwise provided in an Individual Agreement with the participant, determine whether Cause exists. |
(i) | CEO means the Companys chief executive officer. |
(j) | Change in Control and Change in Control Price have the meanings set forth in Sections 15.2 and 15.3, respectively. |
(k) | Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. |
(l) | Committee means the Compensation Committee of the Board, or such other committee as the Board may from time to time designate. |
(m) | Common Stock means (1) the common stock of the Company, par value $.01 per share, subject to adjustment as provided in Section 4.1 Shares Available for Issuance ; or (2) if there is a merger or consolidation and the Company is not the surviving corporation, the capital stock of the surviving corporation given in exchange for such common stock of the Company. |
(n) | Company means John Bean Technologies Corporation, a Delaware corporation. |
(o) | Covered Employee means a participant who has received a Management Incentive Award, Restricted Stock, Performance Units, Stock Units or Restricted Stock Units, who has been designated as such by the Committee and who is or may be a covered employee within the meaning of Section 162(m)(3) of the Code in the year in which the Management Incentive Award, Restricted Stock or Performance Units are expected to be taxable to such participant. |
(p) | Disability means, unless otherwise provided by the Committee, (1) Disability as defined in any Individual Agreement to which the participant is a party, or (2) if there is no such Individual Agreement, or, if it does not define Disability, permanent and total disability as determined under the Companys long-term disability plan. |
(q) |
Dividend Equivalent Rights means the right to receive cash, Stock Options, Restricted Stock, Performance Units, Stock Units or Restricted Stock Units as determined by the Committee, in an amount equal to any dividends that would have been paid on a Stock Option, Restricted Stock, Performance Unit, Stock Units or Restricted Stock Units as applicable, with Dividend Equivalent Rights if such Stock Option, Restricted Stock, Performance Unit, Stock Units or Restricted Stock Units as applicable, was a share of Common Stock held by the participant |
Page 2
on the dividend payment date. Unless the Committee determines that Dividend Equivalent Rights will be paid in cash as of the dividend payment date, such Dividend Equivalent Rights, once credited, will be converted into an equivalent number of Stock Options, shares of Restricted Stock, Performance Units, Stock Units or Restricted Stock Units as applicable; provided, however, that the number of shares subject to any Award will always be a whole number. Unless otherwise determined by the Committee as of the dividend payment date, if a dividend is paid in cash, the number of Stock Options, shares of Restricted Stock, Performance Units, Stock Units or Restricted Stock Units into which a Dividend Equivalent Right will be converted will be calculated as of the dividend payment date, in accordance with the following formula: |
(A x B)/C
in which A equals the number of Stock Options, shares of Restricted Stock, Performance Units, Stock Units or Restricted Stock Units with Dividend Equivalent Rights held by the participant on the dividend payment date, B equals the cash dividend per share and C equals the Fair Market Value per share of Common Stock on the dividend payment date. Unless otherwise determined by the Committee as of the dividend payment date, if a dividend is paid in property other than cash, the number of Stock Options, shares of Restricted Stock Performance Units, Stock Units or Restricted Stock Units as applicable into which a Dividend Equivalent Right will be converted will be calculated, as of the dividend payment date, in accordance with the formula set forth above, except that B will equal the fair market value per share of the property which the participant would have received if the Stock Option, share of Restricted Stock Performance Unit, Stock Unit or Restricted Stock Unit as applicable, with Dividend Equivalent Rights held by the participant on the dividend payment date was a share of Common Stock.
(s) | Effective Date means February 26, 2008. |
(t) | Eligible Individuals means officers, employees, directors and consultants of the Company or any of its Affiliates, and prospective employees, directors and consultants who have accepted offers of employment, membership on a board or consultancy from the Company or its Affiliates, who are or will be responsible for or contribute to the management, growth or profitability of the business of the Company or its Affiliates, as determined by the Committee. |
(u) | Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. |
(v) | Expiration Date means the date on which an Award becomes unexercisable and/or not payable by reason of lapse of time or otherwise as provided in Section 6.2 Expiration Date . |
Page 3
(w) | Fair Market Value means, except as otherwise provided by the Committee, as of any given date, the closing price for the shares on the New York Stock Exchange for the specified date (as of 4 p.m. Eastern Standard Time or Eastern Daylight Savings Time, whichever is then in effect), or, if the shares were not traded on the New York Stock Exchange on such date, then on the next preceding date on which the shares were traded, all as reported by such source as the Committee may select. |
(x) | Grant Date means the date designated by the Committee as the date of grant of an Award. |
(y) | Incentive Stock Option means any Stock Option designated as, and qualified as, an incentive stock option within the meaning of Section 422 of the Code. |
(z) | Individual Agreement means a severance, employment, consulting or similar agreement between a participant and the Company or one of its Affiliates. |
(aa) | Management Incentive Award means an Award of cash, Common Stock, Restricted Stock or a combination of cash, Common Stock and Restricted Stock, as determined by the Committee. |
(bb) | Net Contribution means for a Business Unit, its operating profit after-tax, less the product of (1) a percentage as determined by the Committee; and (2) the Business Units Capital Employed. |
(cc) | Non-Employee Director means each director of the Company who is not otherwise an employee of the Company or its Affiliates. |
(dd) | Nonqualified Stock Option means any Stock Option that is not an Incentive Stock Option. |
(ee) | Notice means the written evidence of an Award granted under the Plan in such form as the Committee will from time to time determine. |
(ff) |
Performance Goals means the performance goals established by the Committee in connection with the grant of Management Incentive Awards, Restricted Stock, Performance Units, Stock Units or Restricted Stock Units as set forth in the Notice. In the case of Qualified Performance-Based Awards, Performance Goals will be set by the Committee within the time period prescribed by Section 162(m) of the Code and related regulations, The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as performance-based compensation shall be limited to one or more of the following performance measures: net revenue; net earnings (before or after taxes); operating earnings or income; absolute and/or relative return measures (including, but not limited to, return on assets, capital, invested capital, net contribution, equity, sales, or revenue); earnings per share; cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow |
Page 4
return on equity, and cash flow return on investment); net operating profits; earnings before or after taxes, interest, depreciation, and/or amortization; earning as a percentage of sales; earnings growth before or after taxes, interest, depreciation, and/or amortization; gross, operating, or net margins; revenue growth; book value per share; stock price (including, but not limited to, growth measures and total shareholder return); economic value added; customer satisfaction; market share; working capital; productivity ratios; operating goals (including, but not limited to, safety, reliability, maintenance expenses, capital expenses, customer satisfaction, operating efficiency, and employee satisfaction); and performance relative to peer companies, each of which may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures. |
(gg) | Performance Units means an Award granted under Section 12 Performance Units . |
(hh) | Plan means the John Bean Technologies Corporation Incentive Compensation and Stock Plan, as set forth herein and as hereinafter amended from time to time. |
(ii) | Qualified Performance-Based Award means a Management Incentive Award, an Award of Restricted Stock, an Award of Performance Units, an Award of Stock Units or an Award of Restricted Stock Units designated as such by the Committee, based upon a determination that (1) the recipient is or may be a Covered Employee; and (2) the Committee wishes such Award to qualify for the Section 162(m) Exemption. |
(jj) | Restricted Stock means an Award granted under Section 11 Restricted Stock . |
(kk) | Section 162(m) Exemption means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code. |
(ll) | Separation from Service means the cessation of a Non-Employee Directors service on the Board. Temporary absences from service on the Board for a period not to exceed six (6) consecutive months because of illness, vacation or leave of absence will not be considered a Separation from Service. |
(mm) | Stock Appreciation Right means an Award granted under Section 10 Stock Appreciation Rights . |
(nn) | Stock Option means an Award granted under Section 9 Stock Options . |
(oo) | Stock Units or Restricted Stock Units means an Award granted under Section 12 Performance Units, Stock Units or Restricted Stock Units. |
(pp) |
Termination of Employment means the termination of the participants employment with, or performance of services for, the Company and any of its |
Page 5
Affiliates. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Affiliates will not be considered a Termination of Employment. |
(qq) | Vesting Date means the date on which an Award becomes vested, and, if applicable, fully exercisable and/or payable by or to the participant as provided in Section 6.3 Vesting . |
2.2 Other Definitions . In addition, certain other terms used herein have definitions given to them in the first place in which they are used.
SECTION 3. ADMINISTRATION
3.1 Committee Administration . The Committee is the administrator of the Plan. Among other things, the Committee has the authority, subject to the terms of the Plan:
(a) | To select the Eligible Individuals to whom Awards are granted; |
(b) | To determine whether and to what extent Awards are granted; |
(c) | To determine the amount of each Award; |
(d) | To determine the terms and conditions of any Award, including, but not limited to, the option price, any vesting condition, restriction or limitation regarding any Award and the shares of Common Stock relating thereto, based on such factors as the Committee will determine; |
(e) | To modify, amend or adjust the terms and conditions of any Award, at any time or from time to time, to the extent that such modification, amendment, or adjustment does not conflict with Section 409A of the Code. |
(f) | To determine to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award will be deferred, to the extent that such deferral does not conflict with Section 409A of the Code and |
(g) | To determine under what circumstances an Award may be settled in cash or Common Stock or a combination of cash and Common Stock. |
The Committee has the authority to adopt, alter and repeal administrative rules, guidelines and practices governing the Plan, to interpret the terms and provisions of the Plan, any Award, any Notice and any other agreement relating to any Award and to take any action it deems appropriate for the administration of the Plan.
3.2 Committee Action . The Committee may act only by a majority of its members then in office unless it allocates or delegates its authority to a Committee member or other person to act on its behalf. Except to the extent prohibited by applicable law or applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any other person or persons. Any such allocation or delegation may be revoked by the Committee at any time.
Page 6
Any determination made by the Committee or its delegate with respect to any Award will be made in the sole discretion of the Committee or such delegate. All decisions of the Committee or its delegate are final, conclusive and binding on all parties.
3.3 Board Authority . Any authority granted to the Committee may also be exercised by the full Board. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action will control. Notwithstanding anything herein to the contrary, the Board is the administrator of the portion of the Plan applicable to Non-Employee Directors.
SECTION 4. SHARES
4.1 Shares Available For Issuance . The maximum number of shares of Common Stock that may be delivered to participants and their beneficiaries under the Plan will be 3,700,000. Shares subject to an Award under the Plan may be authorized and unissued shares or may be treasury shares.
No Award will be counted against the shares available for delivery under the Plan if the Award is payable to the participant only in the form of cash, or if the Award is paid to the participant in cash.
If any Award is forfeited, or if any Stock Option (and any related Stock Appreciation Right) terminates, expires or lapses without being exercised, or if any Stock Appreciation Right is exercised for cash, the shares of Common Stock subject to such Awards will again be available for delivery in connection with Awards under the Plan. If the option price of any Stock Option granted under the Plan is satisfied by delivering shares of Common Stock to the Company (by either actual delivery or by attestation), only the number of shares of Common Stock delivered to the participant, net of the shares of Common Stock delivered or attested to, will be deemed delivered for purposes of determining the maximum numbers of shares of Common Stock available for delivery under the Plan. To the extent any shares of Common Stock subject to an Award are not delivered to a participant because such shares are used to satisfy an applicable tax-withholding obligation, such shares will not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan.
In the event of any corporate event or transaction, (including, but not limited to, a change in the number of shares of Common Stock outstanding), such as a stock split, merger, consolidation, separation, including a spin-off or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Company, the Committee shall make such substitution or adjustments in the aggregate number, kind, and price of shares reserved for issuance under the Plan, and the maximum limitation upon any Awards to be granted to any participant, in the number, kind and price of shares subject to outstanding Awards granted under the Plan and/or such other equitable substitution or adjustments as it may
Page 7
determines are required to accomplish the same; provided, however, that the number of shares subject to any Award will always be a whole number. Such adjusted price will be used to determine the amount payable in cash or shares, as applicable, by the Company upon the exercise of any Award. Any such adjustment to an Award may be made to the extent that such adjustment does not conflict with Section 409A of the Code.
4.2 Individual Limits . No participant may be granted Stock Options and Stock Appreciation Rights covering in excess of 400,000 shares of Common Stock in any calendar year. The maximum aggregate amount with respect to each Management Incentive Award, Award of Performance Units, Award of Restricted Stock, Award of Stock Units or Award of Restricted Stock Units that may be granted, or, that may vest, as applicable, in any calendar year for any individual participant is 400,000 shares of Common Stock, or the dollar equivalent of 400,000 shares.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to Eligible Individuals. Incentive Stock Options may be granted only to employees of the Company and its subsidiaries or parent corporation (within the meaning of Section 424(f) of the Code). The maximum number of Shares of the Share Authorization that may be issued pursuant to Incentive Stock Options under the Plan shall be 3,700,000.
SECTION 6. TERMS AND CONDITIONS OF AWARDS
6.1 General . Awards will be in the form and upon the terms and conditions as determined by the Committee, subject to the terms of the Plan. The Committee is authorized to grant Awards independent of, or in addition to other Awards granted under the Plan. The terms and conditions of each Award may vary from other Awards. Awards will be evidenced by Notices, the terms and conditions of which will be consistent with the terms of the Plan and will apply only to such Award.
6.2 Expiration Date . Unless otherwise provided in the Notice, the Expiration Date of an Award will be the earlier of the date that is ten (10) years after the Grant Date or the date of the participants Termination of Employment.
6.3 Vesting . Each Award vests and becomes fully payable, exercisable and/or released of any restriction on the Vesting Date. The Vesting Date of each Award, as determined by the Committee, will be set forth in the Notice. Prior to the Vesting Date, an Award remains subject to a substantial risk of forfeiture.
SECTION 7. QUALIFIED PERFORMANCE-BASED AWARDS
The Committee may designate a Management Incentive Award, or an Award of Restricted Stock or an Award of Performance Units or an Award of Stock Units or an Award or Restricted Stock Units as a Qualified Performance-Based Award, in which case, the Award is contingent upon the attainment of Performance Goals, and, as a result, remains subject to a substantial risk of forfeiture until the attainment of such Performance Goals.
Page 8
SECTION 8. MANAGEMENT INCENTIVE AWARDS
8.1 Management Incentive Awards . The Committee is authorized to grant Management Incentive Awards, subject to the terms of the Plan. Notices for Management Incentive Awards will indicate the Award Cycle, any applicable Performance Goals, any applicable designation of the Award as a Qualified Performance-Based Award and the form of payment of the Award.
8.2 Settlement . As soon as practicable after the later of the Vesting Date and the date any applicable Performance Goals are satisfied, but in any event within seventy (70) days following the later of such events, Management Incentive Awards will be paid to the participant in cash, Common Stock, Restricted Stock or a combination of cash, Common Stock and Restricted Stock, as determined by the Committee. The number of shares of Common Stock payable under the stock portion of a Management Incentive Award will equal the amount of such portion of the award divided by the Fair Market Value of the Common Stock on the date of payment.
SECTION 9. STOCK OPTIONS
9.1 Stock Options . The Committee is authorized to grant Stock Options, including both Incentive Stock Options and Nonqualified Stock Options, subject to the terms of the Plan. Notices will indicate whether the Stock Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option, the option price, the term and the number of shares to which it pertains. To the extent that any Stock Option is not designated as an Incentive Stock Option, or, even if so designated does not qualify as an Incentive Stock Option on or subsequent to its Grant Date, it will constitute a Nonqualified Stock Option.
9.2 Option Price . The option price per share of Common Stock purchasable under a Stock Option will be determined by the Committee and will not be less than the Fair Market Value of the Common Stock subject to the Stock Option on the Grant Date, except as provided under Section 4.1.
9.3 Incentive Stock Options . The terms of the Plan addressing Incentive Stock Options and each Incentive Stock Option will be interpreted in a manner consistent with Section 422 of the Code and all valid regulations issued thereunder.
9.4 Exercise . Stock Options will be exercisable at such time or times and subject to the terms and conditions set forth in the Notice. A participant can exercise a Stock Option, in whole or in part, at any time on or after the Vesting Date and before the Expiration Date by giving written notice of exercise to the Company specifying the number of shares of Common Stock subject to the Stock Option to be purchased. Such notice will be accompanied by payment in full to the Company of the option price by certified or bank check or such other cash equivalent instrument as the Company may accept. If approved by the Committee, payment in full or in part may also be made in the form of Common Stock (by delivery of such shares or by
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attestation) already owned by the optionee of the same class as the Common Stock subject to the Stock Option, based on the Fair Market Value of the Common Stock on the date the Stock Option is exercised.
9.5 Settlement . As soon as practicable after the exercise of a Stock Option, the Company will deliver to or on behalf of the optionee certificates of Common Stock for the number of shares purchased. No shares of Common Stock will be issued until full payment therefor has been made. An optionee will have all of the rights of a stockholder of the Company holding Common Stock, including, but not limited to, the right to vote the shares and the right to receive dividends, when the optionee has given written notice of exercise, has paid in full for such shares and, if requested, has given the representation described in Section 19 General Provisions . The Committee may give optionees Dividend Equivalent Rights, provided, if a Dividend Equivalent Right is granted, such grant cannot be conditioned on the grantee exercising the underlying option.
9.6 Nontransferability . No Stock Option will be transferable by the optionee other than by will or by the laws of descent and distribution. All Stock Options will be exercisable, subject to the terms of the Plan, only by the optionee, the guardian or legal representative of the optionee, or any person to whom such Stock Option is transferred pursuant to this paragraph, it being understood that the term holder and optionee include such guardian, legal representative and other transferee. No Stock Option will be subject to execution, attachment or other similar process.
Notwithstanding anything herein to the contrary, the Committee may permit a participant at any time prior to his or her death to assign all or any portion without consideration therefor of a Nonqualified Stock Option to:
(a) | The participants spouse or lineal descendants; |
(b) | The trustee of a trust for the primary benefit of the participant and his or her spouse or lineal descendants, or any combination thereof; |
(c) | A partnership of which the participant, his or her spouse and/or lineal descendants are the only partners; |
(d) | Custodianships under the Uniform Transfers to Minors Act or any other similar statute; or |
(e) | Upon the termination of a trust by the custodian or trustee thereof, or the dissolution or other termination of the family partnership or the termination of a custodianship under the Uniform Transfers to Minor Act or any other similar statute, to the person or persons who, in accordance with the terms of such trust, partnership or custodianship are entitled to receive the Nonqualified Stock Option held in trust, partnership or custody. |
In such event, the spouse, lineal descendant, trustee, partnership or custodianship will be entitled to all of the participants rights with respect to the assigned portion of the Nonqualified Stock Option, and such portion will continue to be subject to all of the terms, conditions and restrictions applicable to the Nonqualified Stock Option.
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9.7 Cashing Out . On receipt of written notice of exercise, the Committee may elect to cash out all or part of the portion of the shares of Common Stock for which a Stock Option is being exercised by paying the optionee an amount, in cash or Common Stock, equal to the excess of the Fair Market Value of the Common Stock over the option price times the number of shares of Common Stock for which the Stock Option is being exercised on the effective date of such cash-out. In addition, notwithstanding any other provision of the Plan, the Committee, either on the Grant Date or thereafter, may give a participant the right to voluntarily cash-out the participants outstanding Stock Options during the seventy (70)-day period following a Change in Control. A participant who has such a cash-out right and elects to cash-out Stock Options may do so during the seventy (70)-day period following a Change in Control by giving notice to the Company to elect to surrender all or part of the Stock Option to the Company and to receive cash, within thirty (30) days of such election, in an amount equal to the amount by which the Change in Control Price per share of Common Stock on the date of such election exceeds the exercise price per share of Common Stock under the Stock Option multiplied by the number of shares of Common Stock granted under the Stock Option as to which this cash-out right is exercised.
9.8 Term of Options . Each Option granted to a participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10 th ) anniversary date of its grant.
SECTION 10. STOCK APPRECIATION RIGHTS
10.1 Stock Appreciation Rights . The Committee is authorized to grant Stock Appreciation Rights, subject to the terms of the Plan. Stock Appreciation Rights granted with a Nonqualified Stock Option may be granted either on or after the Grant Date. Stock Appreciation Rights granted with an Incentive Stock Option may be granted only on the Grant Date of such Stock Option. Notices of Stock Appreciation Rights granted with Stock Options may be incorporated into the Notice of the Stock Option. Notices of Stock Appreciation Rights will indicate whether the Stock Appreciation Right is independent of any Award or granted with a Stock Option, the price, the term, the method of exercise and the form of payment. The grant of a Stock Appreciation Right shall be at a price per share that is at least equal to the Fair Market Value of a share of Common Stock as of the Grant Date of such Appreciation Right.
10.2 Exercise . A participant can exercise Stock Appreciation Rights, in whole or in part, at any time after the Vesting Date and before the Expiration Date, or, with respect to Stock Appreciation Rights granted in connection with any Stock Option, at such time or times and to the extent that the Stock Options to which they relate are exercisable, by giving written notice of exercise to the Company specifying the number of Stock Appreciation Rights to be exercised. A Stock Appreciation Right granted with a Stock Option may be exercised by an optionee by surrendering any applicable portion of the related Stock Option in accordance with procedures established by the Committee. To the extent provided by the Committee, Stock Options which have been so surrendered will no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised.
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10.3 Settlement . As soon as practicable after the exercise of a Stock Appreciation Right, an optionee will be entitled to receive an amount in cash, shares of Common Stock or a combination of cash and shares of Common Stock, as determined by the Committee, in value equal to the excess of the Fair Market Value on the date of exercise of one share of Common Stock over the Stock Appreciation Right price per share multiplied by the number of shares in respect of which the Stock Appreciation Right is being exercised. Upon the exercise of a Stock Appreciation Right granted with any Stock Option, the Stock Option or part thereof to which such Stock Appreciation Right is related will be deemed to have been exercised for the purpose of the limitation set forth in Section 4 Shares on the number of shares of Common Stock to be issued under the Plan, but only to the extent of the number of shares delivered upon the exercise of the Stock Appreciation Right.
10.4 Nontransferability . Stock Appreciation Rights will be transferable only to the extent they are granted with any Stock Option, and only to permitted transferees of such underlying Stock Option in accordance with the Nontransferability provisions of Section 9.
10.5 Term of Stock Appreciation Right . Each Stock Appreciation right granted to a participant shall expire at such time as the Committee shall determine at the time of grant; however, no Stock Appreciation Right shall be exercisable later than the tenth (10 th ) anniversary date of its grant.
SECTION 11. RESTRICTED STOCK
11.1 Restricted Stock . The Committee is authorized to grant Restricted Stock, subject to the terms of the Plan. Notices for Restricted Stock may be in the form of a Notice and book-entry registration or issuance of one or more stock certificates. Any certificate issued in respect of shares of Restricted Stock will be registered in the name of such participant and will bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions, including, but not limited to, forfeiture of the FMC Technologies, Inc. Incentive Compensation and Stock Plan and a Restricted Stock Notice. Copies of such Plan and Notice are on file at the offices of FMC Technologies, Inc.
The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon will have lapsed and that, as a condition of any Award of Restricted Stock, the participant will have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award. The Notice or certificates will indicate any applicable Performance Goals, any applicable designation of the Restricted Stock as a Qualified Performance-Based Award and the form of payment.
11.2 Participant Rights . Subject to the terms of the Plan and the Notice or certificate of Restricted Stock, the participant will not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock until the later of the Vesting Date and the date
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any applicable Performance Goals are satisfied. Except as provided in the Plan and the Notice or certificate of the Restricted Stock, the participant will have, with respect to the shares of Restricted Stock, Dividend Equivalent Rights, if so granted.
11.3 Settlement . As soon as practicable after the later of the Vesting Date and the date any applicable Performance Goals are satisfied and prior to the Expiration Date, unlegended certificates for such shares of Common Stock will be delivered to the participant upon surrender of any legended certificates, if applicable.
SECTION 12. PERFORMANCE UNITS, STOCK UNITS OR RESTRICTED STOCK UNITS
12.1 Performance Units, Stock Units or Restricted Stock Units . The Committee is authorized to grant Performance Units, Stock Units or Restricted Stock Units, subject to the terms of the Plan. Notices of Performance Units will indicate any applicable Performance Goals, any applicable designation of the Award as a Qualified Performance-Based Award and the form of payment.
12.2 Settlement . Except as otherwise provided in Section 14, as soon as practicable after the later of the Vesting Date and the date any applicable Performance Goals are satisfied, but in any event within seventy (70) days following the later of such events, Performance Units, Stock Units or Restricted Stock Units will be paid in the manner as provided in the Notice. Payment of Performance Units, Stock Units or Restricted Stock Units will be made in an amount of cash equal to the Fair Market Value of one share of Common Stock multiplied by the number of Performance Units, Stock Units or Restricted Stock Units earned or, if applicable, in a number of shares of Common Stock equal to the number of Performance Units, Stock Units or Restricted Stock Units earned, each as determined by the Committee.
SECTION 13. OTHER AWARDS
The Committee is authorized to make, either alone or in conjunction with other Awards, Awards of cash or Common Stock and Awards that are valued in whole or in part by reference to, or are otherwise based upon, Common Stock, including, without limitation, convertible debentures.
SECTION 14. NON-EMPLOYEE DIRECTOR AWARDS
14.1 Annual Retainer . Each Non-Employee Director will receive an Annual Retainer in such amount as will be determined from time to time by the Board. Until changed by resolution of the Board, the Grant Date of the Annual Retainer will be May 1 of each year, and the amount of the Annual Retainer will be reviewed and adjusted only by Board resolution. At least 50 percent of the retainer must be paid in the form of Stock Units or Restricted Units on the Grant Date, provided the Non-Employee Director makes an irrevocable election to receive such Stock Units or Restricted Stock Units in lieu of cash on or before December 31 of the year prior to the fiscal year in which the Annual Retainer is to be earned, and the remainder of which, if any, will be paid in cash in quarterly installments within seventy (70) days following the end
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of each calendar quarter. The number of Stock Units or Restricted Stock Units constituting the Annual Retainer for each Non-Employee Director will be equal to the number obtained by dividing the value of the retainer which the Non-Employee Director has elected to defer by the Fair Market Value of the Common Stock on the Grant Date.
14.2 Annual Award . In addition to the Annual Retainer, the Board has the authority to grant Non-Employee Directors Stock Options, Restricted Stock, Stock Units or Restricted Stock Units, subject to the terms of the Plan.
14.3 Committee Chairman Fees . Each Non-Employee Director who serves as a chairman of a committee of the Board will receive a committee chairman fee in such amount as determined by the Board for the tenure of such service. The Committee chairmen fee may vary among the committees and may only be changed upon a resolution of the Board. It is payable in cash in quarterly installments within seventy (70) days following the end of each calendar quarter.
14.4 Vesting . Awards granted to Non-Employee Directors, including the portion of the Annual Retainer paid in the form of Stock Units or Restricted Stock Units under Section 14.1, will have a Vesting Date as determined by the Board. Unless otherwise provided in the Award, such Vesting Date will be the date of the Companys annual stockholders meeting next following the Grant Date.
14.5 Separation from Service . Except as provided below, if a Non-Employee Director has a Separation from Service prior to the Vesting Date of a Stock Unit or Restricted Stock Unit, any unvested Stock Units or Restricted Stock Units are forfeited and all further rights of the Non-Employee Director to or with respect to such Stock Units or Restricted Stock Units terminate. If a Non-Employee Director dies while serving as a director of the Company, any vested Stock Units or Restricted Stock Units will be paid to the person designated in the Non-Employee Directors last will and testament or, in the absence of such designation, to his or her estate. Upon death or disability, any unvested Stock Units or Restricted Stock Units will vest and become payable in a proportionate amount, based upon the full months of service completed during the vesting period from the Grant Date to the date of death or disability. Any unvested Stock Units or Restricted Stock Units vest and become immediately payable upon a Change in Control. For purposes of this section 14.5, the term disability shall have such meaning as is set forth under Section 409A of the Internal Revenue Code of 1986, as amended (the Code).
14.6 Settlement . Payments with respect to Stock Units or Restricted Stock Units of a Non-Employee Director will be made in shares of Common Stock issued to the Non-Employee Director as soon as practicable after his or her Separation from Service, but in any event within seventy (70) days following such Separation from Service. Stock Units or Restricted Stock Units will be valued using the Fair Market Value of Common Stock on the last business day of his or her service on the Board. Notwithstanding anything herein to the contrary, payments with respect to Stock Units or Restricted Stock Units will also be made in shares of Common Stock upon the occurrence of a Change in Control.
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SECTION 15. CHANGE IN CONTROL
15.1 Impact of Change in Control . Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control, as of the date such Change in Control is determined to have occurred, any outstanding:
(a) | Stock Options and Stock Appreciation Rights become fully exercisable and vested to the full extent of the original grant; |
(b) | Restricted Stock becomes free of all restrictions and becomes fully vested and transferable to the full extent of all or a portion of the maximum amount of the original grant as provided in the Notice, or, if not provided in the Notice, as determined by the Committee; |
(c) | Stock Units and Restricted Stock Units are considered earned and payable to the full extent of all or a portion of the maximum amount of the original grant as provided in the Notice, or, if not provided in the Notice, as determined by the Committee, any restrictions lapse and such Stock Units or Restricted Stock Units will be settled in cash or Common Stock, as determined by the Committee, as promptly as is practicable following the Change in Control; and |
(d) | Management Incentive Awards become fully vested to the full extent of all or a portion of the maximum amount of the original grant as provided in the Notice, or, if not provided in the Notice, as determined by the Committee, and such Management Incentive Awards will be settled in cash or Common Stock, as determined by the Committee, as promptly as is practicable following the Change in Control. |
The Committee may also make additional substitutions, adjustments and/or settlements of outstanding Awards as it deems appropriate and consistent with the Plans purposes.
15.2 Definition of Change in Control . For purposes of the Plan, a Change in Control means either a Change in Ownership, a Change in Effective Control, or a Change in Ownership of a Substantial Portion of Assets, as defined below:
Change in Ownership: A Change in Ownership of the Company occurs on the date that any one person, or more than one Person Acting as a Group (as defined below), acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company. However, if any one person or more than one Person Acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Ownership of the Company (or to cause a Change in Effective Control of the Company). An increase in the percentage of stock owned by any one person, or Persons Acting as a Group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock. This applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction.
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Persons Acting as a Group: Persons will not be considered to be acting as a group solely because they (i) purchase or own stock of the same corporation at the same time, or as a result of the same public offering, or (ii) purchase assets of the same corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or assets, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock or assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.
Change in Effective Control: A Change in Effective Control of the Company occurs on the date that either
(i) | Any one person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or |
(ii) | a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. |
A Change in Effective Control will have occurred only if the Covered Employee is employed by the Company or an Affiliate upon the date of the Change in Effective Control or the Company is liable for the payment of the benefits hereunder and no other corporation is a majority shareholder of the Company. Further, in the absence of an event described in paragraph (i) or (ii), a Change in Effective Control of the Company will not have occurred.
Acquisition of additional control: If any one person, or more than one Person Acting as a Group, is considered to effectively control the Company, the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Effective Control of the Company (or to cause a Change in Ownership of the Company).
Change in Ownership of a Substantial Portion of Assets: A Change in Ownership of a Substantial Portion of Assets occurs on the date that any one person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
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Transfers to a related person: There is no Change in Control when there is a transfer to an entity that is controlled by the shareholders of the Company immediately after the transfer. A transfer of assets by the Company is not treated as a Change of Ownership of a Substantial Portion of Assets if the assets are transferred to
(i) | A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; |
(ii) | An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company; |
(iii) | A person, or more than one Person Acting as a Group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or |
(iv) | An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii). |
A persons status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is a majority-owned subsidiary of the Company after the transaction is not treated as a Change in Ownership of a Substantial Portion of Assets of the Company.
15.3 Change in Control Price . For purposes of the Plan, Change in Control Price means the higher of (a) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange or other national exchange on which such shares are listed during the sixty (60)-day period prior to and including the date of a Change in Control; or (b) if the Change in Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however , that in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change in Control Price will be in all cases the Fair Market Value of the Common Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration will be determined by the Committee.
SECTION 16. FORFEITURE OF AWARDS
Notwithstanding anything in the Plan to the contrary, the Committee may, in the event of serious misconduct by a participant (including, without limitation, any misconduct prejudicial to or in conflict with the Company or its Affiliates, or any Termination of Employment for Cause), or any activity of a participant in competition with the business of the Company or any Affiliate, (a) cancel any outstanding Award granted to such participant, in whole or in part, whether or not vested , and/or (b) if such conduct or activity occurs within one year following the exercise or payment of an Award, require such participant to repay to the Company any gain realized or payment received upon the exercise or payment of such Award (with such gain or payment
Page 17
valued as of the date of exercise or payment). In the event the Companys financial statements are restated as a result of errors, omissions or fraud, the Committee may, in good faith and to the extent an Award exceeds what would otherwise have been awarded based on the restated financial results, (a) cancel any outstanding Award granted, in whole or in part, whether or not vested or deferred, to officers of the Company who are identified as being subject to Section 16 of the Securities and Exchange Act of 1934 (Section 16 Officers), and/or (b) if such restatement occurs after the exercise or payment of such Award, require such Section 16 Officer to repay to the Company any gain realized or payment received upon the exercise or payment of such Award (with such gain or payment valued as of the date of exercise or payment). Such cancellation or repayment obligation will be effective as of the date specified by the Committee. Any repayment obligation may be satisfied in Common Stock or cash or a combination thereof (based upon the Fair Market Value of Common Stock on the day of payment), and the Committee may provide for an offset to any future payments owed by the Company or any Affiliate to the participant if necessary to satisfy the repayment obligation. The determination of whether a participant has engaged in a serious breach of conduct or any activity in competition with the business of the Company or any Affiliate will be made by the Committee in good faith. This Section 16 will have no application following a Change in Control.
SECTION 17. AMENDMENT AND TERMINATION
The Committee may amend, alter, or discontinue the Plan or any Award, prospectively or retroactively, but no amendment, alteration or discontinuation may impair the rights of a recipient of any Award without the recipients consent, except such an amendment made to comply with applicable law, stock exchange rules or accounting rules.
No amendment will be made without the approval of the Companys stockholders to the extent such approval is required by applicable law or stock exchange rules, or, to the extent such amendment increases the number of shares available for delivery under the Plan, or changes the option price after the Grant Date.
No award of Performance Units, Stock Units or Restricted Stock Units may be granted to Non-Employee Directors under Section 14.1 of this Plan after February 16, 2011 or if later, the date that is ten years from the date a majority of the stockholders of the Company approve the most version of the Plan.
SECTION 18. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitutes an unfunded plan for incentive compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provided, however, that unless the Committee otherwise determines, the existence of such trusts or other arrangements will be consistent with the unfunded status of the Plan.
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SECTION 19. GENERAL PLAN PROVISIONS
19.1 General Provisions . The Plan will be administered in accordance with the following provisions and any other rule, guideline and practice determined by the Committee:
(a) | Each person purchasing or receiving shares pursuant to an Award may be required to represent to and agree with the Company in writing that he or she is acquiring the shares without a view to the distribution of the shares. |
(b) | The certificates for shares issued under an Award may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. |
(c) | Notwithstanding any other provision of the Plan, any Award, any Notice or any other agreements made pursuant thereto, the Company is not required to issue or deliver any shares of Common Stock prior to fulfillment of all of the following conditions: |
(i) | Listing or approval for listing upon notice of issuance, of such shares on the New York Stock Exchange, or such other securities exchange as may at the time be the principal market for the Common Stock; |
(ii) | Any registration or other qualification of such shares of the Company under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee deems necessary or advisable; and |
(iii) | Obtaining any other consents, approval, or permit from any state or federal governmental agency which the Committee deems necessary or advisable. |
(d) | The Company will not issue fractions of shares. Whenever, under the terms of the Plan, a fractional share would otherwise be required to be issued, the participant will be paid at Fair Market Value for such fractional share by rounding down the number of shares received to the nearest whole number and paying in cash the value of the fractional share. |
(e) | In the case of a grant of an Award to any Eligible Individual of an Affiliate of the Company, the Company may, if the Committee so directs, issue or transfer the shares of Common Stock, if any, covered by the Award to the Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer the shares of Common Stock to the Eligible Individual in accordance with the terms of the Award specified by the Committee pursuant to the provisions of the Plan. All shares of Common Stock underlying Awards that are forfeited or canceled revert to the Company. |
19.2 Employment . The Plan will not constitute a contract of employment, and adoption of the Plan will not confer upon any employee any right to continued employment, nor will it interfere in any way with the right of the Company or an Affiliate to terminate at any time the employment of any employee or the membership of any director on a board of directors or any consulting arrangement with any Eligible Individual.
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19.3 Tax Withholding Obligations . No later than the date as of which an amount first becomes includible in the gross income of the participant for federal income tax purposes with respect to any Award under the Plan, the participant will pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Company, withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award that gives rise to the withholding requirement; provided that not more than the legally required minimum withholding may be settled with Common Stock. The obligations of the Company under the Plan will be conditional on such payment or arrangements, and the Company and its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant. The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with Common Stock.
19.4 Beneficiaries . The Committee will establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participants death are to be paid or by whom any rights of the participant, after the participants death, may be exercised.
19.5 Governing Law . The Plan and all Awards made and actions taken thereunder will be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. Notwithstanding anything herein to the contrary, in the event an Award is granted to Eligible Individual who is employed or providing services outside the United States and who is not compensated from a payroll maintained in the United States, the Committee may modify the provisions of the Plan and/or any such Award as they pertain to such individual to comply with and account for the tax and accounting rules of the applicable foreign law so as to maintain the benefit intended to be provided to such participant under the Award.
19.6 409A . Except for Section 14 of the Plan, the Plan is not intended to provide for the deferral of compensation under Section 409A of the Code and, as a result, the Plan (except for Section 14) is not intended to be subject to 409A of the Code. The Plan (except for Section 14) shall, as a result, be administered and interpreted in a manner consistent with such intent. Section 14 of the Plan is intended, in part, to provide for the deferral of compensation under 409A of the Code and, as a result, is intended to be subject to 409A of the Code. Section 14 of the Plan shall therefore be administered and interpreted in a manner consistent with such intent.
19.7 Nontransferability . Except as otherwise provided in Section 9 Stock Options and Section 10 Stock Appreciation Rights , or by the Committee, Awards under the Plan are not transferable except by will or by laws of descent and distribution.
19.8 Severability . Wherever possible, each provision of the Plan and of each Award and of each Notice will be interpreted in such a manner as to be effective and valid under applicable law. If any provision of the Plan, any Award or any Notice is found to be prohibited by or invalid under applicable law, then (a) such provision will be deemed amended to and to
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have contained from the outset such language as will be necessary to accomplish the objectives of the provision as originally written to the fullest extent permitted by law; and (b) all other provisions of the Plan and any Award will remain in full force and effect.
19.9 Strict Construction . No rule of strict construction will be applied against the Company, the Committee or any other person in the interpretation of the terms of the Plan, any Award, any Notice, any other agreement or any rule or procedure established by the Committee.
19.10 Stockholder Rights . Except as otherwise provided herein, no participant will have dividend, voting or other stockholder rights by reason of a grant of an Award or a settlement of an Award in cash.
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Exhibit 10.5
JBT CORPORATION EMPLOYEES RETIREMENT PROGRAM
PART I
SALARIED AND NONUNION HOURLY EMPLOYEES RETIREMENT PLAN
(Adopted Effective as of June 30, 2008)
i.
T ABLE OF C ONTENTS
PAGE | ||
INTRODUCTION |
1 | |
ARTICLE I - Definitions |
2 | |
Actuarial Equivalent |
2 | |
Administrator |
3 | |
Affiliate |
3 | |
Annuity Starting Date |
4 | |
Beneficiary |
4 | |
Benefits Agreement |
4 | |
Board |
4 | |
Code |
4 | |
Committee |
4 | |
Company |
4 | |
Early Retirement Benefit |
4 | |
Early Retirement Date |
4 | |
Earnings |
4 | |
Effective Date |
5 | |
Eligible Employee |
6 | |
Employee |
6 | |
Employee Contributions |
6 | |
Employment Commencement Date |
6 | |
ERISA |
6 | |
50% Joint and Survivors Annuity |
6 | |
Final Average Yearly Earnings |
7 | |
FMC |
7 | |
FMC Beneficiary |
7 | |
FMC Joint Annuitant |
7 | |
FMC Participant |
7 | |
FMC Plan |
8 | |
FTI Spinoff |
8 | |
Foreign Subsidiary |
8 |
i.
T ABLE OF C ONTENTS
( CONTINUED )
PAGE | ||||
Hour of Service |
8 | |||
Individual Life Annuity |
8 | |||
Interest |
8 | |||
Investment Manager |
8 | |||
Joint Annuitant |
9 | |||
Leased Employee |
9 | |||
Level Income Option |
9 | |||
Normal Retirement Date |
9 | |||
100% Joint and Survivors Annuity |
9 | |||
One-Year Period of Severance |
9 | |||
Participant |
9 | |||
Participating Employer |
9 | |||
Period of Service |
9 | |||
Period of Severance |
10 | |||
Plan |
10 | |||
Plan Year |
10 | |||
Primary Social Security Benefit |
10 | |||
Reemployment Commencement Date |
10 | |||
Savings Plan |
10 | |||
Severance from Service Date |
10 | |||
Social Security Covered Compensation Base |
11 | |||
Supplement |
11 | |||
Trust |
11 | |||
Trust Fund |
11 | |||
Year of Credited Service |
11 | |||
Year of Vesting Service |
12 | |||
ARTICLE II - Participation |
13 | |||
2.1 |
Eligibility and Commencement of Participation | 13 | ||
2.2 |
Provision of Information | 13 | ||
2.3 |
Termination of Participation | 13 |
ii.
T ABLE OF C ONTENTS
( CONTINUED )
PAGE | ||||
2.4 |
Special Rules Relating to Veterans Reemployment Rights | 13 | ||
ARTICLE III - Normal, Early and Deferred Retirement Benefits |
13 | |||
3.1 |
Normal Retirement Benefits | 13 | ||
3.2 |
Early Retirement Benefits | 14 | ||
3.3 |
Deferred Retirement Benefits | 15 | ||
3.4 |
Suspension of Benefits | 17 | ||
3.5 |
Benefit Limitations | 19 | ||
3.6 |
FMC Participants Benefits | 21 | ||
ARTICLE IV - Termination Benefits |
22 | |||
4.1 |
Termination of Service | 22 | ||
4.2 |
Amount of Termination Benefit | 22 | ||
ARTICLE V - Refund of Employee Contributions |
23 | |||
5.1 |
Employee Contributions | 23 | ||
5.2 |
Withdrawal of Employee Contributions | 23 | ||
5.3 |
Refund Upon Death Before Annuity Starting Date | 24 | ||
5.4 |
Refund After Annuity Starting Date | 24 | ||
ARTICLE VI - Payment of Retirement Benefits |
24 | |||
6.1 |
Normal Form of Benefit | 24 | ||
6.2 |
Available Forms of Benefits | 24 | ||
6.3 |
Election of Benefits | 25 | ||
6.4 |
Joint Annuitants | 27 | ||
6.5 |
FMC Participants in Pay Status | 27 | ||
6.6 |
Election of Retroactive Starting Date | 28 | ||
ARTICLE VII - SURVIVORS BENEFITS |
29 | |||
7.1 |
Preretirement Survivors Benefit | 29 | ||
7.2 |
Surviving Spouses Benefit | 30 | ||
7.3 |
Certain Former Employees | 30 | ||
ARTICLE VIII - FIDUCIARIES |
31 | |||
8.1 |
Named Fiduciaries | 31 | ||
8.2 |
Employment of Advisers | 31 |
iii.
T ABLE OF C ONTENTS
( CONTINUED )
PAGE | ||||
8.3 |
Multiple Fiduciary Capacities | 31 | ||
8.4 |
Payment of Expenses | 31 | ||
8.5 |
Indemnification | 32 | ||
ARTICLE IX - PLAN ADMINISTRATION |
32 | |||
9.1 |
Powers, Duties and Responsibilities of the Administrator and the Committee | 32 | ||
9.2 |
Delegation of Administration Responsibilities | 32 | ||
9.3 |
Committee Members | 33 | ||
ARTICLE X - FUNDING OF THE PLAN |
33 | |||
10.1 |
Appointment of Trustee | 33 | ||
10.2 |
Actuarial Cost Method | 33 | ||
10.3 |
Cost of the Plan | 33 | ||
10.4 |
Funding Policy | 34 | ||
10.5 |
Cash Needs of the Plan | 34 | ||
10.6 |
Public Accountant | 34 | ||
10.7 |
Enrolled Actuary | 34 | ||
10.8 |
Basis of Payments to the Plan | 34 | ||
10.9 |
Basis of Payments from the Plan | 34 | ||
ARTICLE XI - Plan Amendment or Termination |
35 | |||
11.1 |
Plan Amendment or Termination | 35 | ||
11.2 |
Limitations on Plan Amendment | 35 | ||
11.3 |
Effect of Plan Termination | 35 | ||
11.4 |
Allocation of Trust Fund on Termination | 35 | ||
ARTICLE XII - Miscellaneous Provisions |
36 | |||
12.1 |
Subsequent Changes | 36 | ||
12.2 |
Plan Mergers | 36 | ||
12.3 |
No Assignment of Property Rights | 36 | ||
12.4 |
Beneficiary | 37 | ||
12.5 |
Benefits Payable to Minors, Incompetents and Others | 37 | ||
12.6 |
Employment Rights | 38 | ||
12.7 |
Proof of Age and Marriage | 38 |
iv.
T ABLE OF C ONTENTS
( CONTINUED )
PAGE | ||||
12.8 |
Small Annuities | 38 | ||
12.9 |
Controlling Law | 38 | ||
12.10 |
Direct Rollover Option | 39 | ||
12.11 |
Claims Procedure | 40 | ||
12.12 |
Participation in the Plan by an Affiliate | 44 | ||
12.13 |
Action by Participating Employers | 44 | ||
ARTICLE XIII - Top Heavy Provisions |
44 | |||
13.1 |
Top Heavy Definitions | 44 | ||
13.2 |
Determination of Top Heavy Status | 47 | ||
13.3 |
Minimum Benefit Requirement for Top Heavy Plan | 47 | ||
13.4 |
Vesting Requirement for Top Heavy Plan | 48 | ||
EXHIBIT A | 50 | |||
EXHIBIT B |
51 | |||
EXHIBIT C |
52 | |||
SUPPLEMENT 1 |
53 | |||
SUPPLEMENT 2 |
55 | |||
SUPPLEMENT 3 |
56 | |||
SUPPLEMENT 4 |
58 |
v.
JBT CORPORATION EMPLOYEES RETIREMENT PROGRAM
PART I
SALARIED AND NONUNION HOURLY EMPLOYEES RETIREMENT PLAN
INTRODUCTION
WHEREAS, the JBT Corporation Employees Retirement Program (Program) is hereby established effective June 30, 2008, in connection with a spin-off of assets and liabilities from the FMC Technologies, Inc. Employees Retirement Program (the FMCTI Plan), which spin-off complies with the requirements of Code Section 414(l); and
WHEREAS, the FMC Technologies, Inc. Employees Retirement Program (Program) was established effective May 1, 2001, in connection with a spin-off of assets and liabilities from the FMC Corporation Employees Retirement Program (the FMC Plan); and
WHEREAS, the Program consists of two parts, Part I Salaried and Nonunion Hourly Employees Retirement Plan and Part II Union Hourly Employees Retirement Plan, which are contained in two separate plan documents; and
WHEREAS, Supplements to Part I and Part II of the Program contain provisions which apply only to a specific group of Employees or Participants as specified therein and override any contrary provision of the Program or either Part I or Part II; and
WHEREAS, this document is Part I Salaried and Nonunion Hourly Employees Retirement Plan (Plan) and covers the eligible employees as provided in Article II Participation, and is generally originally effective as of June 30, 2008; except as and to the extent otherwise provided herein or as required with respect to the accrued benefits of any Participant affected by the FTI Spinoff or the JBT Spinoff; and
WHEREAS, the Plan shall not be construed to affect an FMC Participants accrued benefit under the FMC Plan, or to alter in any way the rights of any FMC Participant, FMC Joint Annuitant or FMC Beneficiary thereof who has retired, died, or with respect to whom there has been a severance from service date under the FMC Plan before May 1, 2001; and
WHEREAS, the Plan shall not be construed to affect an FMCTI Participants accrued benefit under the FMCTI Plan, or to alter in any way the rights of any FMCTI Participant, FMCTI Joint Annuitant or FMCTI Beneficiary thereof who has retired, died, or with respect to whom there has been a severance from service date under the FMCTI Plan before June 30, 2008; and
WHEREAS, Plan is intended to be qualified under Code Section 401(a), and its associated trust is intended to be tax exempt under Code Section 501(a). The Plan is intended also to meet the requirements of ERISA and shall be interpreted, wherever possible, to comply with the terms of the Code and ERISA. The Plan is intended to provide a regular monthly retirement benefit for employees who meet the eligibility requirements.
1
NOW, THEREFORE, effective June 30, 2008, the Company hereby establishes the Plan to provide as follows:
ARTICLE I
Definitions
For purposes of this Plan and any amendments to it, the following terms have the meanings ascribed to them below.
Actuarial Equivalent means a benefit determined to be of equal value to another benefit, on the basis of either (a) the actuarial assumptions in Exhibit E-1, E-2, E-3, or E-4, as applicable or (b) the mortality table and interest rate described in the applicable Supplement.
Notwithstanding the above to the contrary, effective February 1, 2006, for purposes of optional form of benefit conversions (including optional form of benefit conversions described in Supplements 2, 3 and 4, but excluding optional form of benefit conversions described in Supplement 1), Actuarial Equivalent means a benefit determined to be of equal value to another benefit on the basis of the greater of (1) either (a) the actuarial equivalent, computed using the actuarial assumptions in Exhibit E-1, E-2, E-3, or E-4, as applicable, of the accrued benefit as of February 1, 2006 or (b) the actuarial equivalent, computed using the mortality and interest rate described in the applicable Supplement, of the accrued benefit as of February 1, 2006, or (2) the actuarial equivalent, computed using the RP-2000 Combined Healthy Participant Table (RP2000CH), weighted 80% male/20% female and 6% interest compounded annually, of the accrued benefit as of the date of determination on or after February 1, 2006.
Notwithstanding anything herein to the contrary, for purposes of Section 12.8 Actuarial Equivalent value shall be determined as follows: (and, effective February 1, 2006, for purposes of the determination of the optional form of benefit conversion to the Level Income Option described in Section 6.2.4, Actuarial Equivalent value shall be determined as follows (provided, that with respect to the Level Income Option optional form of benefit conversion determination, Actuarial Equivalent value shall be determined on the basis of the greater of (1) either (a) the actuarial equivalent, computed using the actuarial assumptions in Exhibit E-1, E-2, E-3, or E-4, as applicable, of the accrued benefit as of February 1, 2006 or (b) the actuarial equivalent, computed using the mortality and interest rate described in the applicable Supplement, of the accrued benefit as of February 1, 2006, or (2) the actuarial equivalent, computed as provided below, of the accrued benefit as of the date of determination on or after February 1, 2006)):
(i) | with respect to FMC Participants whose Annuity Starting Dates occurred prior to June 1, 1995, based on the actuarial assumptions in Exhibit E-4; provided that the interest rate shall not exceed the immediate rate used by the Pension Benefit Guaranty Corporation for lump sum distributions occurring on the first day of the Plan Year that contains the Annuity Starting Date; |
2
(ii) | with respect to FMC Participants with Annuity Starting Dates occurring on or after June 1, 1995, and who had an Hour of Service prior to August 31, 1999, based on the 1983 Group Annuity Mortality Table (weighed 50% male and 50% female) (or the applicable mortality table prescribed under Section 417(e)(3) of the Code) and the lesser of the interest rate in Exhibit E-4 or the applicable interest rate prescribed under Section 417(e)(3) of the Code for the November preceding the Plan Year that contains the Annuity Starting Date; |
(iii) | for Annuity Starting Dates occurring on or after August 31, 1999, with respect to any Participant who did not have an Hour of Service prior to August 31, 1999, based on the 1983 Group Annuity Mortality Table (weighted 50% male and 50% female) (or the applicable mortality table, prescribed under Section 417(e)(3) of the Code) and the applicable interest rate prescribed under Section 417(e)(3) of the Code for the November preceding the Plan Year that contains the Annuity Starting Date; |
(iv) | for Annuity Starting Dates occurring on or after December 31, 2002, using the applicable interest rate as described above, and based on the 1994 Group Annuity Reserving Table (weighted 50% male, 50% female and projected to 2002 using Scale AA), which is the applicable mortality table prescribed in Rev. Rul. 2001-62, (or the applicable mortality table, prescribed under Section 417(e)(3) of the Code or other guidance of general applicability issued thereunder); and |
(v) | Effective January 1, 2008, and solely for purposes of the determination of the present value of benefits pursuant to Code Section 417(e): (1) the applicable interest rate shall mean the applicable interest rate described in Code Section 417(e)(3)(C), which is the adjusted first, second and third segment rates (defined in Code Section 417(e)(3)(D)) applied under rules similar to the rules of Code Section 430(h)(2)(C) for the month of November preceding the first day of the Plan Year which includes the date of distribution, and (2) the applicable mortality table shall mean the applicable mortality table described in Code Section 417(e)(3)(B), Revenue Ruling 2007-67 and subsequent guidance (including regulations) issued by the Internal Revenue Service. |
Administrator means the Company. The Plan is administered by the Company through the Committee. The Administrator and the Committee have the responsibilities specified in Article IX.
Affiliate means any corporation, partnership, or other entity that is:
(a) | a member of a controlled group of corporations of which the Company is a member (as described in Code Section 414(b)); |
(b) | a member of any trade or business under common control with the Company (as described in Code Section 414(c)); |
(c) | a member of an affiliated service group that includes the Company (as described in Code Section 414(m)); |
3
(d) | an entity required to be aggregated with the Company pursuant to regulations promulgated under Code Section 414(o); or |
(e) | a leasing organization that provides Leased Employees to the Company or an Affiliate (as determined under paragraphs (a) through (d) above), unless (i) the Leased Employees constitute less than 20% of the nonhighly compensated workforce of the Company and Affiliates (as determined under paragraphs (a) through (d) above); and (ii) the Leased Employees are covered by a plan described in Code Section 414(n)(5). |
Leasing organization has the meaning ascribed to it in the definition of Leased Employee below.
For purposes of Section 3.5, the 80% thresholds of Code Sections 414(b) and (c) are deemed to be more than 50%, rather than at least 80%.
Annuity Starting Date means the first day of the first period for which an amount is paid in an annuity or other form of benefit. In the case of a lump sum distribution, the Annuity Starting Date is the date payment is actually made.
Beneficiary means the person or persons determined pursuant to Section 12.4.
Benefits Agreement means the Employee Benefits Agreement by and between FMC and the Company.
Board means the board of directors of the Company.
Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to a specific provision of the Code includes that provision, any successor to it and any valid regulation promulgated under the provision or successor provision.
Committee means the JBT Corporation Employee Welfare Benefits Plan Committee as described in Section 9.3, its authorized delegates and any successor to the Committee.
Company means John Bean Technologies Corporation and any successor to it. Prior to June 30, 2008, Company meant FMC Technologies, Inc.
Early Retirement Benefit means the benefits determined pursuant to Section 3.2.
Early Retirement Date means (a) in the case of an FMC Participant who became a Participant in the FMC Plan before January 1, 1984, such Participants 55th birthday; and (b) in the case of an FMC Participant who became a Participant in the FMC Plan after December 31, 1983, any FMCTI Participant who became a Participant in the FMCTI Plan on or after May 1, 2001, or any other Employee who became a Participant in this Plan after the Effective Date, the later of the Participants 55th birthday and the date the Participant acquires 10 Years of Credited Service.
Earnings means the total compensation paid by the Company or a Participating Employer to an Eligible Employee for each Plan Year that is currently includible in gross income for federal income tax purposes:
(a) |
including: overtime, administrative and discretionary bonuses (including, gainsharing bonuses, performance related bonuses, completion bonuses (except as |
4
provided below); sales incentive bonuses; earned but unused vacation, back pay, sick pay (other than a cash payment of unused sick days) and state disability benefits; plus the Employees Pre-Tax Contributions and amounts contributed to a plan described in Code Section 125 or 132; and the incentive compensation (including management incentive bonuses which may be paid in cash and restricted stock and local incentive bonuses) earned during the Plan Year; |
(b) | but excluding: hiring bonuses; referral bonuses; stay bonuses; retention bonuses; awards (including safety awards, Gutbuster awards and other similar awards); amounts received as deferred compensation; disability payments from insurance or the Long-Term Disability Plan for Employees of FMC Technologies, Inc. (effective June 1, 2008, the Long-Term Disability Plan for Employees of JBT Corporation) (other than state disability benefits); workers compensation benefits; flexible credits (i.e., wellness awards and payments for opting out of benefit coverage); expatriate premiums (including completion of expatriate assignment bonuses); grievance or settlement pay; severance pay; incentives for reduction in force; accrued (but not earned) vacation; other special payments such as reimbursements, relocation or moving expense allowances; stock options or other stock-based compensation (except as provided above); any gross-up paid by a Participating Employer; other distributions that receive special tax benefits; any amounts paid by a Participating Employer to cover an Employees FICA tax obligation as to amounts deferred or accrued under any nonqualified retirement plan of a Participating Employer; and, pay in lieu of notice. |
(c) | The annual amount of Earnings taken into account for a Participant must not exceed $160,000 (as adjusted by the Internal Revenue Service for cost-of-living increases in accordance with Code Section 401(a)(17)(B)); provided, however, in determining benefit accruals after December 31, 2001, the annual amount of Earnings taken into account for a Participant must not exceed $200,000 (as adjusted by the Internal Revenue Service, for cost of living increases in accordance with code Section 401(a)(17)(B)). For purposes of determining benefit accruals in any Plan year after December 31, 2001, Earnings for any prior Plan Year shall be subject to the applicable limit on Earnings for that prior year. |
Participants Earnings will be conclusively determined according to the Companys records.
An FMC Participants Earnings shall include all Earnings determined under the FMC Plan on and prior to April 30, 2001 and all Earnings determined under the FMCTI Plan on and after May 1, 2001, but prior to June 30, 2008.
An FMCTI Participants Earnings shall include all Earnings determined under the FMCTI Plan on and prior to May 31, 2008.
Effective Date means (i) June 30, 2008 or, if later, an Employees Employment Commencement Date or Reemployment Commencement date, whichever is applicable, (ii) with respect to each FMC Participant, June 30, 2008 or, if later, the date such FMC Participants accrued benefit under the FMC Plan is deemed transferred to this Plan under the Benefits Agreement or (iii) with respect to each FMCTI Participant, June 30, 2008 or, if later, the date such FMCTI Participants accrued benefit under the FMCTI Plan is deemed transferred to this Plan.
5
Eligible Employee means an Employee of a Participating Employer who is employed on a salaried basis or in such other classifications as the Company may designate as salaried positions, other than:
(a) | a Leased Employee; |
(b) | a member of a bargaining unit covered by a collective bargaining agreement that does not specifically provide for participation in the Plan by members of the bargaining unit; or |
(c) | any Employee who generally resides outside the United States or whose principal duties generally are performed outside the United States as determined by the Company, unless such individual is a United States citizen or permanent resident alien or the Company designates such individual as an Eligible Employee. |
Any individual who is a United States citizen or permanent resident alien and who is employed by a Foreign Subsidiary in a position which would make such individual an Eligible Employee if employed by the Company shall be deemed to be employed by the Company, provided that no entity other than the Company makes contributions under any funded plan of deferred compensation (other than the Thrift Plan or any governmental retirement plan) with respect to the remuneration such individual receives from such Foreign Subsidiary.
Employee means a common law employee or Leased Employee of the Company or an Affiliate, subject to the following rules:
(a) | a person who is not a Leased Employee and who is engaged as an independent contractor is not an Employee; |
(b) | only individuals who are paid as employees from the payroll of the Company or an Affiliate and treated as employees are Employees under the Plan; and |
(c) | any person retroactively found to be a common law employee shall not be eligible to participate in the Plan for any period he was not an Employee under the Plan. |
Employee Contributions means required contributions made by Participants to the FMC Plan or prior plans prior to May 1, 1969.
Employment Commencement Date means the date on which the Employee first performs an Hour of Service.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific provision of ERISA includes the provision, any successor provision and any valid regulation promulgated under the provision or successor provision.
50% Joint and Survivors Annuity means the immediate annuity determined pursuant to Section 6.1.2.
6
Final Average Yearly Earnings means 1/5 th of the sum of the Participants Earnings while an Eligible Employee (or with respect to an FMC Participant, while an Eligible Employee or while an eligible employee under the FMC Plan or FMCTI Plan) (or with respect to an FMCTI Participant, while an Eligible Employee or while an eligible employee under the FMCTI Plan) for the 60 consecutive calendar months (not taking into account months in which the Participant had no Earnings) out of the past 120 calendar months in which such Earnings were the highest. If the commencement of a Participants retirement benefits hereunder is preceded by a period of long-term disability, the Company may adjust Final Average Yearly Earnings on a nondiscriminatory basis; provided, however, that no such adjustment shall be made to the Final Average Yearly Earnings of any Participant who initially commences receiving disability benefits on or after January 12, 2006 under the Long-Term Disability Plan for Employees of FMC Technologies, Inc. (effective June 1, 2008, the Long-Term Disability Plan for Employees of JBT Corporation). With respect to Participants who accepted offers of employment with Snap-On Incorporated (Snap-On) as a result of the Companys sale of assets of its Automotive Service Equipment Division to Snap-On, the Participants Earnings shall include eligible wages with Snap-On and its subsidiaries for purposes of calculating Final Average Yearly Earnings.
FMC means FMC Corporation, a Delaware corporation.
FMC Beneficiary means an individual who was receiving benefits under the FMC Plan as a result of the death of an FMC Participant and whose benefit was transferred to the FMCTI Plan pursuant to the FTI Spinoff.
FMC Joint Annuitant means an individual who was designated as a joint annuitant of an FMC Participant under the FMC Plan, the benefits of such FMC Participant which were transferred to the FMCTI Plan pursuant to the FTI Spinoff.
FMC Participant means any participant in Part I Salaried and Non-Union Hourly Employees Retirement Plan of the FMC Plan who had their accrued benefit, years of credited service and years of vesting service under the FMC Plan transferred to the FMCTI Plan, pursuant to the FTI Spinoff.
FMC Plan means the FMC Corporation Employees Retirement Program.
FMCTI means FMC Technologies, Inc.
FMCTI Beneficiary means an individual who was receiving benefits under the FMCTI Plan as a result of the death of an FMCTI Participant and whose benefit was transferred to this Plan pursuant to the JBT Spinoff.
FMCTI Joint Annuitant means an individual who was designated as a joint annuitant of an FMCTI Participant under the FMCTI Plan, the benefits of such FMCTI Participant which were transferred to this Plan pursuant to the JBT Spinoff.
FMCTI Participant means any participant (including any FMC Participant) in Part I Salaried and Non-Union Hourly Employees Retirement Plan of the FMCTI Plan who had their accrued benefit, years of credited service and years of vesting service under the FMCTI Plan transferred to this Plan, pursuant to the JBT Spinoff.
7
FMCTI Plan means the FMC Technologies, Inc. Employees Retirement Program.
FTI Spinoff means the transfer of assets and liabilities attributable to FMC Participants from the FMC Plan to this Plan pursuant to the Benefits Agreement.
Foreign Subsidiary means a foreign corporation covered by an agreement between the Company and the Internal Revenue Service extending Federal Social Security benefits to such foreign corporations employees who are United States citizens, provided that either (a) not less than 20% of the voting stock of such foreign corporation is owned by the Company or (b) more than 50% of the voting stock of such foreign corporation is owned by another foreign corporation which is described in (a) above.
Hour of Service means each hour (a) for which an Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliate for the performance of duties, and (b) for each FMC Participant, each hour of service credited to such individual under the FMC Plan and the FMCTI Plan as of the date prior to the Effective Date for such FMC Participant and (c) for each FMCTI Participant, each hour of service credited to such individual under the FMCTI Plan as of the date prior to the Effective Date for such FMCTI Participant. Hours of Service will be credited to the Employee for the computation period in which the duties are performed. To the extent required by law, Hour of Service will include each hour for which an Employee is paid, or entitled to payment, by the Company or any Affiliate 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. Nor more than 501 Hours of Service will be credited for any single continuous period (whether or not such period occurs in a single computation period). Hours of Service for these purposes will be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which is incorporated herein by this reference. Also to the extent required by law, Hours of Service will include each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate, provided however, the same hours of service will not be credited. These hours will 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.
Individual Life Annuity means the annuity determined pursuant to Section 6.1.1.
Interest means interest compounded annually at the following rates:
(a) | if Employee Contributions are withdrawn prior to retirement then |
(i) | for periods prior to January 1, 1976 at a rate equal to 3%; and |
(ii) | for periods on and after January 1, 1976 at a rate equal to 5%. |
(b) | if Employee Contributions are not withdrawn and are used to increase a Participants Normal Retirement Benefit under Section 3.1.3, then at a rate equal to 5%. |
Investment Manager means a person who is an investment manager as defined in section 3(38) of ERISA.
8
JBT Spinoff means the transfer of assets and liabilities attributable to FMCTI Participants from the FMCTI Plan to this Plan.
Joint Annuitant means the individual determined pursuant to Section 6.4.
Leased Employee means an individual who performs services for the Company or an Affiliate on a substantially full-time basis for a period of at least one year, under the primary direction or control of the Company or an Affiliate, and under an agreement between the Company or Affiliate and a leasing organization. The leasing organization can be a third party or the Leased Employee himself.
Level Income Option means the annuity determined pursuant to Section 6.2.4.
Normal Retirement Date means the Participants 65th birthday.
100% Joint and Survivors Annuity means the immediate annuity determined pursuant to Section 6.2.3.
One-Year Period of Severance means a 12-consecutive-month period commencing on an Employees Severance From Service Date in which the Employee is not credited with an Hour of Service.
Participant means an Eligible Employee who has begun, but not ended, his or her participation in the Plan pursuant to the provisions of Article II and, unless specifically indicated otherwise, shall include each FMC Participant and each FMCTI Participant. If a Participant who is vested in the Participants accrued benefit on his or her Severance from Service Date is subsequently reemployed after his or her Severance from Service Date, he or she will become a Participant immediately upon reemployment. If a Participant who is not vested in the Participants accrued benefit on his or her Severance from Service Date is subsequently reemployed after his Severance from Service Date, he or she will become a Participant immediately upon reemployment, unless his or her Period of Severance is greater than or equal to five One-Year Periods of Severance.
Participating Employer means the Company and each other Affiliate that adopts the Plan with the consent of the Board, as provided in Section 12.12.
Period of Service means the period commencing on the Effective Date and ending on the Severance From Service Date including, for each FMC Participant and each FMCTI Participant, periods of service credited under the FMC Plan and/or the FMCTI Plan, as applicable, as of the date immediately prior to the relevant Effective Date for such FMC Participant or FMCTI Participant. All Periods of Service (whether or not consecutive) shall be aggregated. For a Participant who is not immediately eligible to participate in the Plan under the terms of Section 2.1 hereof, Period of Service shall include service from and after the first day of the period in which they become eligible to participate in the Plan pursuant to the terms of Section 2.1, but in no event earlier than the Participants date of hire by the Company or its Affiliates. Notwithstanding the foregoing, if an Employee incurs a One-Year Period of Severance at a time when he or she has no vested interest under the Plan and the Employee does not perform an Hour of Service within 5 years after the beginning of the One-Year Period of Severance, the Period of Vesting Service prior to such One-Year Period of Severance shall not be aggregated.
9
Period of Severance means the period commencing on the Severance From Service Date and ending on the date on which the Employee again performs an Hour of Service.
Plan means Part I Salaried and Nonunion Hourly Employees Retirement Plan of the JBT Corporation Employees Retirement Program.
Plan Year means the period beginning June 30, 2008 and ending December 31, 2008 and thereafter the 12-month period beginning on January 1 and ending the next December 31.
Primary Social Security Benefit means the primary benefit which the Participant is eligible to receive at age 65 under the old age portion of the Federal Old Age, Survivors and Disability Insurance Program assuming that after termination of employment with the Company and Affiliates the Participant has no further earnings subject to such programs. A Participants Primary Social Security Benefit shall be determined by taking his Earnings at the time of his employment and applying a salary scale, projected backwards, reflecting the actual change in the average wage from year to year as determined by the Social Security Administration.
Reemployment Commencement Date means the first date following a Period of Severance which is not required to be taken into account for purposes of an Employees Period of Vesting Service on which the Employee performs an Hour of Service.
Savings Plan means the JBT Corporation Employees Savings and Investment Plan, as amended from time to time.
Severance From Service Date means the earliest of:
(a) | the date on which an Employee voluntarily terminates, retires, is discharged or dies; |
(b) | the first anniversary of the first date of a period in which an Employee remains absent from service (with or without pay) with the Company and Affiliates for any reason other than voluntary termination, retirement, discharge or death; or |
(c) | the second anniversary of the date an Employee is absent pursuant to a maternity or paternity leave of absence; provided, however, that the period between the first and second anniversaries of the first date of such absence shall be neither a Period of Service nor a One-Year Period of Severance. |
Notwithstanding the foregoing, a Severance From Service Date shall not be considered to have occurred under the following circumstances:
(i) | during a leave of absence, vacation or holiday with pay; during a leave of absence without pay granted by reason of disability or under the Family and Medical Leave Act of 1993; |
(ii) | during a period of qualified military service, provided the Employee makes application to return within 90 days after completion of active service and returns to active employment as an Employee while reemployment rights are protected by law. If the Employee does not so return, the Employee shall have a Severance From Service Date on the first anniversary of the date of entry into military service. |
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If the Employee violates the terms of a leave of absence, the Employee shall be deemed to have voluntarily terminated as of the date of such violation. In the case of a leave in excess of 12 months, if the Employee fails to return to active employment immediately after such leave, the Employee shall be deemed to have voluntarily terminated as of the last day of the 12th month of the leave.
A maternity or paternity leave of absence means an absence from work by reason of the Employees pregnancy, birth of the Employees child, placement of a child with the Employee in connection with the adoption of such child, or any absence for the purpose of caring for such child for a period immediately following such birth or placement.
Social Security Covered Compensation Base means the average of the compensation and benefit bases in effect under Section 230 of the Social Security Act for each year in the 35-year period ending with the year in which the participant attains Social Security retirement age as defined in Section 415(b)(8) of the Code.
Supplement means the provisions of the Plan which apply only to a specific group of Employees or Participants as detailed in such Supplement and which override any contrary provision of the Plan.
Trust means the trust established by the Trust Agreement. Trust Agreement means the trust agreement or agreements, as amended from time to time, entered into by the Company and the Trustee pursuant to Section 8.1. Trustee means the trustee or trustees at any time appointed by the Company pursuant to Section 8.1.
Trust Fund means the trust fund established and maintained by the Trustee to hold all assets of the Plan pursuant to the Trust Agreement.
Year of Credited Service means (a) for an FMC Participant, his or her years of credited service under the FMC Plan and/or the FMCTI Plan prior to such FMC Participants Effective Date, (b) for an FMCTI Participant, his or her years of credited service under the FMCTI Plan prior to such FMCTI Participants Effective Date, and (c) the total number of calendar months during the Employees Period of Service while the Employee is an Eligible Employee and after he has become a Participant divided by 12. A partial month in such Period of Service counts as a whole month, and fractional Years of Credited Service shall be taken into account in determining a Participants benefits. Year of Credited Service shall also include such other periods as the Company recognizes as a Year of Credited Service, pursuant to written and nondiscriminatory rules.
Notwithstanding the foregoing, Year of Credited Service shall not include (i) any leave of absence without pay unless the Employee returns to active employment as an Employee immediately after such leave and abides by all the terms of the leave, (ii) any maternity or paternity leave of absence unless the Employee returns to active employment as an Employee within 12 months after the first day of such leave, (iii) any period of service with respect to which such Eligible Employee accrues a benefit under the FMC Plan on or after May 1, 2001, the FMCTI Plan on or after June 30, 2008, or any pension, profit sharing or other retirement plan listed on Exhibit A, or (iv) with respect to any Employee who initially commences receiving disability benefits effective on or after January 12, 2006 under the Long-Term Disability Plan for Employees of FMC Technologies, Inc. (effective June 1, 2008, the Long-Term Disability Plan for Employees of JBT Corporation), any period for which the Employee receives such benefits.
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Year of Vesting Service means (a) for an FMC Participant, his or her years of service and years of vesting service credited under the FMC Plan and FMCTI Plan prior to such FMC Participants Effective Date, (b) for an FMCTI Participant, his or her years of service and years of vesting service credited under the FMCTI Plan prior to such FMCTI Participants Effective Date, and (c) the total number of calendar months during the Employees Period of Service divided by 12, determined in accordance with the following rules:
(i) | a partial month in the Employees Period of Service counts as a whole month; |
(ii) | if the Employee has a Severance From Service Date by reason of a voluntary termination, discharge or retirement and the Employee then performs 1 Hour of Service within 12 months of the Severance From Service Date, such Period of Severance is included in the Period of Vesting Service. If the Employee has a Severance From Service Date by reason of a voluntary termination, discharge or retirement during an absence from service of 12 months or less for any reason other than a voluntary termination, discharge or retirement, and then performs 1 Hour of Service within 12 months of the date on which the Employee was first absent from service, such Period of Severance is included in the Period of Vesting Service; |
(iii) | period of Vesting Service also includes the following: |
(1) | a period of employment with an employer substantially all of the equity interest or assets of which have been acquired by the Company or an Affiliate, but only to the extent that the Company expressly recognizes such period as a Period of Vesting Service pursuant to written and nondiscriminatory rules; and |
(2) | such other periods as the Company recognizes as a Period of Vesting Service pursuant to written and nondiscriminatory rules. |
(iv) | Notwithstanding the foregoing, Year of Vesting Service shall not include with respect to any Employee who initially commences receiving disability benefits effective on or after January 12, 2006 under the Long-Term Disability Plan for Employees of FMC Technologies, Inc. (effective June 1, 2008, the Long-Term Disability Plan for Employees of JBT Corporation), any period for which the Employee receives such benefits. |
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ARTICLE II
Participation
2.1 Eligibility and Commencement of Participation
Each FMC Participant and FMCTI Participant shall automatically became a Participant in the Plan on such FMC Participants or FMCTI Participants Effective Date. Except as otherwise provided in the applicable Supplement, each other Employee shall automatically become a Participant in the Plan as of the first day of the month in which the Participant satisfies all of the following requirements:
(a) | the Employee is an Eligible Employee; and |
(b) | the Employee either (i) is a regular, full-time Employee, or (ii) has completed not less than 1,000 Hours of Service in a 12-month period beginning on the date his employment commenced or any anniversary thereof. |
2.2 Provision of Information
Each Participant must make available to the Administrator any information it reasonably requests. As a condition of participation in the Plan, each Employee, FMC Participant and FMCTI Participant agrees, on his or her own behalf and on behalf of all persons who may have or claim any right by reason of the Employees participation in the Plan, to be bound by all provisions of the Plan.
2.3 Termination of Participation
A Participant ceases to be a Participant when he or she dies or, if earlier, when his or her entire vested benefit accrued under the Plan has been paid to him or her.
2.4 Special Rules Relating to Veterans Reemployment Rights
Notwithstanding any provision of this Plan to the contrary, with respect to an Eligible Employee or Participant who is reemployed in accordance with the reemployment provisions of the Uniformed Services Employment and Reemployment Rights Act following a period of qualifying military service (as determined under such Act), contributions, benefits and service credit will be provided in accordance with Section 414(u) of the Code.
ARTICLE III
Normal, Early and Deferred Retirement Benefits
3.1 Normal Retirement Benefits
3.1.1 Normal Retirement: A Participant who retires on the Normal Retirement Date shall be entitled to receive a Normal Retirement Benefit determined under Section 3.1.2. Payment of such benefit shall commence as of the first day of the month coincident with or next following the Participants Normal Retirement Date, unless the Participant elects to defer commencement subject to Section 3.3.2.
3.1.2 Calculation of Normal Retirement Benefit: Subject to Section 3.1.3, a Participants monthly Normal Retirement Benefit shall be equal to the product of (a) multiplied by (b) below:
(a) | 1/12th of the sum of (i) and (ii) below: |
(i) |
the sum of (1) 1% of the Participants Final Average Yearly Earnings up to the Social Security Covered Compensation Base |
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and (2) 1-1/2% of the Participants Final Average Yearly Earnings in excess of the Social Security Covered Compensation Base multiplied by the Participants expected Years of Credited Service at age 65 up to 35 Years of Credited Service; and |
(ii) | 1-1/2% of the Participants Final Average Yearly Earnings multiplied by the Participants expected Years of Credited Service at age 65 in excess of 35 Years of Credited Service. |
(b) | the ratio of actual Years of Credited Service to expected Years of Credited Service at age 65. |
In no event, however, shall an FMC Participants monthly Normal Retirement Benefit be less than his or her accrued monthly Normal Retirement Benefit under the FMC Plan as of December 31, 1990.
3.1.3 Increases for Employee Contributions: Employee Contributions and Interest credited to a Participant are not paid as an accrued benefit, but rather may be withdrawn by the Participant at any time pursuant to Section 5.2 hereof. However, if a Participant does not elect to withdraw the Employee Contributions and Interest credited to the Participant either at the time of Retirement or before, pursuant to the terms of Section 5.2 hereof, a Participants Normal Retirement Benefit shall be increased $1 for each $120.00 of unwithdrawn Employee Contributions credited to the Participant.
3.1.4 Reductions for Certain Benefits: A Participants Normal Retirement Benefit shall be reduced by the value of (a) for FMC Participants, the FMC Participants vested benefit accrued under the FMC Plan as of November 30, 1985 (to the extent funded by the Aetna nonparticipating annuity contract or the Prudential nonparticipating annuity contract) and (b) any vested benefit payable to the Participant under the FMC Plan, the FMCTI Plan, or any pension, profit sharing or other retirement plan other than the Savings Plan (hereinafter called Duplicate Benefit Plan) which is attributable to any period which counts as Credited Service under this Plan. For purposes of determining the amount of any Duplicate Benefit Plan reduction, the vested benefit under the Duplicate Benefit Plan shall be converted to a form which is identical to the form of benefit which is to be paid under this Plan, including any applicable reductions for early commencement as determined under the Plan or the Duplicate Benefit Plan, as applicable. Such values will be determined as of the earlier of the Annuity Starting Date under the Plan, or the date distribution of such vested benefit was made or commenced under the Duplicate Benefit Plan as applicable.
3.2 Early Retirement Benefits
3.2.1 Early Retirement: A Participant who retires on or after the Early Retirement Date shall be entitled to receive an Early Retirement Benefit determined under Section 3.2.2. Payment of such benefit shall commence as of the first of the month after the Participant retires or, if the Participant elects, as of the first day of any subsequent month. Any such election of a deferred commencement date may be revoked at any time prior to such date and a new date may be elected by giving advance written notice to the Administrator in accordance with rules prescribed by the Administrator.
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3.2.2 Calculation of Early Retirement Benefit: Subject to Sections 3.2.3 and 3.2.4, a Participants monthly Early Retirement Benefit shall be equal to the greater of (a) or (b) below:
(a) | an amount determined pursuant to Section 3.1.2; and |
(b) | for an FMC Participant, his or her accrued monthly unreduced Early Retirement Benefit under the FMC Plan as of December 31, 1990 that was transferred to the FMCTI Plan in the FTI Spinoff. |
3.2.3 Early Retirement Reduction Factor: The Participants Early Retirement Benefit computed pursuant to Section 3.2.2 shall be reduced by 1 /3 of 1% for each 1 month in excess of 36 by which the commencement of the Participants Early Retirement Benefit precedes the Participants 65 th birthday.
3.2.4 Adjustments to Early Retirement Benefit: To the extent applicable, a Participants Early Retirement Benefit shall be increased as provided in Section 3.1.3 except that the number of dollars of unwithdrawn Employee Contributions and Interest required to provide $1 of monthly retirement benefits shall be increased by $3 for each full year by which the commencement of the Participants Early Retirement Benefit precedes the Participants Normal Retirement Date. Partial years shall be prorated on the basis of $0.25 per month.
3.3 Deferred Retirement Benefits
3.3.1 Deferred Retirement: A Participant who retires after the Normal Retirement Date shall be entitled to receive a Normal Retirement Benefit determined under Section 3.1.2 commencing as of the first day of the month coinciding with or next following the date the Participant actually retires. Each Participant shall accrue additional benefits hereunder after the Participants Normal Retirement Date with respect to the portion of the Normal Retirement Benefit which is attributable to contributions by the Company, and the amount, if any, of Employee Contributions and Interest required to provide $1 of monthly retirement benefit under Section 3.1.3 shall be decreased by $3 for each full year by which the commencement of the Normal Retirement Benefit follows the Normal Retirement Date. Partial years shall be prorated on the basis of $0.25 per month. If a Participant who is not employed by the Company or its Affiliates on his or her Normal Retirement Date defers his or her Normal Retirement Benefit will be paid retroactive to the Participants Normal Retirement Date as soon as reasonably practicable after the Plan Administrator learns of the deferred benefit.
3.3.2 Distribution Requirements: Except as hereinafter provided, unless the Participant elects otherwise in accordance with the terms of the Plan, payment of a Participants retirement benefits will begin no later than 60 days after the close of the Plan Year in which the latest of the following events occurs:
(a) | the Participants 65th birthday; |
(b) | the 10th anniversary of the year in which the Participant commenced participation in the Plan; and |
(c) | the Participant terminates employment with the Company and all Affiliates. |
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If the amount of the payment required to commence on the date determined under this Section 3.3.2 cannot be ascertained by such date, or if it is not possible to make such payment on such date because the Administrator cannot locate the Participant after making reasonable efforts to do so, a payment retroactive to such date may be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained under this Plan or the date the Participant is located.
Notwithstanding any other provision of this Plan:
(i) | the accrued benefit of a Participant who attains age 70-1/2 on or after January 1, 2000 must be distributed or commence to be distributed no later than the April 1 following the later of (1) the calendar year in which the Participant attains age 70-1/2 or (2) the calendar year in which the Participant retires (unless the Participant is a 5% owner, as defined in Code Section 416, of the Company with respect to the Plan Year in which the Participant attains age 70-1/2, in which case this Subsection (2) shall not apply); and |
(ii) | the accrued benefit of a Participant who attains age 70-1/2 prior to January 1, 2000 must be distributed or commence to be distributed no later than the April 1 following the calendar year in which the Participant attains age 70-1/2 unless the Participant is not a 5% owner (as defined in Subsection (i)) and elects to defer distribution to the calendar year in which the Participant retires. |
All Plan distributions will comply with Code Section 401(a)(9), including Department of Treasury Regulation Section 1.401(a)(9)-2. With respect to distributions made under the Plan for Plan Years beginning on or after January 1, 2003, all Plan distributions will comply with Code Section 401(a)(9), including Department of Treasury Regulation Section 1.401(a)(9)-2 through 1.401(a)(9)-9, as promulgated under Final and Temporary Regulations published in the Federal Register on April 17, 2002 (the 401(a)(9) Regulations), with respect to minimum distributions under Code Section 401(a)(9). In addition, the benefit payments distributed to any Participant on or after January 1, 2003, will satisfy the incidental death benefit provisions under Code Section 401(a)(9)(G) and Department of Treasury Regulation Section 1.401(a)(9)-5(d), as promulgated in the 401(a)(9) Regulations. To the extent required by Coe Section 401(a)(9)(C)(iii), or any other applicable guidance issued thereunder, with respect to a Participant who retires in a calendar year after the calendar year in which the Participant attains age 70 1 / 2 , the actuarial increase in such Participants accrued benefit mandated by Code Section 401(a)(9)(C)(iii) shall be implemented notwithstanding any suspension of benefits provision applicable to such Participant pursuant to ERISA 203(a)(3)(B), Code Section 411(a)(3)(B) and the terms of the Plan.
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3.4 Suspension of Benefits
3.4.1 Prior to Normal Retirement Date: If a Participant receives retirement benefits under the Plan following a termination of his employment prior to the Participants Normal Retirement Date and again becomes an Employee prior to the Participants Normal Retirement Date, no retirement benefits shall be paid during such later period of employment and up to the Participants Normal Retirement Date. Any benefits payable under the Plan to or on behalf of the Participant at the time of the Participants subsequent termination of employment shall be reduced by the actuarial equivalent (based on the assumptions in Exhibit E-4) of any benefits paid to the Participant after the Participant earlier termination and prior to his Normal Retirement Date.
3.4.2 After Normal Retirement Date: If (a) a Participant whose employment terminates again becomes an Employee after the Participants Normal Retirement Date, or again becomes an Employee prior to the Participants Normal Retirement Date and continues in employment beyond the Participants Normal Retirement Date, or (b) a Participant continues in employment with the Company and Affiliates after his Normal Retirement Date without a prior termination, the following provisions of this Section 3.4.2 shall become applicable to the Participant as of the Participants Normal Retirement Date or, if later, the Participants date of reemployment.
(i) | For purposes of this Section 3.4.2, the following definitions shall apply: |
(1) | Postretirement Date Service means each calendar month after a Participants Normal Retirement Date and subsequent to the time that: |
(A) | payment of retirement benefits commenced to the Participant if the Participant returned to employment with the Company and Affiliates, or |
(B) | payment of retirement benefits would have commenced to him if the Participant had not remained in employment with the Company and Affiliates, if in either case the Participant receives pay from the Company and Affiliates for any Hours of Service performed on each of 8 or more days (or separate work shifts) in such calendar month. |
(2) | Suspendable Amount means the monthly retirement benefits otherwise payable in a calendar month in which the Participant is engaged in Postretirement Date Service. |
(ii) |
Payment shall be permanently withheld of a portion of a Participants retirement benefits, not in excess of the Suspendable Amount, for each calendar month during which the Participant is employed in Postretirement Date Service. If payments have been suspended pursuant to Subsection (ii) above, such payments shall resume no later than the first day of the third calendar month after the calendar month in which the Participant ceases to be employed in Postretirement Date Service; provided, however, that no payments shall resume until the Participant has complied with the requirements set forth in Subsection (vi) below. The initial payment upon resumption shall include the payment scheduled |
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to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of Postretirement Date Service and the resumption of payment, less any amounts that are subject to offset pursuant to Subsection (iv) below. |
(iii) | Retirement benefits made subsequent to Postretirement Date Service shall be reduced by (1) the actuarial equivalent (based on the assumptions in Exhibit E-4) of any benefits paid to the Participant prior to the time the Participant is reemployed after the Participants Normal Retirement Date; and (2) the amount of any payments previously made during those calendar months in which the Participant was engaged in Postretirement Date Service; provided, however, that such reduction under (Subsection (2)) shall not exceed, in any one month, 25% percent of that months total retirement benefits (excluding amounts described in Subsection (ii) above) that would have been due but for the offset. |
(iv) | Any Participant whose retirement benefits are suspended pursuant to Subsection (ii) of this Section 3.4.2 shall be notified (by personal delivery or certified or registered mail) during the first calendar month in which payments are withheld that the Participants retirement benefits are suspended. Such notification shall include: |
(1) | a description of the specific reasons for the suspension of payments; |
(2) | a general description of the Plan provisions relating to the suspension; |
(3) | a copy of the provisions; |
(4) | a statement to the effect that applicable Department of Labor Regulations may be found at Section 2530.203-3 of Title 29 of the Code of Federal Regulations; |
(5) | the procedure for appealing the suspension, which procedure shall be governed by Section 12.11; and |
(6) | the procedure for filing a benefits resumption notification pursuant to Subsection (vi) below. |
If payments subsequent to the suspension are to be reduced by an offset pursuant to Subsection (iv) above, the notification shall specifically identify the periods of employment for which the amounts to be offset were paid, the Suspendable Amounts subject to offset, and the manner in which the Plan intends to offset such Suspendable Amounts.
(vi) | Payments shall not resume as set forth in Subsection (iii) above until a Participant performing Postretirement Date Service notifies the Administrator in writing of the cessation of such Service and supplies the Administrator with such proof of the cessation as the Administrator may reasonably require. |
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(vii) | A Participant may request, pursuant to the procedure contained in Section 12.11, a determination whether specific contemplated employment will constitute Postretirement Date Service. |
3.5 Benefit Limitations
3.5.1 Limitation on Accrued Benefit: N otwithstanding any other provision of the Plan, the annual benefit payable under the Plan to a Participant, when expressed as a monthly benefit commencing at the Participants Social Security Retirement Age (as defined in Code Section 415(b)(8)), shall not exceed the lesser of (a) $13,333.33 or (b) the highest average of the Participants monthly compensation for 3 consecutive calendar years, subject to the following:
(i) | The maximum shall apply to the Individual Life Annuity computed under Section 3.1, 3.2, 3.3 or Article IV and to that portion of the Accrued Benefit (as adjusted as required under Code Section 415) payable in the form elected to the Participant during the Participants lifetime. |
(ii) | If a Participant has fewer than 10 years of participation in the Plan, the maximum dollar limitation of Subsection (a) above shall be multiplied by a fraction of which the numerator is the Participants actual years of participation in the Plan (computed to fractional parts of a year) and the denominator is 10. If a Participant has fewer than 10 Years of Vesting Service, the maximum compensation limitation in Subsection (b) above shall be multiplied by a fraction of which the numerator is the Years of Vesting Service (computed to fractional parts of a year) and the denominator is 10. Provided, however, that in no event shall such dollar or compensation limitation, as applicable, be less than 1/10th of such limitation determined without regard to any adjustment under this Subsection (ii). |
(iii) | As of January 1 of each year, the dollar limitation as adjusted by the Commissioner of Internal Revenue for that calendar year to reflect increases in the cost of living shall become effective as the maximum dollar limitation in Subsection (a) above for the Plan Year ending within that calendar year for Participants terminating in or after such Plan Year. |
(iv) | If the benefit of a Participant begins prior to age 62, the defined benefit dollar limitation applicable to the Participant at such earlier age is an annual benefit payable in the form of a Life Annuity beginning at the earlier age that is the Actuarial Equivalent of the dollar limitation under Subsection (a) above applicable to the Participant at age 62. The defined benefit dollar limitation applicable at an age prior to age 62 is determined by using the lesser of the effective Early Retirement reduction, as determined under the Plan, or 5% per year. The mortality basis for determining Actuarial Equivalence for terminations on or after December 31, 2002, as applicable, shall be the 1994 Group Annuity Reserving Table (weighted 50% male, 50% female and projected to 2002 using Scale AA), which is the table prescribed in Rev. Rul. 2001-62, (or the applicable mortality table, prescribed under Section 417(e)(3) of the Code or other guidance of general applicability issued thereunder). |
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For periods prior to January 1, 2002, the dollar limitation under Code Section 415 in effect for the applicable Plan Year above shall be modified as follows to reflect commencement of retirement benefits on a date other than the Participants Social Security Retirement Age:
(1) | if the Participants Social Security Retirement Age is 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the dollar limitation under Subsection (a) above by 5/9ths of 1% for each month by which benefits commence before the month in which the Participant attains age 65; |
(2) | if the Participants Social Security Retirement Age is greater than 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the dollar limitation under Subsection (a) above by 5/9ths of 1% for each of the first 36 months and by 5/12ths of 1% for each of the additional months by which benefits commence before the month in which the Participant attains the Participants Social Security Retirement Age; |
(3) | if the Participants benefit commences prior to age 62, the dollar limitation shall be the actuarial equivalent of Subsection (a) above, payable at age 62, as determined above, reduced for each month by which benefits commence before the month in which the Participant attains age 62. The interest rate for determining Actuarial Equivalence shall be the greater of the interest rate assumption under the Plan for determining early retirement benefits or 5% per year. The mortality basis for determining Actuarial Equivalence for terminations on or after January 1, 1995 shall be the 1983 Group Annuity Mortality Table (weighted 50% male and 50% female); |
(v) | Notwithstanding the foregoing, the maximum as applied to any FMC Participant on April 1, 1987 shall in no event be less than the FMC Participants current accrued benefit as of March 31, 1987, under the FMC Plan, as that term is defined in Section 1106 of the Tax Reform Act of 1986. |
(vi) | The maximum shall apply to the benefits payable to a Participant under the Plan and all other tax-qualified defined benefit plans of the Company and Affiliates (whether or not terminated), and benefits shall be reduced, if necessary, in the reverse of the chronological order of participation in such plans. |
3.5.2 Multiple Plan Reduction: With respect to each FMC Participant who did not have 1 Hour of Service after December 31, 1999 and who is (or has been) a participant in any defined contribution plan (whether or not terminated) maintained by FMC, FMCTI, the
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Company or an Affiliate, the sum of the FMC Participants defined benefit plan fraction (as defined under Code Section 415(e)(2)) and defined contribution plan fraction (as defined under Code Section 415(e)(3)) shall not exceed 1. If such sum exceeds 1, the FMC Participants defined benefit plan fraction shall be reduced until such sum equal 1.
3.5.3 Annual Compensation Limit: The accrued benefit of each Section 401(a)(17) employee under this Plan will be the greater of the accrued benefit determined for the Employee under (a) or (b) below:
(a) | the Employees accrued benefit determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Employees total Years of Credited Service, or |
(b) | the sum of: |
(i) | the Employees accrued benefit as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with section 1.401(a)(4)-13 of the regulations under the Code, and the Employees accrued benefit determined under the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Employees Years of Credited Service credited to the Employee for Plan Years beginning on or after January 1, 1994. |
A Section 401(a)(17) employee means an Employee whose current accrued benefit as of a date on or after the first day of the first Plan Year beginning on or after January 1, 1994, is based on Earnings for a year beginning prior to January 1, 1994 that exceeded $150,000.
3.5.4 Incorporation of Section 415 of the Code : The provisions set forth in Article III are intended to comply with the requirements of Section 415 of the Code and shall be interpreted, applied and if and to the extent necessary, deemed modified without formal language so as to satisfy solely the minimum requirements of Section 415.
3.6 FMC Participants and FMCTI Participants Benefits
The Normal Retirement Benefit, Early Retirement Benefit and Termination Benefit for each FMC Participant who is not an Employee and who does not complete an Hour of Service on or after May 1, 2001 shall, notwithstanding the provisions of Sections 3.1, 3.2, 3.3 or 4.2 hereof, equal the accrued benefit of such FMC Participant as transferred from the FMC Plan in the FTI Spinoff.
The Normal Retirement Benefit, Early Retirement Benefit and Termination Benefit for each FMCTI Participant who is not an Employee and who does not complete an Hour of Service on or after June 30, 2008 shall, notwithstanding the provisions of Sections 3.1, 3.2, 3.3 or 4.2 hereof, equal the accrued benefit of such FMCTI Participant as transferred from the FMCTI Plan in the JBT Spinoff.
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ARTICLE IV
Termination Benefits
4.1 Termination of Service
Except as otherwise provided in the applicable Supplement, a Participant who has 5 Years of Vesting Service but who ceases to be an Employee before the Participants Early Retirement Date for any reason other than death, shall be entitled to receive a Termination Benefit determined under Section 4.2. Except as otherwise provided in the applicable Supplement, unless the Participant elects otherwise subject to Section 3.3.2, payment of such benefit shall commence as of the first day of the month coincident with or next following the Participants Normal Retirement Date or, if the Participant elects, as of the first day of any month before such Normal Retirement Date and coincident with or following the Participants 55th birthday. Any such election of the earlier Annuity Starting Date shall be made by giving advance written notice to the Administrator in accordance with rules prescribed by the Administrator. Except as provided in Article V and Article VII, no benefits shall be payable to any person if the Participant dies prior to the Annuity Starting Date. A terminated Participant who has no vested interest in the Participants accrued benefit shall be deemed to have received a distribution of the Participants entire vested benefit. The Committee or its delegatee may, in its discretion, fully vest a Participant in the Participants accrued benefit in the event the Participants employment with the Company is affected by a transaction undertaken by the Company.
4.2 Amount of Termination Benefit
Except as otherwise provided in the applicable Supplement or in Section 3.6, a Participants monthly Termination Benefit shall be determined pursuant to Sections 3.1.2 and 3.1.3 as in effect on the date the Participant terminates employment, except that the following adjustments shall be made if payment of the Participants Termination Benefit is to commence before the Normal Retirement Date:
(a) | the amount computed pursuant to Section 3.1.2 shall be reduced by 1/2 of 1% for each month between the Annuity Starting Date and the Normal Retirement Date; |
(b) | the amount of Employee Contributions and Interest required to provide $1 of monthly retirement benefit under Section 3.1.3 shall be increased by $3 for each full year by which the Annuity Starting Date precedes the Normal Retirement Date, and partial years shall be prorated on the basis of $0.25 per month; |
(c) |
notwithstanding Subsection (a) of this Section 4.2, the amounts computed pursuant to Section 3.1.2 shall be reduced by 1/3 of 1% for each month in excess of 36 by which the Annuity Starting Date precedes the Participants 65 th birthday if: |
(i) | the Participants combined age and Years of Vesting Service equal at least 65, and the Participant ceases to be an Employee (1) because of the permanent shutdown of a single site of employment or one or more facilities or operating units within a single site of employment or (2) in connection with a permanent reduction in force; or |
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(ii) | the Participant has Years of Vesting Service attributable to employment with FMC before January 1, 1989, has attained age 40, and permanently ceases to be an Employee because of the permanent shutdown of a single site of employment, resulting in the termination of employment of not more than 20 Participants at that employment site. |
(d) | If a Participant ceases to be an Employee (1) because of the permanent shut down of a single site of employment of one or more facilities or operating units within a single site of employment, or (2) in connection with a permanent reduction in force, solely for purposes of determining a Participants eligibility for Early Retirement, a Participant with 10 Years of Credited Service shall have added to his or her age the number of weeks of pay he or she receives that are attributable to severance pay, unused vacation pay and accrued vacation pay. |
(e) | Notwithstanding anything herein to the contrary, for purposes of determining a Participants total combined age and Years of Vesting Service under Section 4.2(c) and 4.2(d), a partial month of age or Period of Service shall be counted as a whole month, and fractional years of age and Years of Vesting Service shall be taken into account. |
ARTICLE V
Refund of Employee Contributions
5.1 Employee Contributions
No Employee Contributions are permitted to be made to this Plan. However, Employee Contributions which were transferred from the FMC Plan are held under this Plan for the FMC Participants. All Employee Contributions transferred from the FMC Plan are fully vested and nonforfeitable and will be paid in accordance with the terms of Sections 5.2, 5.3 or 5.4 or in accordance with the terms of Section 3.1.3, 3.2.4, or 3.3.1, as applicable.
5.2 Withdrawal of Employee Contributions
A FMC Participant may withdraw all of the FMC Participants Employee Contributions, plus Interest thereon to the date of withdrawal, at any time before payment of a monthly retirement benefit commences by giving advance written notice to the Administrator in accordance with procedures prescribed by the Administrator. No partial withdrawal of Employee Contributions and Interest shall be permitted.
Payment of the FMC Participants Employee Contributions plus Interest shall be in the normal form of benefit (50% Joint and Survivors Annuity for a married FMC Participant, Individual Life Annuity for an unmarried FMC Participant) unless the FMC Participant waives such annuity (with the consent of the FMC Participants spouse, if the FMC Participant is married, in accordance with Section 6.3) and elects payment in a single sum.
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5.3 Refund Upon Death Before Annuity Starting Date
If a FMC Participant dies before the Annuity Starting Date, the FMC Participants Beneficiary shall receive in a lump sum a refund of the FMC Participants unwithdrawn Employee Contributions and Interest. The refund shall be made as soon as reasonably practicable after the date of the FMC Participants death, and Interest shall be computed to the date when the refund is paid.
5.4 Refund After Annuity Starting Date
If a FMC Participant dies after the Annuity Starting Date, there shall be paid to his or her Beneficiary the difference, if any, between such FMC Participants Employee Contributions and Interest as of the Annuity Starting Date and:
(a) | if the FMC Participant elected an Individual Life Annuity or a Level Income Option, the portion of the benefits which the FMC Participant has received which are attributable to Employee Contributions and Interest; |
(b) | if the FMC Participant elected any other form of benefit, the portion of the benefits received by the FMC Participant and the FMC Participants Joint Annuitant which are attributable to Employee Contributions and Interest. |
Any payment pursuant to (a) above shall be made as soon as reasonably practicable after the FMC Participants death. Any payment pursuant to (b) above shall be made as soon as reasonably practicable after all other benefit payments to the Joint Annuitant have ceased.
ARTICLE VI
Payment of Retirement Benefits
6.1 Normal Form of Benefit
Except as otherwise provided in the applicable Supplement, a Participants benefit shall be paid in the form of a 50% Joint and Survivors Annuity, with the Participants spouse as Joint Annuitant if the Participant is married on the Annuity Starting Date, and in the form of an Individual Life Annuity if the Participant is not married on the Annuity Starting Date, unless the Participant elects with spousal consent not to receive payments pursuant to this 6.1 and to receive payments in one of the optional forms permitted under Section 6.2. An election not to receive the normal form of benefit and to receive payment in any optional form shall satisfy the applicable requirements of Section 6.3.
6.2 Available Forms of Benefits
A Participant may elect with spousal consent and in accordance with Section 6.3, to receive the Participants benefits in any one of the forms of benefits described in this Section 6.2.
6.2.1 Individual Life Annuity : An Individual Life Annuity is an immediate annuity which provides equal monthly payments for the Participants life only.
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6.2.2 50% Joint and Survivors Annuity: A 50% Joint and Survivors Annuity is an immediate annuity which is the actuarial equivalent of an Individual Life Annuity (determined in accordance with Exhibit E-1) (effective February 1, 2006, the Actuarial Equivalent of an Individual Life Annuity), but which provides a smaller monthly annuity for the Participants life than an Individual Life Annuity.
6.2.3 100% Joint and Survivors Annuity: A 100% Joint and Survivors Annuity is an immediate annuity which is the actuarial equivalent of an Individual Life Annuity (determined in accordance with Exhibit E-2) (effective February 1, 2006, the Actuarial Equivalent of an Individual Life Annuity), but which provides a smaller monthly annuity for the Participants life than an Individual Life Annuity.
6.2.4 Level Income Option: The Level Income Option provides greater monthly annuity payments prior the Participants 62 nd birthday (determined in accordance with Exhibit E-3 (effective February 1, 2006, determined in accordance with the definition of Actuarial Equivalence in Article I)) and after such birthday provides reduced monthly annuity payments in an amount which, when added to the Primary Social Security Benefits which the Participant could elect to receive, approximately equals the amount of the monthly annuity paid prior to the Participants 62 nd birthday. A Participant who is entitled to an Early Retirement Benefit under Section 3.2 and who elects to have such benefit commence prior to age 62 may elect the Level Income Option, unless the Primary Social Security Benefits which the Participant could elect to receive at age 62 would equal or exceed the amount of the monthly annuity payments prior to age 62 or unless the Participant is receiving Social Security disability benefits. Such election shall be subject to the approval of the Participants spouse, given in accordance with the requirements for spousal consent under Section 6.3.
6.2.5 Qualified Optional Survivor Annuity : Effective for Plan Years beginning on or after January 1, 2008, a Participant may elect a Qualified Optional Survivor Annuity which is an immediate annuity for the life of the Participant with a survivor annuity for the life of the Participants surviving spouse that equals 75% of the amount of the annuity which is payable during the joint lives of the Participant and the Participants spouse.
6.3 Election of Benefits
6.3.1 The Administrator shall provide each Participant with a written notice containing the following information:
(a) | a general description of the normal form of benefit payable under the Plan; |
(b) | the Participants right to make and the effect of an election to waive the normal form of benefit; |
(c) | the right of the Participants spouse not to consent to the Participants election under Section 6.1; |
(d) | the right of Participant to revoke such election, and the effect of such revocation; |
(e) | the optional forms of benefits available under the Plan; and |
(f) | the Participants right to request in writing information on the particular financial effect of an election by the Participant to receive an optional form of benefit in lieu of the normal form of benefit. |
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6.3.2 The notice under Section 6.3.1 shall be provided to the Participant at each of the following times as shall be applicable to him:
(a) | not more than 90 (effective January 1, 2008, 180) days and not less than 30 days after a Participant who is in the employ of the Company or an Affiliate gives notice of the Participants intention to terminate employment and commence receipt of the Participants retirement benefits under the Plan; or |
(b) | not more than 90 (effective January 1, 2008, 180) days and not less than 30 days prior to the attainment of age 65 of a Participant (whether or not the Participant has terminated employment) who has not previously commenced receiving retirement benefits. |
The election period in Section 6.3.3 for a Participant who requests additional information during the election period will be extended until 90 days after the additional information is mailed or personally delivered. Any such request shall be made only within 90 days after the date the information described in Section 6.3.1 is given to the Participant, and the Administrator shall not be obligated to comply with more than one such request. Any information provided pursuant to this Section 6.3.2 will be given to the Participant within 30 days after the date of the Participants request and will be based upon the estimated benefits to which the Participant will be entitled as of the later of the first day on which such benefits could commence or the last day of the Plan Year in which the Participants request is received. If a Participant files an election (or revokes an election) pursuant to this Section 6.3 less than 60 days prior to the Annuity Starting Date, such Participants initial payments may be delayed for administrative reasons. In such event, the payments shall begin as soon as practicable and shall be made retroactively to such date. Notwithstanding the above to the contrary, effective January 1, 2004, in the event a Participant elects a Retroactive Annuity Starting Date as provided in Section 6.6, the notice under 6.3.1 shall be provided to the Participant on or about the date that the Participant files an election for a Retroactive Annuity Starting Date.
6.3.3 A Participant may make the election provided in Section 6.3 by filing the prescribed form with the Administrator at any time during the election period. The election period shall begin 90 (effective January 1, 2008, 180) days prior to the Participants Annuity Starting Date. Such election shall be subject to the written consent of the Participants spouse, acknowledging the effect of the election and witnessed by a Plan representative or a notary public. Such spousal consent shall not be required if the Participant establishes to the satisfaction of the Administrator that the consent of the spouse may not be obtained because there is no spouse or the spouse cannot be located. A spouses consent shall be irrevocable. The election in Section 6.3 may be revoked or changed at any time during the election period but shall be irrevocable thereafter.
6.3.4 Notwithstanding Section 6.3.3:
(a) | distribution of benefits may commence less than 30 days after the notice required pursuant to Section 6.3.1 is provided if: |
(i) | the Participant elects to waive the requirement that notice be given at least 30 days prior to the Annuity Starting Date; and |
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(ii) | the distribution commences more than 7 days after such notice is provided. |
(b) | The notice described in Section 6.3.1 may be provided after the Annuity Starting Date, in which case the applicable election period shall not end before the 30th day after the date on which such notice is provided, unless the Participant elects to waive the 30-day notice requirements pursuant to Subsection (a) above. |
6.3.5 Notwithstanding the foregoing provisions in Section 6.3, effective January 1, 2004, a Participant may elect a Retroactive Annuity Starting Date (as defined in Treas. Reg. 1.417(e)-1(b)(3)(iv)(B)), pursuant to Section 6.6. In the event that the notice information described in Section 6.3 is provided to the Participant after the Participants Annuity Starting Date (as defined in Section 417(f)(2) of the Code) or Retroactive Annuity Starting Date, the Participant shall have at least 30 days after the date the notification is provided to make the election described in Section 6.3. The Participant may waive this 30 day period pursuant to the provisions of Section 6.3.4.
6.4 Joint Annuitants
A Participant who elects a joint and survivors annuity shall designate a Joint Annuitant when making such an election. A Participant may designate any individual as the Joint Annuitant; provided, however, that the Joint Annuitant shall be the Participants spouse unless the Participants spouse consents to the designation of another individual in accordance with the requirements for spousal consent under Section 6.3.3. A designation of a Joint Annuitant may be revoked or changed at any time during the applicable election period described in Section 6.3.3 but shall become irrevocable thereafter. If the Joint Annuitant dies on or after the Annuity Starting Date the Participant shall continue to receive the reduced monthly annuity.
6.5 FMC Participants and FMCTI Participants in Pay Status
Notwithstanding any provision in the Plan to the contrary, each FMC Participant who had elected to receive and/or was receiving their normal retirement benefit, early retirement benefit, deferred retirement benefit or termination benefit under the FMC Plan and under the FMCTI Plan prior to the Effective Date shall on and after the Effective Date continue to receive such benefits in the same form, and in the same amount as such FMC Participant and/or, as applicable, FMC Joint Annuitant, was receiving or would have received under the FMC Plan and the FMCTI Plan prior to the Effective Date as if such benefits were paid by the FMC Plan. In addition, each FMC Beneficiary who was receiving benefits under the FMC Plan and the FMCTI Plan on behalf of an FMC Participant prior to the Effective Date shall continue to receive such benefits from this Plan after the Effective Date in the same form and in the same amount as if such benefits were paid by the FMC Plan.
Notwithstanding any provision in the Plan to the contrary, each FMCTI Participant who had elected to receive and/or was receiving their normal retirement benefit, early retirement benefit, deferred retirement benefit or termination benefit under the FMCTI Plan prior to the Effective Date shall on and after the Effective Date continue to receive such benefits in the same form, and in the same amount as such FMCTI Participant and/or, as applicable, FMCTI Joint Annuitant, was receiving or would have received under the FMCTI Plan prior to the Effective Date as if such benefits were paid by the FMCTI Plan. In addition, each FMCTI
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Beneficiary who was receiving benefits under the FMCTI Plan on behalf of an FMCTI Participant prior to the Effective Date shall continue to receive such benefits from this Plan after the Effective Date in the same form and in the same amount as if such benefits were paid by the FMCTI Plan.
6.6. Election of Retroactive Annuity Starting Date
Effective January 1, 2004, a Participant may elect a Retroactive Annuity Starting Date (as defined in Treas. Reg. 1.417(e)-1(b)(3)(iv)(B)), that occurs on or before the date the notice information described in Section 6.3 is provided to the Participant, provided the following conditions are satisfied:
(a) | The Participants spouse (including an alternate payee who is treated as the spouse under a qualified domestic relations order), determined as if the date distributions commence were the Participants Annuity Starting Date (as defined in Section 417(f)(2) of the Code), consents to the Participants election of a Retroactive Annuity Starting Date. The spousal consent requirement of this Section 6.6(a) is satisfied if such consent satisfies the conditions of Section 6.3.3 above. |
(b) | If the date distribution commences is more than 12 months from the Retroactive Annuity Starting Date, the distribution provided based on the Retroactive Annuity Starting Date shall satisfy Section 415 of the Code as though the date distribution commences is substituted for the annuity starting date for all purposes, including for purposes of determining the applicable interest rate and applicable mortality table (as defined in Article I). |
(c) | If the distribution is payable as a lump sum, the distribution amount shall not be less than the present value of the Participants accrued benefit, determined (i) using the applicable mortality table and applicable interest rate as of the distribution date or (ii) using the applicable mortality table and applicable interest rate as of the Participants Retroactive Annuity Starting Date. For purposes of this paragraph (c) applicable mortality table and applicable interest rate are defined in Article I. |
If a Participant elects a Retroactive Annuity Starting Date the following provisions shall apply:
(a) | future periodic payments shall be the same as the future periodic payments, if any, that would have been paid with respect to the Participant had payments actually commenced on the Retroactive Annuity Starting Date; |
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(b) | the Participant shall receive a make-up payment to reflect any missed payment or payments for the period from the Retroactive Annuity Starting Date to the date of actual make-up payment (with appropriate adjustment for interest from the date the missed payment or payments would have been made to the date of the actual make-up payment); |
(c) | the benefit determined as of the Retroactive Annuity Starting Date shall satisfy Section 417(e)(3) of the Code, if applicable, and Section 415 with the applicable interest rate and applicable mortality table (as defined in Article I) determined as of that date; and the Retroactive Annuity Starting Date shall not precede the date the Participant could have otherwise started receiving benefits under the Plan. |
ARTICLE VII
Survivors Benefits
7.1 Preretirement Survivors Benefit
7.1.1 Eligibility: If a Participant who continues to be employed by the Company at any time on or after attaining age 55 and 10 Years of Credited Service dies (whether or not so employed on the date of death) before the Annuity Starting Date, then such Participants surviving Joint Annuitant (if any) shall be entitled to receive a survivors benefit for life, determined under Section 7.2. Payment of such benefit shall commence as of the first day of the month coincident with or next following the date of the Participants death.
7.1.2 Amount of Preretirement Survivors Benefit: The preretirement survivors benefit under this Section 7.1 shall be computed as follows:
(a) | If the Participants Period of Service has not terminated before the Participants death, the survivors benefit shall be equal to the benefit which would have been paid to the Participants Joint Annuitant if the Participants Period of Service had terminated on the date of death, benefits in the form of a 50% Joint and Survivors Annuity commenced as of the first day of the next following month, and the Participant died on such day. |
(b) | If the Participants Period of Service has terminated before the Participants death but the Participant has deferred the commencement of the Early Retirement Benefit, the survivors benefit shall be equal to the benefit which the Participants Joint Annuitant would have been paid if the Participant had elected a 50% Joint and Survivors benefit commencing as of the first day of the month next following the date of the Participants death. |
(c) | The survivors benefit payable pursuant to this Section 7.1.2 shall exclude any retirement benefit based upon Employee Contributions and Interest (which will be refunded upon the Participants death, to the extent provided in Article V). |
7.1.3 Designation of Joint Annuitant Other Than Spouse: A participant may elect at any time during the Election Period (as defined in Section 7.1.5) to waive the
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Preretirement Survivor Annuity and to revoke any such election at any time during the Election Period. Any election by a Participant to waive the Preretirement Survivor Annuity shall not take effect unless the Participants spouse consents in writing to such election, such consent acknowledges the effect of such an election and the consent is witnessed by a representative of the Plan or a notary public, unless the Participant establishes to the satisfaction of the Committee that such consent may not be obtained because there is no spouse, the spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe. The consent by a spouse shall be irrevocable and shall be effective only with respect to that spouse.
7.1.4 Explanation of Preretirement Survivors Benefit: The Committee shall provide each Participant with a written explanation with respect to the Preretirement Survivor Annuity as soon as administratively feasible after the Participant attains age 55. The explanation shall include:
(a) | the terms and conditions of the Preretirement Survivor Annuity, |
(b) | the Participants right to make, and the effect of, an election to waive the Preretirement Survivor Annuity, |
(c) | the rights of the Participants spouse in connection therewith, and |
(d) | the right to make, and the effect of, the revocation of an election to waive the Preretirement Survivor Annuity. |
7.1.5 Election Period: For purposes of this Section 7.1.5, the term Election Period means the period that begins on the Participants 55th birthday and ends on the date of the Participants death.
7.2 Surviving Spouses Benefit
If a Participant who has 5 or more Years of Vesting Service but does not meet the requirements for the preretirement survivors benefit under Section 7.1 dies before the Annuity Starting Date, then such Participants surviving spouse (if any) shall be entitled to receive a survivors benefit for life. The amount of such survivors benefit shall be determined pursuant to Section 4.2 based upon the Participants age and Years of Credited Service on the date of the Participants death and paid in the form of a 50% Joint and Survivors Annuity as if the Participant had died on the date such benefits commenced. The survivors benefit payable pursuant to this Section 7.2 shall exclude any retirement benefit based upon Employee Contributions and Interest (which will be refunded upon the Participants death to the extent provided in Article V). Payment of the survivors benefit shall commence on the first day of the month coincident with or next following the later of the Participants 55th birthday or his death, unless the Participants spouse elects to commence payment of benefits as of the first day of any subsequent month, but not later than the Participants Normal Retirement Date.
7.3 Certain Former Employees
FMC Participants who have 10 Years of Vesting Service but who have not been credited with an Hour of Service on or after August 23, 1984 and are not receiving benefits on that date shall be entitled to elect survivors benefits only as follows:
(a) |
If the FMC Participant was credited with an Hour of Service under the FMC Plan or a predecessor plan on or after September 2, 1974, but is not |
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otherwise credited with an Hour of Service in a Plan Year beginning on or after January 1, 1976, under the FMC Plan, the FMCTI Plan or this Plan, the Participant shall be afforded an opportunity to elect payment of benefits in the form of a 50% Joint and Survivors Annuity. |
(b) | If the Participant is credited with an Hour of Service under this Plan, the FMCTI Plan, the FMC Plan or a predecessor plan in a Plan Year beginning after December 31, 1975, the Participant shall be afforded the opportunity to elect a Surviving Spouses Benefit under Section 7.2. |
ARTICLE VIII
Fiduciaries
8.1 Named Fiduciaries
8.1.1 The Company is the Plan sponsor and a named fiduciary with respect to control over and management of the Plans assets only to the extent that it (a) shall appoint the members of the Committee which administers the Plan at the Administrators direction; (b) shall delegate its authorities and duties as plan administrator, as defined under ERISA, to the Committee; and (c) shall continually monitor the performance of the Committee.
8.1.2 The Company, as Administrator, and the Committee, which administers the Plan at the Administrators direction, are named fiduciaries of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to control and manage the operation and administration of the Plan. The Administrator is also the administrator and plan administrator of the Plan, as those terms are defined in ERISA Section 3(16)(A) and Code Section 414(g), respectively.
8.1.3 The Trustee is a named fiduciary of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to manage and control all Trust assets, except to the extent that authority is delegated to an Investment Manager or to the extent the Administrator or the Committee directs the allocation of Trust assets among general investment categories.
8.1.4 The Company, the Administrator, and the Trustee are the only named fiduciaries of the Plan.
8.2 Employment of Advisers
A named fiduciary, and any fiduciary appointed by a named fiduciary, may employ one or more persons to render advice regarding any of the named fiduciarys or fiduciarys responsibilities under the Plan.
8.3 Multiple Fiduciary Capacities
Any named fiduciary and any other fiduciary may serve in more than one fiduciary capacity with respect to the Plan.
8.4 Payment of Expenses
All Plan expenses, including expenses of the Administrator, the Committee, the Trustee, any Investment Manager and any insurance company, will be paid by the Trust Fund, unless a Participating Employer elects to pay some or all of those expenses.
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8.5 Indemnification
To the extent not prohibited by state or federal law, each Participating Employer agrees to, and will indemnify and save harmless the Administrator, any past, present, additional or replacement member of the Committee, and any other employee, officer or director of that Participating Employer, from all claims for liability, loss, damage (including payment of expenses to defend against any such claim) fees, fines, taxes, interest, penalties and expenses which result from any exercise or failure to exercise any responsibilities with respect to the Plan, other than willful misconduct or willful failure to act.
ARTICLE IX
Plan Administration
9.1 Powers, Duties and Responsibilities of the Administrator and the Committee
9.1.1 The Administrator and the Committee have full discretion and power to construe the Plan and to determine all questions of fact or interpretation that may arise under it. Interpretation of the Plan or determination of questions of fact regarding the Plan by the Administrator or the Committee will be conclusively binding on all persons interested in the Plan.
9.1.2 The Administrator and the Committee have the power to promulgate such rules and procedures, to maintain or cause to be maintained such records, and to issue such forms as they deem necessary or proper to administer the Plan.
9.1.3 Subject to the terms of the Plan, the Administrator and/or the Committee will determine the time and manner in which all elections authorized by the Plan must be made or revoked.
9.1.4 The Administrator and the Committee have all the rights, powers, duties and obligations granted or imposed upon them elsewhere in the Plan.
9.1.5 The Administrator and the Committee have the power to do all other acts in the judgment of the Administrator or Committee necessary or desirable for the proper and advantageous administration of the Plan.
9.1.6 The Administrator and the Committee will exercise all responsibilities in a uniform and nondiscriminatory manner.
9.2 Delegation of Administration Responsibilities
The Administrator and the Committee may designate by written instrument one or more actuaries, accountants or consultants as fiduciaries to carry out, where appropriate, their administrative responsibilities, including their fiduciary duties. The Committee may from time to time allocate or delegate to any subcommittee, member of the Committee and others, not necessarily employees of the Company, any of its duties relative to compliance with ERISA, administration of the Plan and other related matters, including those involving the exercise of discretion. The Companys duties and responsibilities under the Plan shall be carried out by its directors, officers and employees, acting on behalf of and in the name of the Company in their capacities as directors, officers and employees, and not as individual fiduciaries. No director, officer nor employee of the Company shall be a fiduciary with respect to the Plan unless he or she is specifically so designated and expressly accepts such designation.
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9.3 Committee Members
The Committee shall consist of not less than three people, who need not be directors, and shall be appointed by the Board of Directors of the Company. Any Committee member may resign and the Board of Directors may remove any Committee member, with or without cause, at any time. A majority of the members of the Committee shall constitute a quorum for the transaction of business and the act of a majority of the Committee members at a meeting at which a quorum is present shall be the act of the Committee. The Committee can act by written consent signed by all of its members. Any members of the Committee who are Employees shall not receive compensation for their services for the Committee. No Committee member shall be entitled to act on or decide any matter relating solely to his or her status as a Participant.
ARTICLE X
Funding of the Plan
10.1 Appointment of Trustee
The Committee or its authorized delegatee will appoint the Trustee and either may remove it. The Trustee accepts its appointment by executing the Trust Agreement. A Trustee will be subject to direction by the Committee or its authorized delegatee or, to the extent specified by the Company, by an Investment Manager, and will have the degree of discretion to manage and control Plan assets specified in the Trust Agreement. Neither the Company nor any other Plan fiduciary will be liable for any act or omission to act of a Trustee, as to duties delegated to the Trustee.
10.2 Actuarial Cost Method
The Committee or its authorized delegatee shall determine the actuarial cost method to be used in determining costs and liabilities under the Plan pursuant to Section 301 et seq., of ERISA, and Section 412 of the Code. The Committee or its authorized delegatee shall review such actuarial cost method from time to time, and if it determines from review that such method is no longer appropriate, then it shall petition the Secretary of the Treasury for approval of a change of actuarial cost method.
10.3 Cost of the Plan
Annually the Committee or its authorized delegatee shall determine the normal cost of the Plan for the Plan Year and the amount (if any) of the unfunded past service cost on the basis of the actuarial cost method established for the Plan using actuarial assumptions which, in the aggregate, are reasonable. The Committee or its authorized delegatee shall also determine the contributions required to be made for each Plan Year by the Participating Employers in order to satisfy the minimum funding standard (or alternative minimum funding standard) for such Plan Year determined pursuant to Sections 302 through 305 of ERISA and Section 412 of the Code.
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10.4 | Funding Policy |
The Participating Employers shall cause contributions to be made to the Plan for each Plan Year in the amount necessary to satisfy the minimum funding standard (or alternative minimum funding standard) for such Plan Year; provided, however, that this obligation shall cease when the Plan is terminated. In the case of a partial termination of the Plan, this obligation shall cease with respect to those Participants, Joint Annuitants and Beneficiaries who are affected by such partial termination. Each contribution is conditioned upon its deductibility under Section 404 of the Code and shall be returned to the Participating Employers within one year after the disallowance of the deduction (to the extent disallowed). Upon the Companys written request, a contribution that was made by a mistake of fact shall be returned to the Participating Employer within one year after the payment of the contribution.
10.5 Cash Needs of the Plan
The Committee or its authorized delegatee from time to time shall estimate the benefits and administrative expenses to be paid out of the Plan during the period for which the estimate is made and shall also estimate the contributions to be made to the Plan during such period by the Participating Employers. The Committee or its authorized delegatee shall inform the Trustees of the estimated cash needs of and contributions to the Plan during the period for which such estimates are made. Such estimates shall be made on an annual, quarterly, monthly or other basis, as the Committee shall determine.
10.6 Public Accountant
The Committee or its authorized delegatee shall engage an independent qualified public accountant to conduct such examinations and to render such opinions as may be required by Section 103(a)(3) of ERISA. The Committee or its authorized delegatee in its discretion may remove and discharge the person so engaged, but in such case it shall engage a successor independent qualified public accountant to perform such examinations and to render such opinions.
10.7 Enrolled Actuary
The Committee or its authorized delegatee shall engage an enrolled actuary to prepare the actuarial statement described in Section 103(d) of ERISA and to render the opinion described in Section 103(a)(4) of ERISA. The Committee or its authorized delegatee in its discretion may remove and discharge the person so engaged, but in such event it shall engage a successor enrolled actuary to perform such examination and render such opinion.
10.8 Basis of Payments to the Plan
All contributions to the Plan shall be made by the Participating Employers, and no contributions shall be required of or permitted by Participants. From time to time the Participating Employers shall make such contributions to the Plan as the Company determines to be necessary or desirable in order to fund the benefits provided by the Plan, and any expenses thereof which are paid out of the Trust Fund and in order to carry out the obligations of the Participating Employers set forth in Section 10.3. All contributions to the Plan shall be held by the Trustee in accordance with the Trust Agreement.
10.9 Basis of Payments from the Plan
All benefits payable under the Plan shall be paid by the Trustee out of the Trust Fund pursuant to the directions of the Administrator or the Committee and the terms of the Trust Agreement. The Trustee shall pay all proper expenses of the Plan and the Trust Fund out of the Trust Fund, except to the extent paid by the Participating Employers.
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ARTICLE XI
Plan Amendment or Termination
11.1 Plan Amendment or Termination
The Company may amend, modify or terminate the Plan at any time by resolution of the Board or by resolution of or other action recorded in the minutes of the Administrator or the Committee. Execution and delivery by the Chairman of the Board, the President, any Vice President of the Company or the Committee of an amendment to the Plan is conclusive evidence of the amendment, modification or termination.
11.2 Limitations on Plan Amendment
No Plan amendment can:
(a) | authorize any part of the Trust Fund to be used for, or diverted to, purposes other than the exclusive benefit of Participants or their Joint Annuitants and Beneficiaries; |
(b) | decrease the accrued benefits of any Participant or his or her Joint Annuitant or Beneficiary under the Plan; or |
(c) | except to the extent permitted by law, eliminate or reduce an early retirement benefit or retirement-type subsidy (as defined in Code Section 411) or an optional form of benefit with respect to service prior to the date the amendment is adopted or effective, whichever is later. |
11.3 Effect of Plan Termination
Upon termination of the Plan, each Participants rights to benefits accrued hereunder shall be vested and nonforfeitable, and the Trust shall continue until the Trust Fund has been distributed as provided in Section 11.4. Any other provision hereof notwithstanding, the Participating Employers shall have no obligation to continue making contributions to the Plan after termination of the Plan. Except as otherwise provided in ERISA, neither the Participating Employers nor any other person shall have any liability or obligation to provide benefits hereunder after such termination in excess of the value of the Trust Fund. Upon such termination, Participants, Joint Annuitants, and Beneficiaries shall obtain benefits solely from the Trust Fund. Upon partial termination of the Plan, this Section 11.3 shall apply only with respect to such Participants, Joint Annuitants and Beneficiaries as are affected by such partial termination.
11.4 Allocation of Trust Fund on Termination
On termination of the Plan, the Trust Fund shall be allocated by the Administrator on an actuarial basis among Participants, Joint Annuitants and Beneficiaries in the manner prescribed by Section 4044 of ERISA. Any residual assets of the Trust Fund remaining after such allocation shall be distributed to the Company if (a) all liabilities of the Plan to Participants, Joint Annuitants and Beneficiaries have been satisfied and (b) such a distribution does not contravene any provision of law. The foregoing notwithstanding, if any remaining assets of the
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Plan are attributable to Employee Contributions, such assets shall be equitably distributed to the FMC Participants who made such contributions (or to their Beneficiaries) in accordance with their rate of contribution. The benefit of any highly compensated employee or former employee (determined in accordance with section 414(g) of the Code and regulations thereunder) shall be limited to a benefit that is nondiscriminatory under section 401(a)(4) of the Code. In the event of a partial termination of the Plan, the Administrator shall arrange for the division of the Trust Fund, on a nondiscriminatory basis to the extent required by section 401 of the Code, into the portion attributable to those Participants, Joint Annuitants and Beneficiaries who are not affected by such partial termination and the portion attributable to such persons who are so affected. The portion of the Trust Fund attributable to persons who are so affected shall be allocated in the manner prescribed by section 4044 of ERISA.
ARTICLE XII
Miscellaneous Provisions
12.1 Subsequent Changes
All benefits to which any Participant, Joint Annuitant, or Beneficiary may be entitled hereunder shall be determined under the Plan in effect when the Participant ceases to be an Eligible Employee (or under the FMC Plan, as of the date each FMC Participant who is not an Employee ceased being an eligible employee under the FMC Plan or the FMCTI Plan) (or under the FMCTI Plan, as of the date each FMCTI Participant who is not an Employee under the FMCTI Plan) ceased being an eligible employee under the and shall not be affected by any subsequent change in the provisions of the Plan, unless the Participant again becomes an Eligible Employee.
12.2 Plan Mergers
The Plan shall not be merged or consolidated with any other plan, and no assets or liabilities of the Plan shall be transferred to any other plan, unless each Participant would receive a benefit immediately after such merger, consolidation or transfer (if the Plan then terminated) which is equal to or greater than the benefit such Participant would have been entitled to receive immediately before such merger, consolidation or transfer (if the Plan had then been terminated). A list of plans which were merged into the FMC Plan since May 27, 1994, whose assets were transferred to the FMCTI Plan in connection with the FTI Spinoff and whose assets were transferred to this Plan in connection with the JBT Spinoff is attached hereto and made a part hereof as Exhibit C.
12.3 No Assignment of Property Rights
The interest or property rights of any person in the Plan, in the Trust Fund or in any payment to be made under the Plan shall not be assignable nor be subject to alienation or option, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditors process, and any act in violation of this Section 12.3 shall be void. This provision shall not apply to a qualified domestic relations order defined in Code Section 414(p). The Company shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders.
In addition, the prohibition of this Section 12.3 will not apply to any offset of a Participants benefit under the Plan against an amount the Participant is ordered or required to
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pay to the Plan under a judgment, order, decree or settlement agreement that meets the requirements as set forth in this Section 12.3. The Participant must be ordered or required to pay the Plan under a judgment of conviction for a crime involving the Plan, under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA, or pursuant to a settlement agreement between the Secretary of Labor and the Participant in connection with a violation (or alleged violation) of that part 4. This judgment, order, decree or settlement agreement must expressly provide for the offset of all or part of the amount that must be paid to the Plan against the Participants benefit under the Plan. In addition, if a Participant is entitled to receive a 50% Joint and Survivor Annuity under Section 6.1 of the Plan or a Survivors Benefit under Article VII of the Plan, and the Participant is married at the time at which the offset is to be made, the Participants spouse must consent to the offset in accordance with the spousal consent requirements of Section 6.3.3 of the Plan, an election to waive the right of the spouse to the 50% Joint and Survivor Annuity (made in accordance with Section 6.3 of the Plan) or to the Survivors Benefit (made in accordance with Article VII of the Plan) must be in effect, the spouse is ordered or required in the judgment, order, decree, or settlement to pay an amount to the Plan in connection with a violation of Part 4 of subtitle B or ERISA Title I, or the spouse retains in the judgment, order, decree, or settlement the right to receive the survivor annuity under the 50% Joint and Survivor Annuity or under the Survivors Benefit, determined in the following manner: the Participant terminated employment on the date of the offset, there was no offset, the Plan permitted the commencement of benefits only on or after Normal Retirement Age, the Plan provided only the minimum-required qualified joint and survivor annuity, and the amount of the Survivors Benefit under the Plan is equal to the amount of the survivor annuity payable under the minimum-required qualified joint and survivor annuity. For purposes of this Section 12.3 the term minimum-required qualified joint and survivor annuity means a qualified joint and survivor annuity which is the actuarial equivalent of the Participants accrued benefit and under which the survivors annuity is 50% of the amount of the annuity which is payable during the joint lives of the Participant and the Participants spouse.
12.4 Beneficiary
The Beneficiary of a Participant shall be the person or persons so designated by such Participant. If no Beneficiary has been designated or if the designated Beneficiary is not living when a Plan Benefit is to be distributed, the Beneficiary shall be such Participants spouse if then living or, if not, such Participants then living children in equal shares or, if there are no children, such Participants estate. A Participant may revoke and change a designation of a Beneficiary at any time. A designation of a Beneficiary, or any revocation and change thereof, shall be effective only if it is made in writing in a form acceptable to the Administrator and is received by it prior to the Participants death.
12.5 Benefits Payable to Minors, Incompetents and Others
If any benefit is payable to a minor, an incompetent, or a person otherwise under a legal disability, or to a person the Administrator reasonably believes to be physically or mentally incapable of handling and disposing of his or her property, whether because of his or her advanced age, illness, or other physical or mental impairment, the Administrator has the power to apply all or any part of the benefit directly to the care, comfort, maintenance, support, education, or use of the person, or to pay all or any part of the benefit to the persons parent, guardian, committee, conservator, or other legal representative,
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wherever appointed, to the individual with whom the person is living or to any other individual or entity having the care and control of the person. The Plan, the Administrator and any other Plan fiduciary will have fully discharged all responsibilities to the Participant, Joint Annuitant or Beneficiary entitled to a payment by making payment under the preceding sentence.
12.6 Employment Rights
Nothing in the Plan shall be deemed to give any person a right to remain in the employ of the Company and Affiliates or affect any right of the Company or any Affiliate to terminate a persons employment with or without cause.
12.7 Proof of Age and Marriage
Participants and Joint Annuitants shall furnish proof of age and marital status satisfactory to the Administrator at such time or times as it shall prescribe. The Administrator may delay the disbursement of any benefits under the Plan until all pertinent information with respect to age or marital status has been furnished and then make payment retroactively.
12.8 Small Annuities
If the sum of (a) the lump sum Actuarial Equivalent value of a Normal, Early, or Deferred Retirement Benefit under Article III, Termination Benefit (payable at the Participants Normal Retirement Date) under Article IV, or Survivors Benefit under Article VII, excluding any Aetna or Prudential nonparticipating annuity; and (b) the lump sum Actuarial Equivalent value of any Aetna or Prudential nonparticipating annuity is equal to $5,000 (effective January 1, 2005, $1,000) (or such other amount as may be prescribed in or under the Code) or less, such amounts shall be paid in a lump sum as soon as administratively practicable following the Participants retirement, termination of employment or death.
For lump sum distributions paid on or after January 1, 2003, if the Participant is thereafter reemployed by the Company, the Participants subsequent benefit will be reduced by the lump sum Actuarial Equivalent value of the lump sum distribution previously paid to the Participant. For lump sum distributions paid prior to January 1, 2003, if a Participant who has received such a lump sum distribution is thereafter reemployed by the Company, the Participant shall have the option to repay to the Plan the amount of such distribution, together with interest at the rate of 5% per annum (or such other rate as may be prescribed pursuant to section 411(c)(2)(C)(III) of the Code), compounded annually from the date of the distribution to the date of repayment. If a reemployed Participant does not make such repayment, no part of the Period of Service with respect to which the lump sum distribution was made shall count as Years of Vesting Service or Years of Credited Service.
12.9 Controlling Law
The Plan and all rights thereunder shall be interpreted and construed in accordance with ERISA and, to the extent that state law is not preempted by ERISA, the law of the State of Illinois.
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12.10 Direct Rollover Option
Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributees election under this Section 12.10, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.
(a) | As used in this Section 12.10, an eligible rollover distribution means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributees designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any other distribution(s) that is reasonably expected to total less than $200 during a year. |
A portion of a distribution shall not fail to be an eligible rollover distribution because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.
(b) | As used in this Section 12.10, an eligible retirement plan means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, a qualified trust described in Section 401(a) of the Code, that accepts the distributees eligible rollover distribution and an annuity contract described in Section 403(b) of the Code or an eligible retirement plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. |
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(c) | As used in this Section 12.10, a distributee includes an Employee or former Employee. In addition, the Employees or former Employees surviving spouse and the Employees or former Employees spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. |
(d) | As used in this Section 12.10, a direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. |
12.11 Claims Procedure
12.11.1 Any application for benefits under the Plan and all inquiries concerning the Plan shall be submitted to the Company at such address as may be announced to Participants from time to time. Applications for benefits shall be in the form and manner prescribed by the Company and shall be signed by the Participant or, in the case of a benefit payable after the death of the Participant, by the Participants Surviving Spouse or Beneficiary, as the case may be.
12.11.2 The Plan Administrator shall give written or electronic notice of its decision on any application to the applicant within 90 days of receipt of the application. Electronic notification may be used, at the discretion of the Plan Administrator (or Review Panel, as discussed below). If special circumstances require a longer period of time, the Plan Administrator shall provide notice to the applicant within the initial 90-day period, explaining the special circumstances requiring the extension of time and the date by which the Plan expects to render a benefit determination. A decision will be given as soon as possible, but no later than 180 days after receipt of the application. In the event any application for benefits is denied in whole or in part, the Plan Administrator shall notify the applicant in writing or electronic notification of the right to a review of the denial. Such notice shall set forth, in a manner calculated to be understood by the applicant: the specific reasons for the denial; the specific references to the Plan provisions on which the denial is based; a description of any information or material necessary to perfect the application and an explanation of why such material is necessary; and a description of the Plans review procedures and the applicable time limits to such procedures, including a statement of the applicants right to bring a civil action under ERISA Section 502(a) following a denial on review.
12.11.3 The Company shall appoint a Review Panel, which shall consist of three or more individuals who may (but need not) be employees of the Company. The Review Panel shall be the named fiduciary that has the authority to act with respect to any appeal from a denial of benefits under the Plan, and shall hold meetings at least quarterly, as needed. The Review Panel shall have the authority to further delegate its responsibilities to two or more individuals who may (but need not) be employees of the Company.
12.11.4 Any person (or his authorized representative) whose application for benefits is denied in whole or in part may appeal the denial by submitting to the Review Panel a request for a review of the application within 60 days after receiving notice of the denial. The Review Panel shall give the applicant or such representative the opportunity to submit written comments, documents, and other information relating to the claim; and an
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opportunity to review, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other relevant information (other than legally privileged documents) in preparing such request for review. The request for review shall be in writing and addressed as follows: Review Panel of the Employee Welfare Benefits Plan Committee, 1803 Gears Road, Houston, TX 77067-4097. The request for review shall set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents, or other material as it may deem necessary or appropriate in making its review. The Review Panel will consider all comments, documents, and other information submitted by the applicant regardless of whether such information was submitted or considered during the initial benefit determination.
12.11.5 The Review Panel shall act upon each request for review within 60 days after receipt thereof. If special circumstances require a longer period of time, the Review Panel shall so notify the applicant within the initial 60 days, explaining the special circumstances requiring the extension of time and the date by which the Review Panel expects to render a benefit determination. A decision will be given as soon as possible, but no later than 120 days after receipt of the request for review. The Review Panel shall give notice of its decision to the Company and the applicant. In the event the Review Panel confirms the denial of the application for benefits in whole or in part, such notice shall set forth in a manner calculated to be understood by the applicant, the specific reasons for such denial and specific references to the Plan provisions on which the decision is based. If such an extension of time for review is required because of special circumstances, the Plan Administrator shall provide the applicant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. In the event the Review Panel confirms the denial of the application for benefits in whole or in part, such notice shall set forth in a manner calculated to be understood by the applicant: the specific reasons for such denial; the specific references to the Plan provisions on which the decision is based; the applicants right, upon request and free of charge, to receive reasonable access to, and copies of, all documents and other relevant information (other than legally-privileged documents and information); and a statement of the applicants right to bring a civil action under ERISA Section 502(a).
12.11.6 The Review Panel shall establish such rules and procedures, consistent with ERISA and the Plan, as it may deem necessary or appropriate in carrying out its responsibilities under this Section 12.11.
12.11.7 To the extent an application for benefits as a result of a Disability requires the Plan Administrator or the Review Panel, as applicable, to make a determination of Disability under the terms of the Plan, such determination shall be subject to all of the general rules described in this Section 12.11, except as they are expressly modified by this Section 12.11.7.
(a) |
If the applicants claim is for benefits as a result of Disability, then the initial decision on a claim for benefits will be made within 45 days after the Plan receives the applicants claim, unless special circumstances require additional time, in which case the Plan Administrator will notify the applicant before the end of the initial 45- |
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day period of an extension of up to 30 days. If necessary, the Plan Administrator may notify the applicant, prior to the end of the initial 30-day extension period, of a second extension of up to 30 days. If an extension is due to the applicants failure to supply the necessary information, the notice of extension will describe the additional information and the applicant will have 45 days to provide the additional information. Moreover, the period for making the determination will be delayed from the date the notification of extension was sent out until the applicant responds to the request for additional information. No additional extensions may be made, except with the applicants voluntary consent. The contents of the notice shall be the same as described in Section 12.11.12 above. If a benefit claim as a result of Disability is denied in whole or in part, the applicant (or his authorized representative) will receive written or electronic notification, as described in Section 12.11.2. |
(b) | If an internal rule, guideline, protocol or similar criterion is relied upon in making the adverse determination, then the notice to the applicant of the adverse decision will either set forth the internal rule, guideline, protocol or similar criterion, or will state that such was relied upon and will be provided free of charge to the applicant upon request (to the extent not legally-privileged) and if the applicants claim was denied based on a medical necessity or experimental treatment of similar exclusion or limit, then the applicant will be provided a statement either explaining the decision or indicating that an explanation will be provided to the applicant free of charge upon request. |
(c) | The Review Panel, as described above in Section 12.11.3 shall be the named fiduciary with the authority to act on any appeal from a denial of benefits as a result of Disability under the Plan. Any applicant (or his authorized representative) whose application for benefits as a result of Disability is denied in whole or in part may appeal the denial by submitting to the Review Panel a request for a review of the application within 180 days after receiving notice of the denial. The request for review shall be in the form and manner prescribed by the Review Panel and addressed as follows: Review Panel of the Employee Welfare Benefits Plan Committee, 1803 Gears Road, Houston, TX 77067-4097. In the event of such an appeal for review, the provisions of Section 12.11.4 regarding the applicants rights and responsibilities shall apply. Upon request, the Review Panel will identify any medical or vocational expert whose advice was obtained on behalf of the Review Panel in connection with an adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination. The entity or individual appointed by the Review Panel to review the claim will consider the appeal de novo, without any deference to the initial benefit denial. The review will not include any person who participated in the initial benefit denial or who is the subordinate of a person who participated in the initial benefit denial. |
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(d) | If the initial benefit denial was based in whole or in part on a medical judgment, then the Review Panel will consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment, and who was neither consulted in connection with the initial benefit determination nor is the subordinate of any person who was consulted in connection with that determination; and upon notifying the applicant of an adverse determination on review, include in the notice either an explanation of the clinical basis for the determination, applying the terms of the Plan to the applicants medical circumstances, or a statement that such explanation will be provided free of charge upon request. |
(e) | A decision on review shall be made promptly, but not later than 45 days after receipt of a request for review, unless special circumstances require an extension of time for processing. If an extension is required, the applicant will be notified before the end of the initial 45-day period that an extension of time is required and the anticipated date that the review will be completed. A decision will be given as soon as possible, but not later than 90 days after receipt of a request for review. The Review Panel shall give notice of its decision to the applicant; such notice shall comply with the requirements set forth in Section 12.11.5. In addition, if the applicants claim was denied based on a medical necessity or experimental treatment or similar exclusion, the applicant will be provided a statement explaining the decision, or a statement providing that such explanation will be furnished to the applicant free of charge upon request. The notice shall also contain the following statement: You and your Plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency. |
12.11.8 No legal or equitable action for benefits under the Plan shall be brought unless and until the applicant (a) has submitted a written application for benefits in accordance with Section 12.11.1 (or 12.11.7(a), as applicable), (b) has been notified by the Plan Administrator that the application is denied, (c) has filed a written request for a review of the application in accordance with Section 12.11.4 (or 12.11.7(c), as applicable); and (d) has been notified that the Review Panel has affirmed the denial of the application; provided that legal action may be brought after the Review Panel has failed to take any action on the claim within the time prescribed in Section 12.11.5 (or 12.11.7(e), as applicable). An applicant may not bring an action for benefits in accordance with this Section 12.11.8 later than 90 days after the Review Panel denies the applicants application for benefits.
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12.12 Participation in the Plan by an Affiliate
12.12.1 With the consent of the Board, any Affiliate, by appropriate action of its board of directors, a general partner or the sole proprietor, as the case may be, may adopt the Plan and determine the classes of its Employees that will be Eligible Employees.
12.12.2 A Participating Employer will have no power with respect to the Plan except as specifically provided herein.
12.13 Action by Participating Employers
Any action required to be taken by the Company pursuant to any Plan provisions will be evidenced in the manner set forth in Section 11.1. Any action required to be taken by a Participating Employer will be evidenced by a resolution of the Participating Employers board of directors (or an authorized committee of that board). Participating Employer action may also be evidenced by a written instrument executed by any person or persons authorized to take the action by the Participating Employers board of directors, any authorized committee of that board, or the stockholders. A copy of any written instrument evidencing the action by the Company or Participating Employer must be delivered to the secretary or assistant secretary of the Company or Participating Employer.
ARTICLE XIII
Top Heavy Provisions
13.1 Top Heavy Definitions
For purposes of this Article XIII and any amendments to it, the terms listed in this Section 13.1 have the meanings ascribed to them below.
Aggregate Account means the value of all accounts maintained on behalf of a Participant, whether attributable to Company or employee contributions, determined under applicable provisions of the defined contribution plan used in determining Top Heavy Plan status.
Aggregation Group means the group of plans in a Mandatory Aggregation Group, if any, that includes the Plan, unless including additional Related Plans in the group would prevent the Plan for being a Top Heavy Plan, in which case Aggregation Group means the group of plans in a Permissive Aggregation Group, if any, that includes the Plan.
Compensation means compensation as defined in Code Section 415(c)(3) and Treasury regulations thereunder. For purposes of determining who is a Key Employee, Compensation will be applied by taking into account amounts paid by Affiliates who are not Participating Employers, as well as amounts paid by Participating Employers, and without applying the exclusions for amounts paid by a Participating Employer to cover an Employees nonqualified deferred compensation FICA tax obligations and for gross-up payments on such FICA tax payments.
Determination Date means, for a Plan Year, the last day of the preceding Plan Year. If the Plan is part of an Aggregation Group, the Determination Date for each other plan will be, for any Plan Year, the Determination Date for that other plan that falls in the same calendar year as the Determination Date for the Plan.
Key Employee means an employee described in Code Section 416(i)(1), the regulations promulgated thereunder and other guidance of general applicability issued thereunder. Generally, a Key Employee is an Employee or former Employee who, at any time during the Plan Year containing the Determination Date is:
(a) | an officer of the Company or an Affiliate with annual Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002); |
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(b) | a 5% owner of the Company or an Affiliate; or |
(c) | a 1% owner of the Company or an Affiliate with annual Compensation from the Company and all Affiliates of more than $150,000. |
Mandatory Aggregation Group means each plan (considering the Plan and Related Plans) that, during the Plan Year that contains the Determination Date or any of the 4 preceding Plan Years:
(a) | had a participant who was a Key Employee; or |
(b) | was required to be considered with a plan in which a Key Employee participated in order to enable the plan in which the Key Employee participated to meet the requirements of Code Section 401(a)(4) or 410(b). |
Non-Key Employee means an Employee or former Employee who is not a Key Employee.
Permissive Aggregation Group means the group of plans consisting of the plans in a Mandatory Aggregation Group with the Plan, plus any other Related Plan or Plans that, when considered as a part of the Aggregation Group, does not cause the Aggregation Group to fail to satisfy the requirements of Code Section 401(a)(4) or 410(b).
Present Value of Accrued Benefits means, in the case of a defined benefit plan, a Participants present value of accrued benefits determined as follows:
(a) | as of the most recent Actuarial Valuation Date, which is the most recent valuation date within a 12-month period ending on the Determination Date. |
(b) | as if the Participant terminated service as of the actuarial valuation date; and |
(c) | the Actuarial Valuation Date must be the same date used for computing the defined benefit plan minimum funding costs, regardless of whether a valuation is performed that Plan Year. |
Present Value means, in calculating a Participants present value of accrued benefits as of a Determination Date, the sum of:
(a) | the present value of accrued benefits using the actuarial assumptions of Exhibit E-4; |
(b) |
any Plan distributions made within the Plan Year that includes the Determination Date, provided however, in the case of a distribution made for a reason other than separation from service, death or disability, this |
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provision shall also include distributions made within the 4 preceding Plan Years. In the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for top heavy purposes to the extent that such distributions are already included in the Participants present value of accrued benefits as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted; |
(c) | any Employee Contributions, whether voluntary or mandatory. However, amounts attributable to tax deductible Qualified Voluntary Employee Contributions shall not be considered to be a part of the Participants present value of accrued benefits; |
(d) | with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Participant and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section 13.1. If this Plan is the plan accepting such rollovers or plan to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers, as part of the Participants present value of accrued benefits; |
(e) | with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Participant or made to a plan maintained by the same employer), if this Plan provides the rollover or plan-to-plan transfer, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Participants present value of accrued benefits, irrespective of the date on which such rollover or plan-to-plan transfer is accepted; and |
(f) | if an individual has not performed services for a Participating Employer within the Plan Year that includes the Determination Date, any accrued benefit for such individual shall not be taken into account. |
Related Plan means any other defined contribution plan (a Related Defined Contribution Plan) or defined benefit plan (a Related Defined Benefit Plan) (both as defined in Code Section 415(k), maintained by the Company or an Affiliate.
A Super Top Heavy Aggregation Group exists in any Plan Year for which, as of the Determination Date, the sum of the present value of accrued benefits and the Aggregate Accounts of Key Employees under all plans in the Aggregation Group exceeds 90% of the sum of the present value of accrued benefits and the Aggregate Accounts of all employees under all plans in the Aggregation Group. In determining the sum of the Present Value of Accrued Benefits and/or Aggregate Accounts for all employees, the present value of accrued benefits and/or Aggregate Accounts for any Non-key Employee who was a Key Employee for any Plan Year preceding the Plan Year that contains the Determination Date will be excluded.
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Super Top Heavy Plan means the Plan when it is described in the second sentence of Section 13.2.
A Top Heavy Aggregation Group exists in any Plan Year for which, as of the Determination Date, the sum of the Present Value of Accrued Benefits for Key Employees under all plans in the Aggregation Group exceeds 60% of the sum of the Present Value of Accrued Benefits for all employees under all plans in the Aggregation Group. In determining the sum of the Present Value of Accrued Benefits for all employees, the Present Value of Accrued Benefits for any Non-key Employee who was a Key Employee for any Plan Year preceding the Plan Year that contains the Determination Date will be excluded.
Top Heavy Plan means the Plan when it is described in the first sentence of Section 13.2.
13.2 Determination of Top Heavy Status
This Plan is a Top Heavy Plan in any Plan Year in which it is a member of a Top Heavy Aggregation Group, including a Top Heavy Aggregation Group that includes only the Plan. The Plan is a Super Top Heavy Plan in any Plan Year in which it is a member of a Super Top Heavy Aggregation Group, including a Super Top Heavy Aggregation Group that includes only the Plan.
13.3 Minimum Benefit Requirement for Top Heavy Plan
13.3.1 Minimum Accrued Benefit: The minimum accrued benefit (expressed as an Individual Life Annuity commencing at Normal Retirement Date) derived from Company contributions to be provided under this Section for each Non-key Employee who is a Participant for any Plan Year in which this Plan is a Top Heavy Plan shall equal the product of (a) 1/12th of 416 Compensation averaged over 5 the consecutive Plan Years (or actual number of Plan Years if less) which produce the highest average and (b) the lesser of (i) 2% multiplied by Years of Vesting Service or (ii) 20%.
13.3.2 For purposes of providing the minimum benefit under Code Section 416, a Non-key Employee who is not a Participant solely because (a) his compensation is below a stated amount or (b) he declined to make mandatory contributions to the Plan will be considered to be a Participant.
13.3.3 For purposes of this Section 13.3, Years of Vesting Service for any Plan Year during which the Plan was not a Top Heavy Plan shall be disregarded.
13.3.4 For purposes of this Section 13.3, 416 Compensation for any Plan Year subsequent to the last Plan Year during which the Plan is a Top Heavy Plan shall be disregarded.
13.3.5 For the purposes of this Section 13.3, 416 Compensation shall mean W-2 wages for the calendar year ending with or within the Plan Year, plus any elective deferral (as defined in Code section 402(g)), any amounts contributed to a plan described in Code Section 125 and any amounts contributed to a plan described in Code Section 132. 416 Compensation shall be limited to $200,000 (as adjusted for cost-of-living in accordance with Section 401(a)(17)(B) of the Code in Top Heavy Plan Years).
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13.3.6 If payment of the minimum accrued benefit commences at a date other than Normal Retirement Date, or if the form of benefit is other than an Individual Life Annuity, the minimum accrued benefit shall be the actuarial equivalent of the minimum accrued benefit expressed as an Individual Life Annuity commencing at Normal Retirement Date pursuant to Exhibits E-1, E-2, E-3 and E-4, except, effective February 1, 2006, with respect to the optional form of benefit conversion, the minimum accrued benefit shall be determined pursuant to the definition of Actuarial Equivalent.
13.3.7 To the extent required to be nonforfeitable under Section 13.4, the minimum accrued benefit under this Section 13.3 may not be forfeited under Code Section 411(a)(3)(B) or Code Section 411(a)(3)(D).
13.3.8 In determining Years of Service, any service shall be disregarded to the extent such service occurs during a Plan Year when the Plan benefits (within the meaning of Code Section 410(b)) no Key Employee or Former Key Employee.
13.4 Vesting Requirement for Top Heavy Plan
13.4.1 Notwithstanding any other provision of this Plan, for any Top Heavy Plan Year, the vested portion of any Participants accrued benefit shall be determined on the basis of the Participants number of Years of Vesting Service according to the following schedule:
Years of Service |
Percentage Vested |
|
1-2 |
0% | |
3 |
100% |
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy Plan, the Company may, in its sole discretion, elect to continue to apply this vesting schedule in determining the vested portion of any Participants accrued benefit, or revert to the vesting schedule in effect before this Plan became a Top Heavy Plan. Any such reversion shall be treated as a Plan amendment.
13.4.2 The computation of the nonforfeitable percentage of the Participants interest in the Plan shall not be reduced as the result of any direct or indirect amendment to this Plan. In the event that this Plan is amended to change or modify any vesting schedule, a Participant with at least 3 Years of Service as of the expiration date of the election period may elect to have the Participants nonforfeitable percentage computed under the Plan without regard to such amendment. If a Participant fails to make such election, then such Participant shall be subject to the new vesting schedule. The Participants election period shall commence on the adoption date of the amendment and shall end 60 days after the latest of:
(a) | the adoption date of the amendment, |
(b) | the effective date of the amendment, or |
(c) | the date the Participant receives written notice of the amendment from the Company. |
48
IN WITNESS WHEREOF, the undersigned and duly authorized Committee member has executed this Plan this 6 th day of June, 2008, to be effective as of June 30, 2008, except as otherwise expressly provided herein.
John Bean Technologies Corporation |
||
By: |
/s/ Jeffrey A. Carr |
|
Member, Employee Welfare Benefits Plan Committee |
49
EXHIBIT A
CREDITED SERVICE
Any service acquired as a participant under any of the plans listed herein shall not be counted as Credited Service for purposes of this Plan.
1. | Frigoscandia Inc. Money Purchase Pension Plan |
2. | Frigoscandia Inc. Retirement Plan: Pension Plan/401(k) Plan |
To the extent applicable to any FMC Participant, any service acquired as a participant under any of the plans listed below shall not be counted as Credited Service for purposes of this Plan.
1. | Stearns Electric Company Profit Sharing Plan |
2. | Fritzke & Icke Employees Savings and Profit Sharing Plan |
3. | Employees Profit Sharing Plan of Industrial Brush Company |
4. | Wayne Manufacturing Company Profit Sharing Plan |
5. | P.E. Van Pelt, Inc. Profit Sharing Plan |
6. | Mojonnier Bros. Co. Salaried Employees Profit Sharing Plan |
7. | Lithium Corporation of America Retirement Plan |
8. | Elf Acquitaine, Inc. Pension Plan |
50
EXHIBIT B
INACTIVE LOCATIONS
The following is a list of former locations of FMC which have been sold or closed. As a result of the FTI Spinoff and the JBT Spinoff, the Plan retains the assets and liabilities with respect to certain Participants formerly employed by FMC at such locations:
LOCATION |
DATE SOLD/CLOSED |
|
Invalco |
February 26, 1999 | |
Houston Fluid Control |
January 1, 1984 |
51
EXHIBIT C
MERGED PLANS
The following is a list of other plans which were merged into the FMC Plan on and after May 27, 1994, the assets of which are retained by the FMCIT Plan as a result of the FTI Spinoff and the Plan as a result of the JBT Spinoff.
PLAN NAME |
EFFECTIVE DATE OF MERGER |
SUPPLEMENT
NUMBER |
||
Pneumo Abex Corporation Retirement Income Plan (Jetway Equipment Division) |
May 27, 1994 | 1 | ||
Retirement Plan for Employees of Stein |
June 1, 1997 | 2 | ||
Moorco International, Inc. Retirement Income Plan |
July 1, 1997 | 3 | ||
Smith Meter, Inc. Salaried Retirement Plan |
July 1, 1997 | 4 |
52
SUPPLEMENT 1
JETWAY SYSTEMS DIVISION
1-1 Eligible Employees
The terms of this Supplement apply only to individuals who are current or former salaried and nonunion hourly employees of the FMC Technologies, Inc., Jetway Systems Division (effective June 30, 2008, the JBT Corporation Jetway Systems Division) and who were participants in the Pneumo Abex Corporation Retirement Income Plan (Prior Plan) before May 27, 1994 (the Merger Date) who had not received a full distribution of their benefit under such plan, or the FMC Plan, as of the Effective Date (Participant). On the Merger Date the benefits of such participants were spun off from the Prior Plan and merged into the FMC Plan.
1-2 Calculation of Normal Retirement Benefit
A Participants monthly Normal Retirement Benefit shall be no less than the normal retirement benefit to which the Participant would have been entitled under the Prior Plan if the Participant had terminated employment immediately prior to the Merger Date.
1-3 Early Retirement Date
Early Retirement Date means the earlier of: (a) a Participants Early Retirement Date under the Plan or (b) the date the Participant has a Severance from Service before Normal Retirement Date for a reason other than death (i) if the Participant is at least age 55 and has at least 10 Years of Vesting Service, (ii) if the Participant was hired before age 35 and before January 1, 1989 and the sum of the Participants age and Years of Vesting Service is at least 75, or (iii) if the Participant was entitled to an early retirement benefit under the Prior Plan.
1-4 Termination Benefit
If a Participant has a Severance from Service before Early or Normal Retirement Date for a reason other than death and had accrued at least 10 Years of Vesting Service, the Participant may begin to receive the Participants Plan benefit, subject to the Plans reduction for early retirement, as early as the date the Participant reaches age 55.
1-5 Years of Vesting Service
A Participant is fully vested in the Participants benefit under the Prior Plan. A Participants Employment Commencement Date will be the date the Participant was first employed by the Company or an Affiliate, or any earlier date from which the Participant was granted vesting service under the FMC Plan, the FMCTI Plan or the Prior Plan. In no event will a Participant be credited with fewer Years of Vesting Service under the Plan than the Participant would have been credited with under the vesting rules of the Prior Plan.
1-6 Available Forms of Benefits
In addition to the optional forms of benefit described in the Plan, a Participant may elect to receive his benefit under the Prior Plan in the following form of benefit:
Life and 10 Year Certain Annuity: A Life and 10 Year Certain Annuity is an immediate annuity which is the Actuarial Equivalent of an Individual Life Annuity, but which provides a smaller monthly annuity for the Participants
53
life than an Individual Life Annuity. After the Participants death, if the monthly annuity has been paid for a period shorter than 10 years, it will continue in the same amount as during the Participants life, for the remainder of the 10 year term certain. The Participants Joint Annuitant will receive any payments due after the Participants death.
1-7 Special Provisions for Participants in the Retirement Plan for Salaried Employees of Abex Corporation
In addition to the special provisions of the preceding sections, a Participant who participated in the Retirement Plan for Employees of Abex Corporation before January 1, 1989 will be subject to the following provision with respect to the Participants Prior Plan benefit accrued before May 27, 1994.
Special Rule of 75 Benefit : Participants who were hired before age 35 and before January 1, 1989, and who accrue total years of age and Vesting Service at Early Retirement equal to at least 75 will be entitled to a monthly benefit at their Early Retirement Date reduced by 1 / 3 of 1% for each month payments are made before the Participant reaches age 65.
54
SUPPLEMENT 2
STEIN
2-1 Eligible Employees
The terms of this Supplement apply only to individuals who were participants in the Retirement Plan for Employees of Stein (the Prior Plan) prior to June 1, 1997 (the Merger Date) and who had not received a full distribution of their benefit under such Prior Plan, the FMC Plan, or the FMCTI Plan as of the Effective Date (Participant).
2-2 Calculation of Normal Retirement Benefit
A Participants Normal Retirement Benefit shall be no less than the normal retirement benefit to which the Participant would have been entitled under the Prior Plan if the Participant had permanently terminated employment immediately prior to the Merger Date.
2-3 Years of Vesting Service
A Participant is fully vested in the Participants benefit under the Prior Plan. A Participants Employment Commencement Date will be the date the Participant was first employed by the Company or an Affiliate, or any earlier date from which the Participant was granted vesting service under the FMC Plan, the FMCTI Plan or the Prior Plan. In no event will a Participant be credited with fewer Years of Vesting Service under the Plan than the Participant would have been credited with under the vesting rules of the Prior Plan.
2-4 Available Forms of Benefits
In addition to the optional forms of benefit described in the Plan, a Participant may elect to receive the Participants benefit under the Prior Plan in the following form of benefit:
Life and 10 Year Certain Annuity: A Life and 10 Year Certain Annuity is an immediate annuity which is the Actuarial Equivalent of an Individual Life Annuity, but which provides a smaller monthly annuity for the Participants life than an Individual Life Annuity. After the Participants death, if the monthly annuity has been paid for a period shorter than 120 months, it will continue, in the same amount as during the Participants life, for the remainder of the 120-month term certain. The Participants Joint Annuitant will receive any payments due after the Participants death.
55
SUPPLEMENT 3
MOORCO INTERNATIONAL INC. RETIREMENT INCOME PLAN
3-1 Eligible Employees
The terms of this Supplement apply only to individuals who were participants in the Moorco International Inc. Retirement Income Plan (the Prior Plan) prior to July 1, 1997 (the Merger Date) and who had not yet received a full distribution of their benefit under such Prior Plan, the FMC Plan or the FMCTI Plan as of the Effective Date (Participant).
3-2 Calculation of Normal Retirement Benefit
A Participants Normal Retirement Benefit shall be no less than the normal retirement benefit to which the Participant would have been entitled if the Participant had terminated employment immediately prior to the Merger Date.
3-3 Early Retirement Date
Early Retirement Date means the earlier of: (a) Early Retirement Date under the Plan; or (b) the date the Participant has a Severance from Service before Normal Retirement Date for a reason other than death, if the Participant is at least age 55 and has at least 10 Years of Vesting Service or if the Participant was entitled to an early retirement benefit under the Geosource Inc. Retirement Income Plan.
3-4 Years of Vesting Service
A Participant is fully vested in the Participants benefits under the Prior Plan. A Participants Employment Commencement Date will be the date the Participant was first employed by the Company or an Affiliate, or any earlier date from which the Participant was first granted vesting service under the FMC Plan, the FMCTI Plan or the Prior Plan. Each Participant will be credited with the number of full years of vesting service with which the Participant was credited under the Prior Plan plus the greater of: (a) 6 months of Vesting Service; and (b) if the Participant accrued 1,000 hours of service under the Prior Plan during the period from January 1, 1997 through June 30, 1997, 1 Year of Vesting Service. In no event will a Participant be credited with fewer Years of Vesting Service under the Plan than the Participant would have been credited with under the vesting rules of the Prior Plan.
3-5 Prior Plan Benefits
(a) Early Retirement Reductions for No Service after June 30, 1997. A Participant who did not have an Hour of Service after June 30, 1997, will be subject to the following early retirement reductions upon commencement of the Participants Prior Plan benefit prior to Normal Retirement Age, calculating actuarial equivalence by using the UP-1984 Mortality Table and an interest rate of 4.0%:
(i) A Participant who was employed with Moorco International Inc. until the attainment of age 55 and 10 years of Vesting Service will have his or her vested benefits reduced by 0.25% for each of the first 60 months, and by 0.5% for each subsequent month by which the Participants benefit commencement date precedes the Participants 65 th birthday.
(ii) A Participant who terminated their employment with Moorco International, Inc. prior to the attainment of age 55 and 10 years of Vesting Service will have his or her vested benefits reduced actuarially for commencement prior to the Participants 65 th birthday.
56
(iii) Available Forms of Benefits. In addition to the optional forms of benefit described in the Plan, a Participant may elect to receive the Participants benefit under the Prior Plan in the following form of a Life and Term Certain Annuity as described below. A Life and Term Certain Annuity is an immediate annuity which is the Actuarial Equivalent of an Individual Life Annuity, but which provides a smaller monthly annuity for the Participants life than an Individual Life Annuity. After the Participants death, if the monthly annuity has been paid for a period shorter than the term chosen by the Participant, it will continue, in the same amount as during the Participants life, for the remainder of the term certain. The Participants Joint Annuitant will receive any payments due after the Participants death. The Participant may choose a term certain of 60, 120, 180 or 240 months, so long as the term certain does not exceed the joint life expectancies of the Participant and the Joint Annuitant. For purposes of converting the Prior Plan benefit from the normal form of payment into an optional form of payment, actuarial equivalence shall be calculated based upon the UP-1984 Mortality Table and an interest rate of 4.0%.
(b) Early Retirement Reductions for Service after June 30, 1997. A Participant who has an Hour of Service after June 30, 1997, will have the option to receive the Prior Plan benefit in the form of a Life and Term Certain Annuity as described in (a)(iii) Available Forms of Benefits above. If so elected, the Prior Plan benefit shall be adjusted for early retirement in accordance with the reductions described in (a) Early Retirement Reductions for No Service after June 30, 1997 above. The remainder of the Participants Plan benefit shall be available in any of the optional payment forms described under the Plan and subject to any early retirement reductions as apply under Sections 3.2 and 4.2 of the Plan.
3-6 Non-Spouse Death Benefit
If the Preretirement Survivors Benefit is not payable to the spouse of a deceased Participant, and if the Participant dies on or after the Participants Early Retirement Date, the Participants Beneficiary will be entitled to a death benefit consisting of monthly payments made for a period of 60 months, beginning as of the first day of the month coincident with or next following the month in which the Participant dies. The amount of the monthly payment will be equal to the monthly payment to which the Participant would have been entitled if the Participant had retired on the day before his death, and had elected to receive only the Participants Prior Plan benefit in the form of an immediate Life and Term Certain Annuity with a term certain of 60 months.
57
SUPPLEMENT 4
SMITH METER, INC. SALARIED RETIREMENT PLAN
4-1 Eligible Employees
The terms of this Supplement apply only to individuals who were participants in the Smith Meter, Inc. Salaried Retirement Plan (Prior Plan) prior to July 1, 1997 (the Merger Date) and who had not yet received a full distribution of their benefit under the FMC Plan, the FMCTI Plan or the Prior Plan as of the Effective Date (Participant).
4-2 Calculation of Normal Retirement Benefit
A Participants Normal Retirement Benefit shall be no less than the normal retirement benefit to which the Participant would have been entitled if the Participant had permanently terminated employment with FMC and all of its Affiliates (as defined in the FMC Plan) on the Merger Date.
4-3 Early Retirement Date
Early Retirement Date means the earlier of: (a) the Participants Early Retirement Date under the Plan, or (b) the date the Participant has a Severance from Service before Normal Retirement Date for a reason other than death (i) if the Participant is at least age 57 and has at least 10 Years of Vesting Service or (ii) if the Participant was entitled to an early retirement benefit under the Geosource Inc. Smith Meter Systems Division Salaried Retirement Income Plan.
4-4 Normal Retirement Date
Normal Retirement Date means the earlier of: (a) the Participants Normal Retirement Date under the Plan, or (b) the date the Participant has a Severance from Service with at least 10 Years of Vesting Service at or after age 62.
4-5 Years of Vesting Service
A Participant is fully vested in the Participants benefits under the Prior Plan. A Participants Employment Commencement Date will be the date the Participant was first employed by the Company or any Affiliate, or any earlier date from which he was granted vesting service under the FMC Plan, the FMCTI Plan or the Prior Plan. Each Participant will be credited with the number of full years of vesting service with which the Participant was credited under the Prior Plan plus the greater of: (a) 6 months of Vesting Service, or (b) if the Participant accrued 1,000 hours of service under the Prior Plan during the period from January 1, 1997 through June 30, 1997, 1 Year of Vesting Service. In no event will a Participant be credited with fewer Years of Vesting Service under the Plan than the Participant would have been credited with under the vesting rules of the Prior Plan.
4-6 Prior Plan Benefits
(a) Early Retirement Reductions for No Service after June 30, 1997. A Participant who did not have an Hour of Service after June 30, 1997, will be subject to the following early retirement reductions upon commencement of the Participants Prior Plan benefit prior to Normal Retirement Age, calculating actuarial equivalence by using the UP-1984 Mortality Table and an interest rate of 4.0%:
(i) Participant who was employed with Smith Meter, Inc. until the attainment of age 57 and 10 years of Vesting Service will have his or her vested benefits reduced by 1/180 for each complete month between the date of the Participants benefit commencement and the Participants 62 nd birthday.
58
(ii) A Participant who terminated their employment with Smith Meter, Inc. prior to the attainment of age 57 and 10 years of Vesting Service will have his or her vested benefits reduced actuarially for commencement prior to the Participants 62 nd birthday.
(iii) Available Forms of Benefits. In addition to the optional forms of benefit described in the Plan, a Participant may elect to receive the Participants benefit under the Prior Plan in the following form of a Life and Term Certain Annuity as described below. A Life and Term Certain Annuity is an immediate annuity which is the Actuarial Equivalent of an Individual Life Annuity, but which provides a smaller monthly annuity for the Participants life than an Individual Life Annuity. After the Participants death, if the monthly annuity has been paid for a period shorter than the term chosen by the Participant, it will continue, in the same amount as during the Participants life, for the remainder of the term certain. The Participants Joint Annuitant will receive any payments due after the Participants death. The Participant may choose a term certain of 60, 120, 180 or 240 months, so long as the term certain does not exceed the joint life expectancies of the Participant and the Joint Annuitant. For purposes of converting the Prior Plan benefit from the normal form of payment into an optional form of payment, actuarial equivalence shall be calculated based upon the UP-1984 Mortality Table and an interest rate of 4.0%.
(b) Early Retirement Reductions for Service after June 30, 1997. A Participant who has an Hour of Service after June 30, 1997, will have the option to receive the Prior Plan benefit in the form of a Life and Term Certain Annuity as described in (a)(iii) Available Forms of Benefits above. If so elected, the Prior Plan benefit shall be adjusted for early retirement in accordance with the reductions described in (a) Early Retirement Reductions for No Service after June 30, 1997 above. The remainder of the Participants Plan benefit shall be available in any of the optional payment forms described under the Plan and subject to any early retirement reductions as apply under Sections 3.2 and 4.2 of the Plan.
4-7 Payment to Active Participant After Normal Retirement Date
A Participant who continues to be employed by the Company or a Participating Employer after reaching Normal Retirement Date may begin receiving the Participants Prior Plan benefit at or after Normal Retirement Date.
4-8 Non-Spouse Death Benefit
If the Preretirement Survivors Benefit is not payable to the spouse of a deceased Participant, and if the Participant dies on or after the Participants Early Retirement Date, the Participants Beneficiary will be entitled to a death benefit consisting of monthly payments made for a period of 60 months, beginning as of the first day of the month coincident with or next following the month in which the Participant dies. The amount of the monthly payment will be equal to the monthly payment to which the Participant would have been entitled if he had retired on the day before his death, and had elected to receive only his Prior Plan benefit in the form of an immediate Life and Term Certain Annuity with a term certain of 60 months.
59
JBT CORPORATION
EMPLOYEES RETIREMENT PROGRAM
PART II
UNION HOURLY EMPLOYEES RETIREMENT PLAN
(Adopted Effective as of June 30, 2008)
T ABLE OF C ONTENTS
P AGE | ||||
INTRODUCTION |
1 | |||
ARTICLE I |
DEFINITIONS | 2 | ||
Actuarial Equivalent |
2 | |||
Administrator |
3 | |||
Affiliate |
3 | |||
Annuity Starting Date |
4 | |||
Beneficiary |
4 | |||
Board |
4 | |||
Benefits Agreement |
4 | |||
Code |
4 | |||
Collective Bargaining Agreement |
4 | |||
Committee |
4 | |||
Company |
4 | |||
Early Retirement Benefit |
4 | |||
Early Retirement Date |
4 | |||
Effective Date |
4 | |||
Eligible Employee |
5 | |||
Employee |
5 | |||
Employment Commencement Date |
5 | |||
ERISA |
5 | |||
50% Joint and Survivors Annuity |
5 | |||
FMC |
5 | |||
FMC Beneficiary |
5 | |||
FMC Joint Annuitant |
5 | |||
FMC Participant |
6 | |||
FMC Plan |
6 | |||
FMCTI Beneficiary |
6 | |||
FMCTI Joint Annuitant |
6 | |||
FMCTI Participant |
6 | |||
FMCTI |
6 |
i.
T ABLE OF C ONTENTS
( CONTINUED )
ii.
T ABLE OF C ONTENTS
( CONTINUED )
P AGE | ||||
ARTICLE III |
NORMAL, EARLY AND DEFERRED RETIREMENT BENEFITS |
12 | ||
3.1 |
Normal Retirement Benefits |
12 | ||
3.2 |
Early Retirement Benefits |
12 | ||
3.3 |
Deferred Retirement Benefits |
13 | ||
3.4 |
Suspension of Benefits |
14 | ||
3.5 |
Benefit Limitations |
17 | ||
3.6 |
FMC Participants and FMCTI Participants Benefits |
19 | ||
ARTICLE IV |
TERMINATION BENEFITS |
19 | ||
4.1 |
Termination of Service |
19 | ||
4.2 |
Amount of Termination Benefit |
20 | ||
ARTICLE V |
DISABILITY RETIREMENT BENEFITS |
20 | ||
5.1 |
Disability Retirement |
20 | ||
5.2 |
Amount of Disability Retirement Benefit |
20 | ||
ARTICLE VI |
PAYMENT OF RETIREMENT BENEFITS |
21 | ||
6.1 |
Normal Form of Benefit |
21 | ||
6.2 |
Optional Forms of Benefit |
21 | ||
6.3 |
Election of Benefits |
21 | ||
6.4 |
FMC Participants and FMCTI Participants in Pay Status |
23 | ||
6.5 |
Election of Retroactive Annuity Starting Date |
24 | ||
ARTICLE VII |
SURVIVORS BENEFITS |
25 | ||
7.1 |
Surviving Spouses Benefit |
25 | ||
7.2 |
Certain Former Employees |
25 | ||
ARTICLE VIII |
FIDUCIARIES |
26 | ||
8.1 |
Named Fiduciaries |
26 | ||
8.2 |
Employment of Advisers |
26 | ||
8.3 |
Multiple Fiduciary Capacities |
26 | ||
8.4 |
Payment of Expenses |
26 | ||
8.5 |
Indemnification |
27 | ||
ARTICLE IX |
PLAN ADMINISTRATION |
27 |
iii.
T ABLE OF C ONTENTS
( CONTINUED )
P AGE | ||||
9.1 |
Powers, Duties and Responsibilities of the Administrator and the Committee |
27 | ||
9.2 |
Delegation of Administration Responsibilities |
27 | ||
9.3 |
Committee Members |
28 | ||
ARTICLE X |
FUNDING OF THE PLAN |
28 | ||
10.1 |
Appointment of Trustee |
28 | ||
10.2 |
Actuarial Cost Method |
28 | ||
10.3 |
Cost of the Plan |
28 | ||
10.4 |
Funding Policy |
29 | ||
10.5 |
Cash Needs of the Plan |
29 | ||
10.6 |
Public Accountant |
29 | ||
10.7 |
Enrolled Actuary |
29 | ||
10.8 |
Basis of Payments to the Plan |
30 | ||
10.9 |
Basis of Payments from the Plan |
30 | ||
ARTICLE XI |
PLAN AMENDMENT OR TERMINATION |
30 | ||
11.1 |
Plan Amendment or Termination |
30 | ||
11.2 |
Limitations on Plan Amendment |
30 | ||
11.3 |
Effect of Plan Termination |
31 | ||
11.4 |
Allocation of Trust Fund on Termination |
31 | ||
ARTICLE XII |
MISCELLANEOUS PROVISIONS |
31 | ||
12.1 |
Subsequent Changes |
31 | ||
12.2 |
Plan Mergers |
32 | ||
12.3 |
No Assignment of Property Rights |
32 | ||
12.4 |
Beneficiary |
33 | ||
12.5 |
Benefits Payable to Minors, Incompetents and Others |
33 | ||
12.6 |
Employment Rights |
33 | ||
12.7 |
Proof of Age and Marriage |
33 | ||
12.8 |
Small Annuities |
34 | ||
12.9 |
Controlling Law |
34 | ||
12.10 |
Direct Rollover Option |
34 |
iv.
T ABLE OF C ONTENTS
( CONTINUED )
P AGE | ||||
12.11 |
Claims Procedure |
35 | ||
12.12 |
Participation in the Plan by an Affiliate |
39 | ||
12.13 |
Action by Participating Employers |
39 | ||
ARTICLE XIII |
TOP HEAVY PROVISIONS |
40 | ||
13.1 |
Top Heavy Definitions |
40 | ||
13.2 |
Determination of Top Heavy Status |
43 | ||
13.3 |
Minimum Benefit Requirement for Top Heavy Plan |
43 | ||
13.4 |
Vesting Requirement for Top Heavy Plan |
44 |
SUPPLEMENTAL 1 |
JETWAY SYSTEMS DIVISION, OGDEN, UTAH |
46 | ||
SUPPLEMENTAL 2 |
PACKAGING MACHINERY DIVISION, GREEN BAY, WISCONSIN |
50 | ||
SUPPLEMENTAL 3 |
SMITH METER PLANT, ERIE, PENNSYLVANIA |
52 | ||
SUPPLEMENTAL 4 |
FOOD PROCESSING MACHINERY DIVISION, HOOPESTON, ILLINOIS |
58 | ||
SUPPLEMENTAL 5 |
AIRLINE EQUIPMENT DIVISION, SAN JOSE, CALIFORNIA |
61 | ||
SUPPLEMENTAL 6 |
FOOD PROCESSING MACHINERY DIVISION, SAN JOSE, CALIFORNIA |
63 |
v.
JBT CORPORATION
EMPLOYEES RETIREMENT PROGRAM
PART II
UNION HOURLY EMPLOYEES RETIREMENT PLAN
INTRODUCTION
WHEREAS, the JBT Corporation Employees Retirement Program (Program) is hereby established effective as of June 30, 2008, in connection with a spinoff of assets and liabilities from the FMC Technologies, Inc. Employees Retirement Program (the FMCTI Plan), which spinoff complies with the requirements of Code Section 414(l); and
WHEREAS, the FMCTI Plan was established effective May 1, 2001, in connection with a spinoff of assets and liabilities from the FMC Corporation Employees Retirement Program (the FMC Plan); and
WHEREAS, the Program consists of two parts, Part I Salaried and Nonunion Hourly Employees Retirement Plan and Part II Union Hourly Employees Retirement Plan, which are contained in two separate plan documents; and
WHEREAS, supplements to Part I and Part II of the Program contain provisions which apply only to a specific group of Employees or Participants as specified therein and override any contrary provision of the Program or either Part I or Part II; and
WHEREAS, this document is Part II Union Hourly Employees Retirement Plan (Plan) and covers certain eligible union hourly employees as provided in Article II Participation; and
WHEREAS, the Plan shall not be construed to affect an FMC Participants accrued benefit under the FMC Plan or to alter in any way the rights of an FMC Participant, FMC Joint Annuitant, or FMC Beneficiary thereof who has retired, died or with respect to whom there has been a severance from service date under the FMC Plan; and
WHEREAS, the Plan shall not be construed to affect the FMCTI Participants accrued benefit under the FMCTI Plan or to alter in any way the rights of an FMCTI Participant, FMCTI Joint Annuitant, or FMCTI Beneficiary thereof who has retired, died, or with respect to whom there has been a severance from service date under the FMCTI Plan; and
WHEREAS, the Plan is intended to be qualified under Code Section 401(a), and its associated trust is intended to be tax exempt under Code Section 501(a). The Plan is intended also to meet the requirements of ERISA and shall be construed wherever possible to comply with the terms of the Code and ERISA. The Plan is intended to provide a regular monthly retirement benefit for employees who meet the eligibility requirements.
1
NOW, THEREFORE, effective June 30, 2008, the Company hereby establishes the Plan to provide as follows:
ARTICLE I
Definitions
For purposes of this Plan and any amendments to it, the following terms have the meanings ascribed to them below.
Actuarial Equivalent means a benefit determined to be of equal value to another benefit, on the basis of either (a) the UP-1984 Mortality Table and 8- 1 / 2 % interest compounded annually or (b) the mortality table and interest rate described in the applicable Supplement.
Notwithstanding the above to the contrary, for purposes of Section 12.8, Actuarial Equivalent value shall be determined as follows: (and effective February 1, 2006, for purposes of optional form of benefit conversions (including optional form of benefit conversions described in Supplements 2, 3, 4, 5 and 6, but excluding optional form of benefit conversions described in Supplement 1), Actuarial Equivalent means a benefit determined to be of equal value to another benefit on the basis of the greater of (1) either (a) the actuarial equivalent, computed using the UP-1984 Mortality Table and 8- 1 / 2 % interest compounded annually, of the accrued benefit as of February 1, 2006 or (b) the actuarial equivalent, computed using the mortality table and interest rate described in the applicable Supplement, of the accrued benefit as of February 1, 2006, or (2) the actuarial equivalent, computed using the RP-2000 Combined Healthy Participant Table (RP2000CH), weighted 80% male/20% female and 6% interest compounded annually, of the accrued benefit as of the date of determination on or after February 1, 2006).
(i) | with respect to FMC Participants whose Annuity Starting Dates occurred prior to June 1, 1995, based on the actuarial assumptions described above; provided that the interest rate shall not exceed the immediate rate used by the Pension Benefit Guaranty Corporation for lump sum distributions occurring on the first day of the Plan Year that contains the Annuity Starting Date; |
(ii) | with respect to FMC Participants with Annuity Starting Dates occurring on or after June 1, 1995, and who had an Hour of Service prior to August 31, 1999, based on the 1983 Group Annuity Mortality Table (weighted 50% male and 50% female) (or the applicable mortality table prescribed under Section 417(e)(3) of the Code) and the lesser of the interest rate described above or the applicable interest rate prescribed under Section 417(e)(3) of the Code for the November preceding the Plan Year that contains the Annuity Starting Date; |
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(iii) | for Annuity Starting Dates occurring on or after August 31, 1999, with respect to any Participant who did not have an Hour of Service prior to August 31, 1999, based on the 1983 Group Annuity Mortality Table (weighted 50% male and 50% female) (or the applicable mortality table, prescribed under Section 417(e)(3) of the Code) and the applicable interest rate prescribed under Section 417(e)(3) of the Code for the November preceding the Plan Year that contains the Annuity Starting Date; |
(iv) | For Annuity Starting Dates occurring on or after December 31, 2002, using the applicable interest rate as described above, based on the 1994 Group Annuity Reserving Table (weighted 50% male, 50% female and projected to 2002 using Scale AA), which is the applicable mortality table prescribed in Rev. Rul. 2001-62 (or the applicable mortality table, prescribed under Section 417(e)(3) of the Code or other guidance of general applicability issued thereunder); and |
(v) | Effective January 1, 2008, and solely for purposes of the determination of the present value of benefits pursuant to Code Section 417(e): (1) the applicable interest rate shall mean the applicable interest rate described in Code Section 417(e)(3)(C), which is the adjusted first, second and third segment rates (defined in Code Section 417(e)(3)(D)) applied under rules similar to the rules of Code Section 430(h)(2)(C) for the month of November preceding the first day of the Plan Year which includes the date of distribution, and (2) the applicable mortality table shall mean the applicable mortality table described in Code Section 417(e)(3)(B), Revenue Ruling 2007-67 and subsequent guidance (including regulations) issued by the Internal Revenue Service. |
Administrator means the Company. The Plan is administered by the Company through the Committee. The Administrator and the Committee have the responsibilities specified in Article IX.
Affiliate means any corporation, partnership, or other entity that is:
(a) | a member of a controlled group of corporations of which the Company is a member (as described in Code Section 414(b)); |
(b) | a member of any trade or business under common control with the Company (as described in Code Section 414(c)); |
(c) | a member of an affiliated service group that includes the Company (as described in Code Section 414(m)); |
(d) | an entity required to be aggregated with the Company pursuant to regulations promulgated under Code Section 414(o); or |
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(e) | a leasing organization that provides Leased Employees to the Company or an Affiliate (as determined under paragraphs (a) through (d) above), unless (i) the Leased Employees constitute less than 20% of the nonhighly compensated workforce of the Company and Affiliates (as determined under paragraphs (a) through (d) above; and (ii) the Leased Employees are covered by a plan described Code Section 414(n)(5). |
Leasing organization has the meaning ascribed to it in the definition of Leased Employee below.
For purposes of Section 3.5, the 80% thresholds of Code Sections 414(b) and (c) are deemed to be more than 50%, rather than at least 80%.
Annuity Starting Date means the first day of the first period for which an amount is paid in an annuity or other form of benefit. In the case of a lump sum distribution, the Annuity Starting Date is the date payment is actually made.
Beneficiary means the person or persons determined pursuant to Section 12.4.
Board means the board of directors of the Company.
Benefits Agreement means the Employee Benefits Agreement by and between FMC and the Company.
Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to a specific provision of the Code includes that provision, any successor to it and any valid regulation promulgated under the provision or successor provision.
Collective Bargaining Agreement means the collective bargaining agreement referred to in the applicable Supplement.
Committee means the JBT Corporation Employee Welfare Benefits Plan Committee as described in Section 9.3, its authorized delegatee and any successor to the Committee.
Company means John Bean Technologies Corporation and any successor to it. Prior to June 1, 2008, Company meant FMC Technologies, Inc.
Early Retirement Benefit means the benefits determined pursuant to Section 3.2.
Early Retirement Date means the later of the Participants 55th birthday and the date he or she acquires 10 Years of Credited Service.
Effective Date means (i) June 30, 2008, or if later, an Employees Employment Commencement Date or Reemployment Commencement Date, whichever is applicable, (ii) with respect to each FMC Participant, June 30, 2008 or, if later, the date
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such FMC Participants accrued benefit under the FMC Plan is deemed transferred to this Plan under the Benefits Agreement, or (iii) with respect to each FMCTI Participant, June 30, 2008 or, if later, the date such FMCTI Participants accrued benefit under the FMCTI Plan is deemed transferred to this Plan.
Eligible Employee means an Employee of a Participating Employer, other than a Leased Employee, who is employed on an hourly basis and covered by the applicable Collective Bargaining Agreement which specifically provides for Plan participation, or to whom coverage under the Plan is extended by the Company.
Employee means a common law employee or Leased Employee of the Company or an Affiliate, subject to the following rules:
(a) | a person who is not a Leased Employee and who is engaged as an independent contractor is not an Employee; |
(b) | only individuals who are paid as employees from the payroll of the Company or an Affiliate and treated as employees are Employees under the Plan; and |
(c) | any person retroactively found to be a common law employee shall not be eligible to participate in the Plan for any period he was not an Employee under the Plan. |
Employment Commencement Date means the date on which the Employee first performs an Hour of Service.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific provision of ERISA includes the provision, any successor provision and any valid regulation promulgated under the provision or successor provision.
50% Joint and Survivors Annuity means an immediate annuity which is the Actuarial Equivalent of an Individual Life Annuity, but which provides a smaller monthly annuity for the Participants life than an Individual Life Annuity. After the Participants death, 50% of such reduced annuity will be paid to the Participants surviving spouse for such spouses life.
FMC means FMC Corporation, a Delaware corporation.
FMC Beneficiary means an individual who was receiving benefits under the FMC Plan as a result of the death of an FMC Participant and whose benefit was transferred to the FMCTI Plan pursuant to the FTI Spinoff.
FMC Joint Annuitant means an individual who was designated as a joint annuitant of an FMC Participant under the FMC Plan, the benefits of such FMC Participant which were transferred to the FMCTI Plan pursuant to the FTI Spinoff.
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FMC Participant means any participant in Part II Union Hourly Employees - Retirement Plan of the FMC Plan who had their accrued benefit, years of credited service and years of vesting service under the FMC Plan transferred to the FMCTI Plan, pursuant to the FTI Spinoff.
FMC Plan means the FMC Corporation Employees Retirement Program.
FMCTI Beneficiary means an individual who was receiving benefits under the FMCTI Plan as a result of the death of an FMCTI Participant and whose benefit was transferred to this Plan pursuant to the JBT Spinoff.
FMCTI Joint Annuitant means an individual who was designated as a joint annuitant of an FMCTI Participant under the FMCTI Plan, the benefits of such FMCTI Participant which were transferred to this Plan pursuant to the JBT Spinoff.
FMCTI Participant means any participant (including an FMC Participant) in Part II Union Hourly Employees Retirement Plan of the FMCTI Plan who had their accrued benefit, years of credited service and years of vesting service under the FMCTI Plan transferred to this Plan, pursuant to the JBT Spinoff.
FMCTI means FMC Technologies, Inc., a Delaware corporation.
FMCTI Plan means the FMC Technologies, Inc. Employees Retirement Program.
FTI Spinoff means the transfer of assets and liabilities attributable to FMC Participants from the FMC Plan to the FMCTI Plan pursuant to the Benefits Agreement.
Hour of Service means each hour (a) for which an Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliate for the performance of duties, (b) for each FMC Participant, each hour of service credited to such individual under the FMC Plan and FMCTI Plan as of the date prior to the Effective Date for such FMC Participant, and (c) for each FMCTI Participant, each hour of service credited to such individual under the FMCTI Plan as of the date prior to the Effective Date for such FMCTI Participant. Hours of Service will be credited to the Employee for the computation period in which the duties are performed. To the extent required by law, Hour of Service will include each hour for which an Employee is paid, or entitled to payment, by the Company or an Affiliate 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 of Service will be credited for any single continuous period (whether or not such period occurs in a single computation period). Hours of Service for these purposes will be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which is incorporated herein by this reference. Also to the extent required by law, Hours of Service will include each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate, provided, however, the same hours of service will not be credited. These hours will 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.
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Individual Life Annuity means an immediate annuity which provides equal monthly payments for the Participants life only.
Investment Manager means a person who is an investment manager as defined in section 3(38) of ERISA.
JBT Spinoff means the transfer of assets and liabilities attributable to FMCTI Participants from the FMCTI Plan to this Plan.
Leased Employee means an individual who performs services for the Company or an Affiliate on a substantially full-time basis for a period of at least 1 year, under the primary direction or control of the Company or an Affiliate, and under an agreement between the Company or Affiliate and a leasing organization. The leasing organization can be a third party or the Leased Employee himself.
Normal Retirement Benefit means the benefits determined pursuant to Section 3.1.
Normal Retirement Date means the Participants 65th birthday, except as otherwise provided in the applicable Supplement.
100% Joint and Survivors Annuity means an immediate annuity which is the Actuarial Equivalent of an Individual Life Annuity, but which provides a smaller monthly annuity for the Participants life than a 50% Joint and Survivor Annuity. After the Participants death, 100% of such reduced annuity will continue to be paid to the Participants surviving spouse for such spouses life.
One-Year Period of Severance means a 12-consecutive-month period commencing on an Employees Severance From Service Date in which the Employee is not credited with an Hour of Service.
Participant means an Eligible Employee who has begun, but not ended, his or her participation in the Plan pursuant to the provisions of Article II and, unless specifically indicated otherwise, shall include each FMC Participant and each FMCTI Participant. If a Participant who is vested in the Participants accrued benefit on his or her Severance from Service Date is subsequently reemployed after his or her Severance from Service Date, he or she will become a Participant immediately upon reemployment. If a Participant who is not vested in the Participants accrued benefit on his or her Severance from Service Date is subsequently reemployed after his or her Severance from Service Date, he or she will become a Participant immediately upon reemployment, unless his or her Period of Severance is greater than or equal to five One-Year Periods of Severance.
Participating Employer means the Company and each other Affiliate that adopts the Plan with the consent of the Board, as provided in Section 12.12.
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Period of Service means the period commencing on the Effective Date and ending on the Severance From Service Date including, for each FMC Participant and each FMCTI Participant, periods of service credited under the FMC Plan or the FMCTI Plan, as applicable, as of the date immediately prior to the relevant Effective Date for such FMC Participant or FMCTI Participant. All Periods of Service (whether or not consecutive) shall be aggregated. For a Participant who is not immediately eligible to participate in the Plan under the terms of Section 2.1 hereof, Period of Service shall include service from and after the Participants date of hire by the Company or its Affiliates. Notwithstanding the foregoing, if an Employee incurs a One-Year Period of Severance at a time when he or she has no vested interest under the Plan and the Employee does not perform an Hour of Service within 5 years after the beginning of the One-Year Period of Severance, the Period of Vesting Service prior to such One-Year Period of Severance shall not be aggregated.
Period of Severance means the period commencing on the Severance From Service Date and ending on the date on which the Employee again performs an Hour of Service.
Plan means Part II Union Hourly Employees Retirement Plan of the JBT Corporation Employees Retirement Program.
Plan Year means the period beginning June 30, 2008 and ending December 31, 2008 and thereafter the 12-month period beginning on January 1 and ending the next December 31.
Reemployment Commencement Date means the first date following a Period of Severance which is not required to be taken into account for purposes of an Employees Period of Vesting Service on which the Employee performs an Hour of Service.
Severance From Service Date means the earliest of:
(a) | the date on which an Employee voluntarily terminates, retires, is discharged or dies; the first anniversary of the first date of a period in which an Employee remains absent from service (with or without pay) with the Company and Affiliates for any reason other than voluntary termination, retirement, discharge or death; or |
(b) | the second anniversary of the date an Employee is absent pursuant to a maternity or paternity leave of absence; provided, however, that the period between the first and second anniversaries of the first date of such absence shall be neither a Period of Service nor a One-Year Period of Severance. |
Notwithstanding the foregoing, a Severance From Service Date shall not be considered to have occurred under the following circumstances:
(i) | during a leave of absence, vacation or holiday with pay; |
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(ii) | during a leave of absence without pay granted by reason of disability or under the Family and Medical Leave Act of 1993; |
(iii) | during a period of qualified military service, provided the Employee makes application to return within 90 days after completion of active an Eligible Employee and after he has become a Participant divided by 12. A partial month in such Period of Service counts as a whole month, and fractional Years of Credited Service shall service and returns to active employment as an Employee while reemployment rights are protected by law. If the Employee does not so return, the Employee shall have a Severance From Service Date on the first anniversary of the date of entry into military service. |
If the Employee violates the terms of a leave of absence, the Employee shall be deemed to have voluntarily terminated as of the date of such violation. In the case of a leave in excess of 12 months, if the Employee fails to return to active employment immediately after such leave, the Employee shall be deemed to have voluntarily terminated as of the last day of the 12th month of the leave.
A maternity or paternity leave of absence means an absence from work by reason of the Employees pregnancy, birth of the Employees child, placement of a child with the Employee in connection with the adoption of such child, or any absence for the purpose of caring for such child for a period immediately following such birth or placement.
Supplement means the provisions of the Plan which apply only to a specific group of Employees or Participants as detailed in such Supplement and which override any contrary provision of the Plan.
Total and Permanent Disability has the meaning assigned thereto in the applicable Supplement.
Trust means the trust established by the Trust Agreement. Trust Agreement means the trust agreement or agreements, as amended from time to time, entered into by the Company and the Trustee pursuant to Section 8.1. Trustee means the trustee or trustees at any time appointed by the Company pursuant to Section 8.1.
Trust Fund means the trust fund established and maintained by the Trustee to hold all assets of the Plan pursuant to the Trust Agreement.
Year of Credited Service means (a) for an FMC Participant, his or her years of credited service under the FMC Plan and FMCTI Plan prior to such FMC Participants Effective Date (b) for an FMCTI Participant, his or her years of credited service under the FMCTI Plan prior to such FMCTI Participants Effective Date, and (c) the total number of calendar months during the Employees Period of Service while the Employee is be taken into account in determining a Participants benefits. Year of Credited Service shall also include such other periods as the Company recognizes as a Year of Credited Service, pursuant to written and nondiscriminatory rules.
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Notwithstanding the foregoing, Credited Service shall not include: (i) any leave of absence without pay unless the Employee returns to active employment as an Employee immediately after such leave and abides by all the terms of the leave, (ii) any maternity or paternity leave of absence unless the Employee returns to active employment as an Employee within 12 months after the first day of such leave, or (iii) any period of service with respect to which such Eligible Employee accrues a benefit under the FMC Plan on or after May 1, 2001, the FMCTI Plan on or after June 30, 2008, or any pension, profit sharing or other retirement plan listed on Exhibit A.
Year of Vesting Service means (a) for an FMC Participant, his or her years of service and years of vesting service credited under the FMC Plan and FMCTI Plan prior to such FMC Participants Effective Date, (b) for an FMCTI Participant, his or her years of service and years of vesting service credited under the FMCTI Plan prior to such FMCTI Participants Effective Date, and (c) the total number of calendar months during the Employees Period of Service divided by 12, determined in accordance with the following rules:
(i) | a partial month in the Employees Period of Service counts as a whole month; |
(ii) | if the Employee has a Severance From Service Date by reason of a voluntary termination, discharge or retirement and the Employee then performs 1 Hour of Service within 12 months of the Severance From Service Date, such Period of Severance is included in the Period of Service. If the Employee has a Severance From Service Date by reason of a voluntary termination, discharge or retirement during an absence from service of 12 months or less for any reason other than a voluntary termination, discharge or retirement, and then performs 1 Hour of Service within 12 months of the date on which the Employee was first absent from service, such Period of Severance is included in the Period of Service; |
(iii) | period of Service also includes the following: |
(1) | a period of employment with an employer substantially all of the equity interest or assets of which have been acquired by the Company or an Affiliate, but only to the extent that the Company expressly recognizes such period as a Period of Service pursuant to written and nondiscriminatory rules; and |
(2) | such other periods as the Company recognizes as a Period of Service pursuant to written and nondiscriminatory rules. |
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ARTICLE II
Participation
2.1 | Eligibility and Commencement of Participation |
Each FMC Participant and each FMCTI Participant shall automatically became a Participant in the Plan on such FMC Participants or FMCTI Participants Effective Date. Except as otherwise provided in the applicable Supplement, each other Employee shall automatically become a Participant in the Plan as of the date he or she satisfies all of the following requirements:
(a) | the Employee is an Eligible Employee; and |
(b) | the Employee either (i) is a regular, full-time employee, or (ii) has completed not less than 1,000 Hours of Service in a 12-month period beginning on the Employees Employment Commencement Date or any anniversary thereof. |
2.2 | Provision of Information |
Each Participant must make available to the Administrator any information it reasonably requests. As a condition of participation in the Plan, an Employee agrees, on his or her own behalf and on behalf of all persons who may have or claim any right by reason of the Employees participation in the Plan, to be bound by all provisions of the Plan.
2.3 | Termination of Participation |
A Participant ceases to be a Participant when he or she dies or, if earlier, when his or her entire vested benefit accrued under the Plan has been paid to him or her.
2.4 | Special Rules Relating to Veterans Reemployment Rights |
Notwithstanding any provision of this Plan to the contrary, with respect to an Eligible Employee or Participant who is reemployed in accordance with the reemployment provisions of the Uniformed Services Employment and Reemployment Rights Act following a period of qualifying military service (as determined under such Act), contributions, benefits and service credit will be provided in accordance with Section 414(u) of the Code.
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ARTICLE III
Normal, Early and Deferred Retirement Benefits
3.1 | Normal Retirement Benefits |
3.1.1 Normal Retirement : A Participant who retires on the Normal Retirement Date shall be entitled to receive a Normal Retirement Benefit determined under Section 3.1.2. Payment of such benefit shall commence as of the first day of the month coincident with or next following the Participants Normal Retirement Date, unless the Participant elects to defer commencement subject to Section 3.3.2.
3.1.2 Amount of Normal Retirement Benefit : A Participants monthly Normal Retirement Benefit shall be equal to the amount determined in accordance with the applicable Supplement.
3.1.3 Reductions for Certain Benefits : A Participants Normal Retirement Benefit shall be reduced by the value of any vested benefit payable to the Participant under the FMC Plan, the FMCTI Plan, or any pension, profit sharing or other retirement plan other than the Savings Plan (hereinafter called Duplicate Benefit Plan) which is attributable to any period which counts as Credited Service under this Plan. For purposes of determining the amount of any Duplicate Benefit Plan reduction, the vested benefit under the Duplicate Benefit Plan shall be converted to a form which is identical to the form of benefit which is to be paid under this Plan, including any applicable reductions for early commencement as determined under the Plan or the Duplicate Benefit Plan, as applicable. Such values will be determined as of the earlier of the Annuity Starting Date under the Plan, or the date distribution of such vested benefit was made or commenced under the Duplicate Benefit Plan, as applicable.
3.2 | Early Retirement Benefits |
3.2.1 Early Retirement : A Participant who retires on or after the Early Retirement Date shall be entitled to receive an Early Retirement Benefit determined under Section 3.2.2. Payment of such benefit shall commence as of the first of the month coincident with or next following the Participants Early Retirement Date or, if the Participant elects, as of the first day of any subsequent month, but not later than the Normal Retirement Date. Any such election of a deferred commencement date may be revoked at any time prior to such date and a new date may be elected by giving advance written notice to the Administrator in accordance with rules prescribed by the Administrator.
3.2.2 Amount of Early Retirement Benefit : Subject to Section 3.2.3, a Participants monthly Early Retirement Benefit shall be equal to an amount determined pursuant to Section 3.1.2 as in effect on the date the Participants Years of Credited Service terminate, based on the Participants Years of Credited Service as of such date.
3.2.3 Early Retirement Reduction Factor : If a Participants Early Retirement Benefit commences prior to the Participants Normal Retirement Date, the Participants Early Retirement Benefit computed pursuant to Section 3.2.2 shall be reduced in accordance with the applicable Supplement.
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3.3 | Deferred Retirement Benefits |
3.3.1 Deferred Retirement : A Participant who retires after the Normal Retirement Date shall be entitled to receive a Normal Retirement Benefit determined under Section 3.1.2 commencing as of the first day of the month coinciding with or next following the date the Participant actually retires. Each Participant shall accrue additional benefits hereunder after the Participants Normal Retirement Date with respect to the portion of the Normal Retirement Benefit which is attributable to contributions by the Company. If a Participant who is not employed by the Company or its Affiliates on his or her Normal Retirement Date defers his or her Normal Retirement Benefit beyond his or her Normal Retirement Date, the Normal Retirement Benefit will be paid retroactive to the Participants Normal Retirement Date as soon as reasonably practicable after the Plan Administrator learns of the deferred benefit.
3.3.2 Distribution Requirements : Except as hereinafter provided, unless the Participant elects otherwise in accordance with the terms of the Plan, payment of a Participants retirement benefits will begin no later than 60 days after the close of the Plan Year in which the latest of the following events occurs:
(a) | the Participants 65th birthday; |
(b) | the 10th anniversary of the year in which the Participant commenced participation in the Plan; and |
(c) | the Participant terminates employment with the Company and all Affiliates. |
If the amount of the payment required to commence on the date determined under this Section 3.3.2 cannot be ascertained by such date, or if it is not possible to make such payment on such date because the Administrator cannot locate the Participant after making reasonable efforts to do so, a payment retroactive to such date may be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained under this Plan or the date the Participant is located.
Notwithstanding any other provision of this Plan:
(i) | the accrued benefit of a Participant who attains age 70-1/2 on or after January 1, 2000 must be distributed or commence to be distributed no later than the April 1 following the later of (1) the calendar year in which the Participant attains age 70-1/2 or (2) the calendar year in which the Participant retires (unless the Participant is a 5% owner, as defined in Code Section 416, of the Company with respect to the Plan Year in which the Participant attains age 70-1/2, in which case this Subsection (2) shall not apply); and |
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(ii) |
the accrued benefit of a Participant who attains age 70- 1 / 2 prior to January 1, 2000 must be distributed or commence to be distributed no later than the April 1 following the calendar year in which the Participant attains age 70- 1 / 2 unless the Participant is not a 5% owner (as defined in Subsection (i)) and elects to defer distribution to the calendar year in which the Participant retires. |
All Plan distributions will comply with Code Section 401(a)(9), including Department of Treasury Regulation Section 1.401(a)(9)-2. With respect to distributions made under the Plan for Plan Years beginning on or after January 1, 2003, all Plan distributions will comply with Code Section 401(a)(9), including Department of Treasury Regulation Section 1.401(a)(9)-2 through 1.401(a)(9)-9, as promulgated under Final and Temporary Regulations published in the Federal Register on April 17, 2002 (the 401(a)(9) Regulations), with respect to minimum distributions under Code Section 401(a)(9). In addition, the benefit payments distributed to any Participant on or after January 1, 2003, will satisfy the incidental death benefit provisions under Code Section 401(a)(9)(G) and Department of Treasury Regulation Section 1.401(a)(9)-5(d), as promulgated in the 401(a)(9) Regulations. To the extent required by Code Section 401(a)(9)(C)(iii), or any other applicable guidance issued thereunder, with respect to a Participant who retires in a calendar year after the calendar year in which the Participant attains age 70 1 / 2 , the actuarial increase in such Participants accrued benefit mandated by Code Section 401(a)(9)(C)(iii) shall be implemented notwithstanding any suspension of benefits provision applicable to such Participant pursuant to ERISA 203(a)(3)(B), Code Section 411(a)(3)(B) and the terms of the Plan.
3.4 | Suspension of Benefits |
3.4.1 Prior to Normal Retirement Date : If a Participant receives retirement benefits under the Plan following a termination of employment prior to the Participants Normal Retirement Date and again becomes an Employee prior to Normal Retirement Date, no retirement benefits shall be paid during such later period of employment and up to Normal Retirement Date. Any benefits payable under the Plan to or on behalf of the Participant at the time of the Participants subsequent termination of employment shall be reduced by the Actuarial Equivalent of any benefits paid to the Participant after the Participants earlier termination and prior to the Participants Normal Retirement Date.
3.4.2 After Normal Retirement Date : If (a) a Participant whose employment terminates again becomes an Employee after the Participants Normal Retirement Date, or again becomes an Employee prior to the Participants Normal Retirement Date and continues in employment beyond the Participants Normal Retirement Date, or (b) a Participant continues in employment with the Company and Affiliates after the Participants Normal Retirement Date without a prior termination, the following provisions of this Section 3.4.2 shall apply to the Participant as of the Participants Normal Retirement Date or, if later, the Participants date of reemployment.
(i) | For purposes of this Section 3.4.2, the following definitions shall apply: |
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(1) | Postretirement Date Service means each calendar month after a Participants Normal Retirement Date and subsequent to the time that: |
(A) | payment of retirement benefits commenced to the Participant if the Participant returned to employment with the Company and Affiliates, or |
(B) | payment of retirement benefits would have commenced to the Participant if the Participant had not remained in employment with the Company and Affiliates, |
if in either case the Participant receives pay from the Company and Affiliates for any Hours of Service performed on each of 8 or more days (or separate work shifts) in such calendar month.
(2) | Suspendable Amount means the monthly retirement benefits otherwise payable in a calendar month in which the Participant is engaged in Postretirement Date Service Payment shall be permanently withheld on a portion of a Participants retirement benefits, not in excess of the Suspendable Amount, for each calendar month during which the Participant is employed in Postretirement Date Service. |
(ii) | If payments have been suspended pursuant to Subsection (ii) above, such payments shall resume no later than the first day of the third calendar month after the calendar month in which the Participant ceases to be employed in Postretirement Date Service; provided, however, that no payments shall resume until the Participant has complied with the requirements set forth in Subsection (vi) below. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of Postretirement Date Service and the resumption of payment, less any amounts that are subject to offset pursuant to Subsection (iv) below. |
(iii) | Retirement benefits made subsequent to Postretirement Date Service shall be reduced by (1) the Actuarial Equivalent of any benefits paid to the Participant prior to the time the Participant is reemployed after the Participants Normal Retirement Date; and (2) the amount of any payments previously made during those calendar months in which the Participant was engaged in Postretirement Date Service; provided, however, that such reduction under Subsection (2) shall not exceed, in any one month, 25% percent of that months total retirement benefits (excluding amounts described in Subsection (ii) above) that would have been due but for the offset. |
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(iv) | Any Participant whose retirement benefits are suspended pursuant to Subsection (ii) of this Section 3.4.2 shall be notified (by personal delivery or certified or registered mail) during the first calendar month in which payments are withheld that the Participants retirement benefits are suspended. Such notification shall include: |
(1) | a description of the specific reasons for the suspension of payments; |
(2) | a general description of the Plan provisions relating to the suspension; |
(3) | a copy of the provisions; |
(4) | a statement to the effect that applicable Department of Labor Regulations may be found at Section 2530.203-3 of Title 29 of the Code of Federal Regulations; |
(5) | the procedure for appealing the suspension, which procedure shall be governed by Section 12.11; and |
(6) | the procedure for filing a benefits resumption notification pursuant to Subsection (vi) below. |
If payments subsequent to the suspension are to be reduced by an offset pursuant to Subsection (iv) above, the notification shall specifically identify the periods of employment for which the amounts to be offset were paid, the Suspendable Amounts subject to offset, and the manner in which the Plan intends to offset such Suspendable Amounts.
(v) | Payments shall not resume as set forth in Subsection (iii) above until a Participant performing Postretirement Date Service notifies the Administrator in writing of the cessation of such Service and supplies the Administrator with such proof of the cessation as the Administrator may reasonably require. |
(vi) | A Participant may request, pursuant to the procedure contained in Section 12.11, a determination whether specific contemplated employment will constitute Postretirement Date Service. |
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3.5 | Benefit Limitations |
3.5.1 Limitation on Accrued Benefit : Notwithstanding any other provision of the Plan, the annual benefit payable under the Plan to a Participant, when expressed as a monthly benefit commencing at the Participants Social Security Retirement Age (as defined in Code Section 415(b)(8)), shall not exceed the lesser of (a) $13,333.33 or (b) the highest average of the Participants monthly compensation for 3 consecutive calendar years, subject to the following:
(i) | The maximum shall apply to the Individual Life Annuity and to that portion of the Accrued Benefit (as adjusted as required under Code Section 415) payable in the form elected by the Participant during his lifetime. |
(ii) | If a Participant has fewer than 10 years of participation in the Plan, the maximum dollar limitation of Subsection (a) above shall be multiplied by a fraction of which the numerator is the Participants actual years of participation in the Plan (computed to fractional parts of a year) and the denominator is 10. If a Participant has fewer than 10 Years of Vesting Service, the maximum compensation limitation in Subsection (b) above shall be multiplied by a fraction of which the numerator is the Years of Vesting Service (computed to fractional parts of a year) and the denominator is 10. Provided, however, that in no event shall such dollar or compensation limitation, as applicable, be less than 1/10th of such limitation determined without regard to any adjustment under this Subsection (ii). |
(iii) | As of January 1 of each year, the dollar limitation as determined by the Commissioner of Internal Revenue for that calendar year to reflect increases in the cost of living, shall become effective as the maximum dollar limitation in Subsection (a) above for the Plan Year ending within that calendar year for Participants terminating in or after such Plan Year. |
(iv) |
If the benefit of a Participant begins prior to age 62, the defined benefit dollar limitation applicable to the Participant at such earlier age is an annual benefit payable in the form of a Life Annuity beginning at the earlier age that is the Actuarial Equivalent of the dollar limitation under Subsection (a) above applicable to the participant at age 62. The defined benefit dollar limitation applicable at an age prior to age 62 is determined by using the lesser of the effective Early Retirement reduction, as determined under the Plan, or 5% per year. The mortality basis for determining Actuarial Equivalence for terminations on or after December 31, 2002, as applicable, shall be the 1994 Group Annuity Reserving Table (weighted 50% male, 50% female and projected to 2002 using Scale AA), which is the table prescribed in |
17
Rev. Rul. 2001-62, (or the applicable mortality table, prescribed under Section 417(e)(3) of the Code or other guidance of general applicability issued thereunder). |
For periods prior to January 1, 2002, the dollar limitation under Code Section 415 in effect for the applicable Plan year shall be modified as follows to reflect commencement of retirement benefits on a date other than the Participants Social Security Retirement Age:
(1) | if the Participants Social Security Retirement Age is 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the dollar limitation under Subsection (a) above by 5/9ths of 1% for each month by which benefits commence before the month in which the Participant attains age 65; |
(2) | if the Participants Social Security Retirement Age is greater than 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the dollar limitation under Subsection (a) above by 5/9ths of 1% for each of the first 36 months and by 5/12ths of 1% for each of the additional months by which benefits commence before the month in which the Participant attains Social Security Retirement Age; |
(3) | if the Participants benefit commences prior to age 62, the dollar limitation shall be the actuarial equivalent of Subsection (a) above, payable at age 62, as determined above, reduced for each month by which benefits commence before the month in which the Participant attains age 62. Actuarial equivalence shall be determined using the greater of the interest rate assumption under the Plan for determining early retirement benefits or 5% per year. The mortality basis for determining Actuarial Equivalence for terminations prior to January 1, 1995 shall be the 1971 Group Annuity Mortality Table (weighted 95% male and 5% female). The mortality basis for determining Actuarial Equivalence for any terminations on or after January 1, 1995 shall be the 1983 Group Annuity Mortality Table (weighted 50% male and 50% female); |
(v) | Notwithstanding the foregoing, the maximum as applied to any FMC Participant on April 1, 1987 shall in no event be less than the FMC Participants current accrued benefit under the FMC Plan as of March 31, 1987, as that term is defined in Section 1106 of the Tax Reform Act of 1986. |
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(vi) | The maximum shall apply to the benefits payable to a Participant under the Plan and all other tax-qualified defined benefit plans of the Company and Affiliates (whether or not terminated), and benefits shall be reduced, if necessary, in the reverse of the chronological order of participation in such plans. |
3.5.2 Multiple Plan Reduction : With respect to a FMC Participant who did not have 1 Hour of Service after December 31, 1999 and who is (or has been) a participant in any defined contribution plan (whether or not terminated) maintained by FMC, FMCTI, the Company or an Affiliate, the sum of the FMC Participants defined benefit plan fraction (as defined under Code Section 415(e)(2)) and defined contribution plan fraction (as defined under Code Section 415(e)(3)) shall not exceed 1. If such sum exceeds 1, the FMC Participants defined benefit plan fraction shall be reduced until such sum equal 1.
3.5.3 Incorporation of Section 415 of the Code : The provisions set forth in Article III are intended to comply with the requirements of Section 415 of the Code and shall be interpreted, applied and if and to the extent necessary, deemed modified without formal language so as to satisfy solely the minimum requirements of Section 415.
3.6 | FMC Participants and FMCTI Participants Benefits |
The Normal Retirement Benefit, Early Retirement Benefit Termination Benefit, and Disability Retirement Benefit for each FMC Participant who is not an Employee and who does not complete an Hour of Service on or after May 1, 2001 shall, notwithstanding the provisions of Sections 3.1, 3.2, 3.3, 4.2 or 5.2 hereof, equal the accrued benefit of such FMC Participant as transferred from the FMC Plan in the FTI Spinoff.
The Normal Retirement Benefit, Early Retirement Benefit Termination Benefit, and Disability Retirement Benefit for each FMCTI Participant who is not an Employee and who does not complete an Hour of Service on or after June 30, 2008, shall, notwithstanding the provisions of Sections 3.1, 3.2, 3.3, 4.2 or 5.2 hereof, equal the accrued benefit of such FMCTI Participant as transferred from the FMCTI Plan in the JBT Spinoff.
ARTICLE IV
Termination Benefits
4.1 | Termination of Service |
Except as provided in the applicable Supplement, a Participant who has 5 Years of Vesting Service but who ceases to be an Employee before the Participants Early Retirement Date for any reason other than death shall be entitled to receive a Termination Benefit determined under Section 4.2. Except as provided in the applicable Supplement, payment of such benefit shall commence as of the first day of the month coincident with or next following the Participants Normal Retirement Date, unless the Participant elects to defer commencement subject to Section 3.3.2. Except as
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provided in the applicable Supplement, if the Participant satisfies the age requirement for an Early Retirement Benefit, the Participant may elect payment of the Actuarial Equivalent of the Participants Termination Benefit to commence as of the first day of any month before such Normal Retirement Date and coincident with or following the Participants Early Retirement Date. Any such election of the earlier Annuity Starting Date shall be made by giving advance written notice to the Administrator in accordance with rules prescribed by the Administrator. Except as provided in Article V and Article VII, no benefits shall be payable to any person if the Participant dies prior to the Annuity Starting Date. A terminated Participant who has no vested interest in the Participants accrued benefit shall be deemed to have received a distribution of the Participants entire vested benefit. The Committee or its delegatee may, in its discretion, vest a Participant in the Participants accrued benefit in the event the Participants employment with the Company is affected by a transaction undertaken by the Company.
4.2 | Amount of Termination Benefit |
Except as provided in the applicable Supplement or Section 3.6, a Participants monthly Termination Benefit shall be determined pursuant to Section 3.1.2 as in effect on the date his Years of Vesting Service terminate based on the Participants Years of Vesting Service as of such date. Except as provided in the applicable Supplement, if payment of the Participants Termination Benefit commences before the Normal Retirement Date, the amount of the monthly benefit shall be reduced to an Actuarial Equivalent to reflect such earlier commencement.
ARTICLE V
Disability Retirement Benefits
5.1 | Disability Retirement |
To the extent provided in the applicable Supplement, a Participant who is an Employee and who satisfies the requirements for Disability Retirement in the applicable Supplement shall be entitled to receive a Disability Retirement Benefit determined under Section 5.2. If a Participants Total and Permanent Disability ceases, the payment of the Participants Disability Retirement Benefit shall cease.
5.2 | Amount of Disability Retirement Benefit |
A Participants Disability Retirement Benefit shall be determined pursuant to the applicable Supplement as in effect on the date the Participants Years of Credited Service terminate.
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ARTICLE VI
Payment of Retirement Benefits
6.1 | Normal Form of Benefit |
Except as otherwise provided in the applicable Supplement, a Participants benefit shall be paid in the form of a 100% Joint and Survivors Annuity, with the Participants spouse as joint annuitant if the Participant is married on the Annuity Starting Date, and in the form of an Individual Life Annuity if the Participant is not married on the Annuity Starting Date, unless the Participant elects not to receive payments pursuant to this Section 6.1 and to receive payments in one of the optional forms permitted under Section 6.2. An election not to receive the normal form of benefit and to receive payment in an optional form shall satisfy the applicable requirements of Section 6.3.
6.2 | Optional Forms of Benefit |
Except as otherwise provided in the applicable Supplement, a married Participant may elect, with spousal consent and in accordance with Section 6.3, to receive the Participants benefits in the form of an Individual Life Annuity. Effective for Plan Years beginning on or after January 1, 2009, and notwithstanding any provision set forth in the Plan or any Supplement to the Plan to the contrary, a Participant may elect a Qualified Optional Survivor Annuity, which is an immediate annuity for the life of the Participant with a survivor annuity for the life of the Participants surviving spouse that equals either 50% or 75% (as elected by the Participant) of the amount of the annuity which is payable during the joint lives of the Participant and the Participants spouse.
6.3 | Election of Benefits |
6.3.1 The Administrator shall provide each Participant with a written notice containing the following information:
(a) | a general description of the normal form of benefit payable under the Plan; |
(b) | the Participants right to make and the effect of an election to waive the normal form of benefit; |
(c) | the right of the Participants spouse not to consent to the Participants election under Section 6.1; |
(d) | the right of Participant to revoke such election, and the effect of such revocation; |
(e) | the optional forms of benefits available under the Plan; and |
(f) | the Participants right to request in writing information on the particular financial effect of an election by the Participant to receive an optional form of benefit in lieu of the normal form of benefit. |
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6.3.2 The notice under Section 6.3.1 shall be provided to the Participant at each of the following times as shall be applicable to him
(a) | not more than 90 (effective January 1, 2008, 180) days and not less than 30 days after a Participant who is in the employ of the Company or an Affiliate gives notice of the Participants intention to terminate employment and commence receipt of the Participants retirement benefits under the Plan; or |
(b) | not more than 90 (effective January 1, 2008, 180) days and not less than 30 days prior to the attainment of age 65 of a Participant (whether or not the Participant has terminated employment) who has not previously commenced receiving retirement benefits. |
The election period in Section 6.3.3 for a Participant who requests additional information during the election period will be extended until 90 days after the additional information is mailed or personally delivered. Any such request shall be made only within 90 days after the date the information described in Section 6.3.1 is given to the Participant, and the Administrator shall not be obligated to comply with more than one such request. Any information provided pursuant to this Section 6.3.2 will be given to the Participant within 30 days after the date of the Participants request and will be based upon the estimated benefits to which the Participant will be entitled as of the later of the first day on which such benefits could commence or the last day of the Plan Year in which the Participants request is received. If a Participant files an election (or revokes an election) pursuant to this Section 6.3 less than 60 day shall be made retroactively to such date. Notwithstanding the above to the contrary, effective January 1, 2004, in the event a Participant elects a Retroactive Annuity Starting Date as provided in Section 6.5, the notice under 6.3.1 shall be provided to the Participant on or about the date that the Participant files an election for a Retroactive Annuity Starting Date.
6.3.3 A Participant may make the election provided in Section 6.1 by filing the prescribed form with the Administrator at any time during the election period. The election period shall begin 90 (effective January 1, 2008, 180) days prior to the Participants Annuity Starting Date. Such election shall be subject to the written consent of the Participants spouse, acknowledging the effect of the election and witnessed by a Plan representative or a notary public. Such spousal consent shall not be required if the Participant establishes to the satisfaction of the Administrator that the consent of the spouse may not be obtained because there is no spouse or the spouse cannot be located. A spouses consent shall be irrevocable. The election in Section 6.1 may be revoked or changed at any time during the election period but shall be irrevocable thereafter.
6.3.4 Notwithstanding Section 6.3.3:
(a) | distribution of benefits may commence less than 30 days after the |
(i) | the Participant elects to waive the requirement that notice be given at least 30 days prior to the Annuity Starting Date; and |
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(ii) | the distribution commences more than 7 days after such notice is provided. |
(b) | The notice described in Section 6.3.1 may be provided after the Annuity Starting Date, in which case the applicable election period shall not end before the 30th day after the date on which such notice is provided, unless the Participant elects to waive the 30-day notice requirements pursuant to Subsection (a) above. |
6.3.5 Notwithstanding the foregoing provisions in Section 6.3, effective January 1, 2004, a Participant may elect a Retroactive Annuity Starting Date (as defined in Treas. Reg. 1.417(e)-1(b)(3)(iv)(B)), pursuant to Section 6.5. In the event that the notice information described in Section 6.3 is provided to the Participant after the Participants Annuity Starting Date (as defined in Section 417(f)(2) of the Code) or Retroactive Annuity Starting Date, the Participant shall have at least 30 days after the date the notification is provided to make the election described in Section 6.3. The Participant may waive this 30 day period pursuant to the provisions of Section 6.3.4.
6.4 | FMC Participants and FMCTI Participants in Pay Status |
Notwithstanding any provision in the Plan to the contrary, each FMC Participant who had elected to receive and/or was receiving their normal retirement benefit, early retirement benefit, deferred retirement benefit, disability retirement benefit or termination benefit under the FMC Plan prior to the Effective Date shall on and after the Effective Date continue to receive such benefits in the same form, and in the same amount as such FMC Participant and/or, as applicable, FMC Joint Annuitant, was receiving or would have received under the FMC Plan prior to the Effective Date as if such benefits were paid by the FMC Plan. In addition, each FMC Beneficiary who was receiving benefits under the FMC Plan on behalf of an FMC Participant prior to the Effective Date shall continue to receive such benefits from this Plan after the Effective Date in the same form and in the same amount as if such benefits were paid by the FMC Plan.
Notwithstanding any provision in the Plan to the contrary, each FMCTI Participant who had elected to receive and/or was receiving their normal retirement benefit, early retirement benefit, deferred retirement benefit, disability retirement benefit or termination benefit under the FMCTI Plan prior to the Effective Date shall on and after the Effective Date continue to receive such benefits in the same form, and in the same amount as such FMCTI Participant and/or, as applicable, FMCTI Joint Annuitant, was receiving or would have received under the FMCTI Plan prior to the Effective Date as if such benefits were paid by the FMCTI Plan. In addition, each FMCTI Beneficiary who was receiving benefits under the FMCTI Plan on behalf of an FMCTI Participant prior to the Effective Date shall continue to receive such benefits from this Plan after the Effective Date in the same form and in the same amount as if such benefits were paid by the FMCTI Plan.
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6.5 | Election of Retroactive Annuity Starting Date |
Effective January 1, 2004, a Participant may elect a Retroactive Annuity Starting Date (as defined in Treas. Reg. 1.417(e)-1(b)(3)(iv)(B)), that occurs on or before the date the notice information described in Section 6.3 is provided to the Participant, provided the following conditions are satisfied:
(a) | The Participants spouse (including an alternate payee who is treated as the spouse under a qualified domestic relations order), determined as if the date distributions commence were the Participants Annuity Starting Date (as defined in Section 417(f)(2) of the Code), consents to the Participants election of a Retroactive Annuity Starting Date. The spousal consent requirement of this Section 6.5(a) is satisfied if such consent satisfies the conditions of Section 6.3.3 above. |
(b) | If the date distribution commences is more than 12 months from the Retroactive Annuity Starting Date, the distribution provided based on the Retroactive Annuity Starting Date shall satisfy Section 415 of the Code as though the date distribution commences is substituted for the annuity starting date for all purposes, including for purposes of determining the applicable interest rate and applicable mortality table (as defined in Article I). |
(c) | If the distribution is payable as a lump sum, the distribution amount shall not be less than the present value of the Participants accrued benefit, determined (i) using the applicable mortality table and applicable interest rate as of the distribution date or (ii) using the applicable mortality table and applicable interest rate as of the Participants Retroactive Annuity Starting Date. For purposes of this paragraph (c) applicable mortality table and applicable interest rate are defined in Article I. |
If a Participant elects a Retroactive Annuity Starting Date the following provisions shall apply:
(a) | future periodic payments shall be the same as the future periodic payments, if any, that would have been paid with respect to the Participant had payments actually commenced on the Retroactive Annuity Starting Date; |
(b) | the Participant shall receive a make-up payment to reflect any missed payment or payments for the period from the Retroactive Annuity Starting Date to the date of actual make-up payment (with appropriate adjustment for interest from the date the missed payment or payments would have been made to the date of the actual make-up payment); |
(c) |
the benefit determined as of the Retroactive Annuity Starting Date shall satisfy Section 417(e)(3) of the Code, if applicable, and Section 415 with the applicable interest rate and applicable mortality table (as defined in |
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Article I) determined as of that date; and the Retroactive Annuity Starting Date shall not precede the date the Participant could have otherwise started receiving benefits under the Plan. |
ARTICLE VII
Survivors Benefits
7.1 | Surviving Spouses Benefit |
If a Participant who has 5 or more Years of Vesting Service dies before the Annuity Starting Date and leaves a surviving spouse to whom the Participant has been married for at least 12 months, the Participants surviving spouse shall be entitled to receive a survivors benefit for life. Except as otherwise provided in the applicable Supplement, the amount of such survivors benefit shall be determined pursuant to Section 4.2 based upon the Participants age and Years of Credited Service on the date of the Participants death and paid in the form of a 50% Joint and Survivors Annuity as if the Participant had died on the day before such benefits commence. Except as otherwise provided in the applicable Supplement, payment of the survivors benefit shall commence on the first day of the month coincident with or next following the later of the first date the Participant could have commenced an Early Retirement Benefit or the Participants death, unless the Participants spouse elects to commence payment of benefits as of the first day of any subsequent month, but not later than the Participants Normal Retirement Date.
7.2 | Certain Former Employees |
FMC Participants who have 10 Years of Vesting Service but who have not been credited with an Hour of Service on or after August 23, 1984 and are not receiving benefits on that date shall be entitled to elect survivors benefits only as follows:
(a) | if the FMC Participant is credited with an hour of service under the FMC Plan or a predecessor plan on or after September 2, 1974, but is not otherwise credited with an hour of service under the FMC Plan, the FMCTI Plan or this Plan in a Plan Year beginning on or after January 1, 1976, the Participant shall be afforded an opportunity to elect payment of benefits in the form of a 100% Joint and Survivors Annuity; or |
(b) | if the Participant is credited with an Hour of Service under this Plan, the FMC Plan, the FMCTI Plan, or a predecessor plan in a Plan Year beginning after December 31, 1975, the Participant shall be afforded the opportunity to elect a Surviving Spouses Benefit under Section 7.1. |
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ARTICLE VIII
Fiduciaries
8.1 | Named Fiduciaries |
8.1.1 The Company is the Plan sponsor and a named fiduciary with respect to control over and management of the Plans assets only to the extent that it (a) shall appoint the members of the Committee which administers the Plan at the Administrators direction; (b) shall delegate its authorities and duties as plan administrator, as defined under ERISA, to the Committee; and (c) shall continually monitor the performance of the Committee.
8.1.2 The Company, as Administrator, and the Committee, which administers the Plan at the Administrators direction, are named fiduciaries of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to control and manage the operation and administration of the Plan. The Administrator is also the administrator and plan administrator of the Plan, as those terms are defined in ERISA Section 3(16)(A) and Code Section 414(g), respectively.
8.1.3 The Trustee is a named fiduciary of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to manage and control all Trust assets, except to the extent that authority is delegated to an Investment Manager or to the extent the Administrator or the Committee directs the allocation of Trust assets among general investment categories.
8.1.4 The Company, the Administrator, and the Trustee are the only named fiduciaries of the Plan.
8.2 | Employment of Advisers |
A named fiduciary, and any fiduciary appointed by a named fiduciary, may employ one or more persons to render advice regarding any of the named fiduciarys or fiduciarys responsibilities under the Plan.
8.3 | Multiple Fiduciary Capacities |
Any named fiduciary and any other fiduciary may serve in more than one fiduciary capacity with respect to the Plan.
8.4 | Payment of Expenses |
All Plan expenses, including expenses of the Administrator, the Committee, the Trustee, any Investment Manager and any insurance company, will be paid by the Trust Fund, unless a Participating Employer elects to pay some or all of those expenses.
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8.5 | Indemnification |
To the extent not prohibited by state or federal law, each Participating Employer agrees to, and will indemnify and save harmless the Administrator, any past, present, additional or replacement member of the Committee, and any other employee, officer or director of that Participating Employer, from all claims for liability, loss, damage (including payment of expenses to defend against any such claim) fees, fines, taxes, interest, penalties and expenses which result from any exercise or failure to exercise any responsibilities with respect to the Plan, other than willful misconduct or willful failure to act.
ARTICLE IX
Plan Administration
9.1 | Powers, Duties and Responsibilities of the Administrator and the Committee |
9.1.1 The Administrator and the Committee have full discretion and power to construe the Plan and to determine all questions of fact or interpretation that may arise under it. Interpretation of the Plan or determination of questions of fact regarding the Plan by the Administrator or the Committee will be conclusively binding on all persons interested in the Plan.
9.1.2 The Administrator and the Committee have the power to promulgate such rules and procedures, to maintain or cause to be maintained such records, and to issue such forms as it deems necessary or proper to administer the Plan.
9.1.3 Subject to the terms of the Plan, the Administrator and/or the Committee will determine the time and manner in which all elections authorized by the Plan must be made or revoked.
9.1.4 The Administrator and the Committee have all the rights, powers, duties and obligations granted or imposed upon them elsewhere in the Plan.
9.1.5 The Administrator and the Committee have the power to do all other acts in the judgment of the Administrator or the Committee necessary or desirable for the proper and advantageous administration of the Plan.
9.1.6 The Administrator and the Committee will exercise all responsibilities in a uniform and nondiscriminatory manner.
9.2 | Delegation of Administration Responsibilities |
The Administrator and the Committee may designate by written instrument one or more actuaries, accountants or consultants as fiduciaries to carry out, where appropriate, the administrative responsibilities, including their fiduciary duties. The Committee may from time to time allocate or delegate to any subcommittee, member of the Committee and others, not necessarily employees of the Company, any of its duties relative to
27
compliance with ERISA, administration of the Plan and related matters, including involving the exercise of discretion. The Companys duties and responsibilities under the Plan shall be carried out by its directors, officers and employees, acting on behalf of and in the name of the Company in their capacities as directors, officers and employees, and not as individual fiduciaries. No director, officer nor employee of the Company shall be a fiduciary with respect to the Plan unless he or she is specifically so designated and expressly accepts such designation.
9.3 | Committee Members |
The Committee shall consist of not less than 3 people, who need not be directors, and shall be appointed by the Board of Directors of the Company. Any Committee member may resign and the Board of Directors may remove any Committee member, with or without cause, at any time. A majority of the members of the Committee shall constitute a quorum for the transaction of business and the act of a majority of the Committee members at a meeting at which a quorum is present shall be the act of the Committee. The Committee can act by written consent signed by all of its members. Any members of the Committee who are Employees shall not receive compensation for their services for the Committee. No Committee member shall be entitled to act on or decide any matter relating solely to his or her status as a Participant.
ARTICLE X
Funding of the Plan
10.1 | Appointment of Trustee |
The Committee or its authorized delegatee will appoint the Trustee and either may remove it. The Trustee accepts its appointment by executing the Trust Agreement. A Trustee will be subject to direction by the Committee or its authorized delegatee or, to the extent specified by the Company, by an Investment Manager, and will have the degree of discretion to manage and control Plan assets specified in the Trust Agreement. Neither the Company nor any other Plan fiduciary will be liable for any act or omission to act of a Trustee, as to duties delegated to the Trustee.
10.2 | Actuarial Cost Method |
The Committee or its authorized delegatee shall determine the actuarial cost method to be used in determining costs and liabilities under the Plan pursuant to Section 301 et seq., of ERISA and Section 412 of the Code. The Committee or its authorized delegatee shall review such actuarial cost method from time to time, and if it determines from review that such method is no longer appropriate, then it shall petition the Secretary of the Treasury for approval of a change of actuarial cost method.
10.3 | Cost of the Plan |
Annually the Committee or its authorized delegatee shall determine the normal cost of the Plan for the Plan Year and the amount (if any) of the unfunded past service cost on the basis of the actuarial cost method established for the Plan using actuarial
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assumptions which, in the aggregate, are reasonable. The Committee or its authorized delegatee shall also determine the contributions required to be made for each Plan Year by the Participating Employers in order to satisfy the minimum funding standard (or alternative minimum funding standard) for such Plan Year determined pursuant to Sections 302 through 305 of ERISA and Section 412 of the Code.
10.4 | Funding Policy |
The Participating Employers shall cause contributions to be made to the Plan for each Plan Year in the amount necessary to satisfy the minimum funding standard (or alternative minimum funding standard) for such Plan Year; provided, however, that this obligation shall cease when the Plan is terminated. In the case of a partial termination of the Plan, this obligation shall cease with respect to those Participants, Joint Annuitants and Beneficiaries who are affected by such partial termination. Each contribution is conditioned upon its deductibility under Section 404 of the Code and shall be returned to the Participating Employers within one year after the disallowance of the deduction (to the extent disallowed). Upon the Companys written request, a contribution that was made by a mistake of fact shall be returned to the Participating Employer within one year after the payment of the contribution.
10.5 | Cash Needs of the Plan |
The Committee or its authorized delegatee from time to time shall estimate the benefits and administrative expenses to be paid out of the Plan during the period for which the estimate is made and shall also estimate the contributions to be made to the Plan during such period by the Participating Employers. The Committee or its authorized delegatee shall inform the Trustees of the estimated cash needs of and contributions to the Plan during the period for which such estimates are made. Such estimates shall be made on an annual, quarterly, monthly or other basis, as the Committee shall determine.
10.6 | Public Accountant |
The Committee or its authorized delegatee shall engage an independent qualified public accountant to conduct such examinations and to render such opinions as may be required by Section 103(a)(3) of ERISA. The Committee or its authorized delegatee in its discretion may remove and discharge the person so engaged, but in such case it shall engage a successor independent qualified public accountant to perform such examinations and to render such opinions.
10.7 | Enrolled Actuary |
The Committee or its authorized delegatee shall engage an enrolled actuary to prepare the actuarial statement described in Section 103(d) of ERISA and to render the opinion described in Section 103(a)(4) of ERISA. The Committee or its authorized delegatee in its discretion may remove and discharge the person so engaged, but in such event it shall engage a successor enrolled actuary to perform such examination and render such opinion.
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10.8 | Basis of Payments to the Plan |
All contributions to the Plan shall be made by the Participating Employers and no contributions shall be required of or permitted by Participants. From time to time the Participating Employers shall make such contributions to the Plan as the Company determines to be necessary or desirable in order to fund the benefits provided by the Plan and any expenses thereof which are paid out of the Trust Fund and in order to carry out the obligations of the Participating Employers set forth in Section 10.3. All contributions to the Plan shall be held by the Trustee in accordance with the Trust Agreement.
10.9 | Basis of Payments from the Plan |
All benefits payable under the Plan shall be paid by the Trustee out of the Trust Fund pursuant to the directions of the Committee or its authorized delegatee and the terms of the Trust Agreement. The Trustee shall pay all proper expenses of the Plan and the Trust Fund out of the Trust Fund, except to the extent paid by the Participating Employers.
ARTICLE XI
Plan Amendment or Termination
11.1 | Plan Amendment or Termination |
The Company may, subject to any applicable Collective Bargaining Agreement, amend, modify or terminate the Plan at any time by resolution of the Board or by resolution of or other action recorded in the minutes of the Administrator or Committee. Execution and delivery by the Administrator or the Committee or by the Chairman of the Board, the President, or any Vice President of the Company of an amendment to the Plan is conclusive evidence of the amendment, modification or termination. The Committee in any event shall have the authority to amend the Plan at any time to the extent that such amendments are required in order to obtain a favorable determination letter from the Internal Revenue Service regarding the Plans qualification under the Code or to conform the Plan to such regulations and rulings as may be issued by the Internal Revenue Service or the United States Department of Labor.
11.2 | Limitations on Plan Amendment |
No Plan amendment can:
(a) | authorize any part of the Trust Fund to be used for, or diverted to, purposes other than the exclusive benefit of Participants or their Beneficiaries; |
(b) | decrease the accrued benefits of any Participant or his or her Beneficiary under the Plan; or |
(c) | except to the extent permitted by law, eliminate or reduce an early retirement benefit or retirement-type subsidy (as defined in Code Section 411) or an optional form of benefit with respect to service prior to the date the amendment is adopted or effective, whichever is later. |
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11.3 | Effect of Plan Termination |
Upon termination of the Plan, each Participants rights to benefits accrued hereunder shall be vested and nonforfeitable, and the Trust shall continue until the Trust Fund has been distributed as provided in Section 11.4. Any other provision hereof notwithstanding, the Participating Employers shall have no obligation to continue making contributions to the Plan after termination of the Plan. Except as otherwise provided in ERISA, neither the Participating Employers nor any other person shall have any liability or obligation to provide benefits hereunder after such termination in excess of the value of the Trust Fund. Upon such termination, Participants and Beneficiaries shall obtain benefits solely from the Trust Fund. Upon partial termination of the Plan, this Section 11.3 shall apply only with respect to such Participants and Beneficiaries as are affected by such partial termination.
11.4 | Allocation of Trust Fund on Termination |
On termination of the Plan, the Trust Fund shall be allocated by the Administrator on an actuarial basis among Participants and Beneficiaries in the manner prescribed by Section 4044 of ERISA. Any residual assets of the Trust Fund remaining after such allocation shall be distributed to the Company if (a) all liabilities of the Plan to Participants and Beneficiaries have been satisfied and (b) such a distribution does not contravene any provision of law. The foregoing notwithstanding, if any remaining assets of the Plan are attributable to Employee Contributions, such assets shall be equitably distributed to the Participants who made such contributions (or to their Beneficiaries) in accordance with their rate of contribution. Effective January 1, 1989, the benefit of any highly compensated employee or former employee (determined in accordance with section 414(g) of the Code and regulations thereunder) shall be limited to a benefit that is nondiscriminatory under section 401(a)(4) of the Code. In the event of a partial termination of the Plan, the Administrator shall arrange for the division of the Trust Fund, on a nondiscriminatory basis to the extent required by section 401 of the Code, into the portion attributable to those Participants and Beneficiaries who are not affected by such partial termination and the portion attributable to such persons who are so affected. The portion of the Trust Fund attributable to persons who are so affected shall be allocated in the manner prescribed by section 4044 of ERISA.
ARTICLE XII
Miscellaneous Provisions
12.1 | Subsequent Changes |
All benefits to which any Participant may be entitled hereunder shall be determined under the Plan in effect when the Participant ceases to be an Eligible Employee (or under the FMC Plan, as of the date each FMC Participant who is not an
31
Employee ceased to be an eligible employee under the FMC Plan) (or under the FMCTI Plan, as of the date each FMCTI Participant who is not an Employee ceased to be an eligible employee under the FMCTI Plan) and shall not be affected by any subsequent change in the provisions of the Plan, unless the Participant again becomes an Eligible Employee.
12.2 | Plan Mergers |
The Plan shall not be merged or consolidated with any other plan, and no assets or liabilities of the Plan shall be transferred to any other plan, unless each Participant would receive a benefit immediately after such merger, consolidation or transfer (if the Plan then terminated) which is equal to or greater than the benefit such Participant would have been entitled to receive immediately before such merger, consolidation or transfer (if the Plan had then been terminated). A list of other plans which have been merged into the FMC Plan, the FMCTI Plan, or this Plan is attached hereto and made a part hereof as Exhibit A.
12.3 | No Assignment of Property Rights |
The interest or property rights of any person in the Plan, in the Trust Fund or in any payment to be made under the Plan shall not be assignable nor be subject to alienation or option, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditors process, and any act in violation of this Section 12.3 shall be void. This provision shall not apply to a qualified domestic relations order defined in Code Section 414(p). The Company shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders.
In addition, the prohibition of this Section 12.3 will not apply to any offset of a Participants benefit under the Plan against an amount the Participant is ordered or required to pay to the Plan under a judgment, order, decree or settlement agreement that meets the requirements as set forth in this Section 12.3. The Participant must be ordered or required to pay the Plan under a judgment of conviction for a crime involving the Plan, under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA, or pursuant to a settlement agreement between the Secretary of Labor and the Participant in connection with a violation (or alleged violation) of that part 4. This judgment, order, decree or settlement agreement must expressly provide for the offset of all or part of the amount that must be paid to the Plan against the Participants benefit under the Plan. In addition, if a Participant is entitled to receive a 100% Joint and Survivor Annuity under Section 6.1 of the Plan or a Surviving Spouses Benefit under Section 7.1 of the Plan, and the Participant is married at the time at which the offset is to be made, the Participants spouse must consent to the offset in accordance with the spousal consent requirements of Section 6.3.3 of the Plan, an election to waive the right of the spouse to the 100% Joint and Survivor Annuity (made in accordance with Section 6.3 of the Plan) or the Surviving Spouses Benefit under Section 7.1 of the Plan, must be in effect, the spouse is ordered or required in the judgment, order, decree, or settlement to
32
pay an amount to the Plan in connection with a violation of Part 4 of subtitle B or ERISA Title I, or the spouse retains in the judgment, order, decree, or settlement the right to receive the survivor annuity under the 100% Joint and Survivor Annuity or under the Surviving Spouses Benefit, determined in the following manner: the Participant terminated employment on the date of the offset, there was no offset, the Plan permitted the commencement of benefits only on or after Normal Retirement Age, the Plan provided only the minimum-required qualified joint and survivor annuity, and the amount of the Surviving Spouses Benefit under the Plan is equal to the amount of the survivor annuity payable under the minimum-required qualified joint and survivor annuity. For purposes of this Section 12.3 the term minimum-required qualified joint and survivor annuity means a qualified joint and survivor annuity which is the Actuarial Equivalent of the Participants accrued benefit and under which the survivors annuity is 50% of the amount of the annuity which is payable during the joint lives of the Participant and the Participants spouse.
12.4 | Beneficiary |
To the extent permitted by the applicable Supplement, the Beneficiary of a Participant shall be the person or persons so designated by such Participant with spousal consent and in accordance with Section 6.3. A Participant may revoke and change a designation of a Beneficiary at any time. A designation of a Beneficiary, or any revocation and change thereof, shall be effective only if it is made in writing in a form acceptable to the Administrator and is received by it prior to the Participants death.
12.5 | Benefits Payable to Minors, Incompetents and Others |
If any benefit is payable to a minor, an incompetent, or a person otherwise under a legal disability, or to a person the Administrator reasonably believes to be physically or mentally incapable of handling and disposing of his or her property, whether because of his or her advanced age, illness, or other physical or mental impairment, the Administrator has the power to apply all or any part of the benefit directly to the care, comfort, maintenance, support, education, or use of the person, or to pay all or any part of the benefit to the persons parent, guardian, committee, conservator, or other legal representative, wherever appointed, to the individual with whom the person is living or to any other individual or entity having the care and control of the person. The Plan, the Administrator and any other Plan fiduciary will have fully discharged all responsibilities to the Participant or Beneficiary entitled to a payment by making payment under the preceding sentence.
12.6 | Employment Rights |
Nothing in the Plan shall be deemed to give any person a right to remain in the employ of the Company and Affiliates or affect any right of the Company or any Affiliate to terminate a persons employment with or without cause.
12.7 | Proof of Age and Marriage |
Participants and Beneficiaries shall furnish proof of age and marital status satisfactory to the Administrator at such time or times as it shall prescribe. The
33
Administrator may delay the disbursement of any benefits under the Plan until all pertinent information with respect to age or marital status has been furnished and then make payment retroactively.
12.8 | Small Annuities |
If the sum of (a) the lump sum Actuarial Equivalent value of a Normal, Early, or Deferred Retirement Benefit under Article III, Termination Benefit (payable at the Participants Normal Retirement Date) under Article IV or Survivors Benefit under Article VII, excluding any Aetna or Prudential nonparticipating annuity; and (b) the lump sum Actuarial Equivalent value of any Aetna or Prudential nonparticipating annuity is equal to $5,000 (effective January 1, 2005, $1,000) (or such other amount as may be prescribed in or under the Code) or less, such amounts shall be paid in a lump sum as soon as administratively practicable following the Participants retirement, termination of employment or death.
For lump sum distributions paid on or after January 1, 2003, if the Participant is thereafter reemployed by the Company, the Participants subsequent benefit will be reduced by the lump sum Actuarial Equivalent value of the lump sum distribution previously paid to the Participant. For lump sum distributions paid prior to January 1, 2003, if a Participant who has received such a lump sum distribution is thereafter reemployed by the Company, the Participant shall have the option to repay to the Plan the amount of such distribution, together with interest at the rate of 5% per annum (or such other rate as may be prescribed pursuant to section 411(c)(2)(C)(III) of the Code), compounded annually from the date of the distribution to the date of repayment. If a reemployed Participant does not make such repayment, no part of the Period of Service with respect to which the lump sum distribution was made shall count as Years of Vesting Service or Years of Credited Service.
12.9 | Controlling Law |
The Plan and all rights thereunder shall be interpreted and construed in accordance with ERISA and, to the extent that state law is not preempted by ERISA, the law of the State of Illinois.
12.10 | Direct Rollover Option |
Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributees election under this Section 12.10, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.
(a) |
As used in this Section 12.10, an eligible rollover distribution means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) |
34
of the distributee and the distributees designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any other distribution(s) that is reasonably expected to total less than $200 during a year. |
A portion of a distribution shall not fail to be an eligible rollover distribution because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.
(b) | As used in this Section 12.10, an eligible retirement plan means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, a qualified trust described in Section 401(a) of the Code that accepts the distributees eligible rollover distribution, an annuity contract described in Section 403(b) of the Code or an eligible retirement plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of eligible retirement plan shall apply in the case of a distribution to a surviving spouse or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. |
(c) | As used in this Section 12.10, a distributee includes an Employee or former Employee. In addition, the Employees or former Employees surviving spouse and the Employees or former Employees spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. |
(d) | As used in this Section 12.10, a direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. |
12.11 | Claims Procedure |
12.11.1 Any application for benefits under the Plan and all inquiries concerning the Plan shall be submitted to the Company at such address as may be
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announced to Participants from time to time. Applications for benefits shall be in the form and manner prescribed by the Company and shall be signed by the Participant or, in the case of a benefit payable after the death of the Participant, by the Participants Surviving Spouse or Beneficiary, as the case may be.
12.11.2 The Plan Administrator shall give written or electronic notice of its decision on any application to the applicant within 90 days of receipt of the application. Electronic notification may be used, at the discretion of the Plan Administrator (or Review Panel, as discussed below). If special circumstances require a longer period of time, the Plan Administrator shall provide notice to the applicant within the initial 90-day period, explaining the special circumstances requiring the extension of time and the date by which the Plan expects to render a benefit determination. A decision will be given as soon as possible, but no later than 180 days after receipt of the application. In the event any application for benefits is denied in whole or in part, the Plan Administrator shall notify the applicant in writing or electronic notification of the right to a review of the denial. Such notice shall set forth, in a manner calculated to be understood by the applicant: the specific reasons for the denial; the specific references to the Plan provisions on which the denial is based; a description of any information or material necessary to perfect the application and an explanation of why such material is necessary; and a description of the Plans review procedures and the applicable time limits to such procedures, including a statement of the applicants right to bring a civil action under ERISA Section 502(a) following a denial on review.
12.11.3 The Company shall appoint a Review Panel, which shall consist of three or more individuals who may (but need not) be employees of the Company. The Review Panel shall be the named fiduciary that has the authority to act with respect to any appeal from a denial of benefits under the Plan, and shall hold meetings at least quarterly, as needed. The Review Panel shall have the authority to further delegate its responsibilities to two or more individuals who may (but need not) be employees of the Company.
12.11.4 Any person (or his authorized representative) whose application for benefits is denied in whole or in part may appeal the denial by submitting to the Review Panel a request for a review of the application within 60 days after receiving notice of the denial. The Review Panel shall give the applicant or such representative the opportunity to submit written comments, documents, and other information relating to the claim; and an opportunity to review, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other relevant information (other than legally privileged documents) in preparing such request for review. The request for review shall be in writing and addressed as follows: Review Panel of the Employee Welfare Benefits Plan Committee, 1803 Gears Road, Houston, Texas 77067-4097. The request for review shall set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents, or other material as it may deem necessary or appropriate in making its review. The Review Panel will consider all comments, documents, and other information submitted by the applicant regardless of whether such information was submitted or considered during the initial benefit determination.
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12.11.5 The Review Panel shall act upon each request for review within 60 days after receipt thereof. If special circumstances require a longer period of time, the Review Panel shall so notify the applicant within the initial 60 days, explaining the special circumstances requiring the extension of time and the date by which the Review Panel expects to render a benefit determination. A decision will be given as soon as possible, but no later than 120 days after receipt of the request for review. The Review Panel shall give notice of its decision to the Company and the applicant. In the event the Review Panel confirms the denial of the application for benefits in whole or in part, such notice shall set forth in a manner calculated to be understood by the applicant, the specific reasons for such denial and specific references to the Plan provisions on which the decision is based. If such an extension of time for review is required because of special circumstances, the Plan Administrator shall provide the applicant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. In the event the Review Panel confirms the denial of the application for benefits in whole or in part, such notice shall set forth in a manner calculated to be understood by the applicant: the specific reasons for such denial; the specific references to the Plan provisions on which the decision is based; the applicants right, upon request and free of charge, to receive reasonable access to, and copies of, all documents and other relevant information (other than legally-privileged documents and information); and a statement of the applicants right to bring a civil action under ERISA Section 502(a).
12.11.6 The Review Panel shall establish such rules and procedures, consistent with ERISA and the Plan, as it may deem necessary or appropriate in carrying out its responsibilities under this Section 12.11.
12.11.7 To the extent an application for benefits as a result of a Disability requires the Plan Administrator or the Review Panel, as applicable, to make a determination of Disability under the terms of the Plan, such determination shall be subject to all of the general rules described in this Section 12.11, except as they are expressly modified by this Section 12.11.7.
(a) |
If the applicants claim is for benefits as a result of Disability, then the initial decision on a claim for benefits will be made within 45 days after the Plan receives the applicants claim, unless special circumstances require additional time, in which case the Plan Administrator will notify the applicant before the end of the initial 45-day period of an extension of up to 30 days. If necessary, the Plan Administrator may notify the applicant, prior to the end of the initial 30-day extension period, of a second extension of up to 30 days. If an extension is due to the applicants failure to supply the necessary information, the notice of extension will describe the additional information and the applicant will have 45 days to provide the additional information. Moreover, the period for making the determination will be delayed from the date the notification of extension was sent out until the applicant responds to the request for additional information. No additional extensions may be made, except with the applicants voluntary consent. The contents of the notice shall be the same as described in Section 12.11.2 above. If a benefit claim as a result |
37
of Disability is denied in whole or in part, the applicant (or his authorized representative) will receive written or electronic notification, as described in Section 12.11.2. |
(b) | If an internal rule, guideline, protocol or similar criterion is relied upon in making the adverse determination, then the notice to the applicant of the adverse determination will either set forth the internal rule, guideline, protocol or similar criterion, or will state that such was relied upon and will be provided free of charge to the applicant upon request (to the extent not legally-privileged) and if the applicants claim was denied based on a medical necessity or experimental treatment or similar exclusion or limit, then the applicant will be provided a statement either explaining the decision or indicating that an explanation will be provided to the applicant free of charge upon request. |
(c) | The Review Panel, as described above in Section 12.11.3 shall be the named fiduciary with the authority to act on any appeal from a denial of benefits as a result of Disability under the Plan. Any applicant (or his authorized representative) whose application for benefits as a result of Disability is denied in whole or in part may appeal the denial by submitting to the Review Panel a request for a review of the application within 180 days after receiving notice of the denial. The request for review shall be in the form and manner prescribed by the Review Panel and addressed as follows: Review Panel of the Employee Welfare Benefits Plan Committee, 1803 Gears Road, Houston, Texas 77067-4097. In the event of such an appeal for review, the provisions of Section 12.11.4 regarding the applicants rights and responsibilities shall apply. Upon request, the Review Panel will identify any medical or vocational expert whose advice was obtained on behalf of the Review Panel in connection with an adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination. The entity or individual appointed by the Review Panel to review the claim will consider the appeal de novo, without any deference to the initial benefit denial. The review will not include any person who participated in the initial benefit denial or who is the subordinate of a person who participated in the initial benefit denial. |
(d) | If the initial benefit denial was based in whole or in part on a medical judgment, then the Review Panel will consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment, and who was neither consulted in connection with the initial benefit determination nor is the subordinate of any person who was consulted in connection with that determination; and upon notifying the applicant of an adverse determination on review, include in the notice either an explanation of the clinical basis for the determination, applying the terms of the Plan to the applicants medical circumstances, or a statement that such explanation will be provided free of charge upon request. |
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(e) | A decision on review shall be made promptly, but not later than 45 days after receipt of a request for review, unless special circumstances require an extension of time for processing. If an extension is required, the applicant will be notified before the end of the initial 45-day period that an extension of time is required and the anticipated date that the review will be completed. A decision will be given as soon as possible, but not later than 90 days after receipt of a request for review. The Review Panel shall give notice of its decision to the applicant; such notice shall comply with the requirements set forth in Section 12.11.5. In addition, if the applicants claim was denied based on a medical necessity or experimental treatment or similar exclusion, the applicant will be provided a statement explaining the decision, or a statement providing that such explanation will be furnished to the applicant free of charge upon request. The notice shall also contain the following statement: You and your Plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency. |
12.11.8 No legal or equitable action for benefits under the Plan shall be brought unless and until the applicant (a) has submitted a written application for benefits in accordance with Section 12.11.1 (or 12.11.7(a), as applicable), (b) has been notified by the Plan Administrator that the application is denied, (c) has filed a written request for a review of the application in accordance with Section 12.11.4 (or 12.11.7(c), as applicable); and (d) has been notified that the Review Panel has affirmed the denial of the application; provided that legal action may be brought after the Review Panel has failed to take any action on the claim within the time prescribed in Section 12.11.5 (or 12.11.7(e), as applicable). An applicant may not bring an action for benefits in accordance with this Section 12.11.8 later than 90 days after the Review Panel denies the applicants application for benefits.
12.12 | Participation in the Plan by an Affiliate |
12.12.1 With the consent of the Board, any Affiliate, by appropriate action of its board of directors, a general partner or the sole proprietor, as the case may be, may adopt the Plan and determine the classes of its Employees that will be Eligible Employees.
12.12.2 A Participating Employer will have no power with respect to the Plan except as specifically provided herein.
12.13 | Action by Participating Employers |
Any action required to be taken by the Company pursuant to any Plan provisions will be evidenced in the manner set forth in Section 11.1. Any action required to be taken by a Participating Employer will be evidenced by a resolution of the Participating
39
Employers board of directors (or an authorized committee of that board). Participating Employer action may also be evidenced by a written instrument executed by any person or persons authorized to take the action by the Participating Employers board of directors, any authorized committee of that board, or the stockholders. A copy of any written instrument evidencing the action by the Company or Participating Employer must be delivered to the secretary or assistant secretary of the Company or Participating Employer.
ARTICLE XIII
Top Heavy Provisions
13.1 | Top Heavy Definitions |
For purposes of this Article XIII and any amendments to it, the terms listed in this Section 13.1 have the meanings ascribed to them below.
Aggregate Account means the value of all accounts maintained on behalf of a Participant, whether attributable to Company or employee contributions, determined under applicable provisions of the defined contribution plan used in determining Top Heavy Plan status.
Aggregation Group means the group of plans in a Mandatory Aggregation Group, if any, that includes the Plan, unless including additional Related Plans in the group would prevent the Plan for being a Top Heavy Plan, in which case Aggregation Group means the group of plans in a Permissive Aggregation Group, if any, that includes the Plan.
Compensation means compensation as defined in Code Section 415(c)(3) and Treasury regulations thereunder. For purposes of determining who is a Key Employee, Compensation will be applied by taking into account amounts paid by Affiliates who are not Participating Employers, as well as amounts paid by Participating Employers, and without applying the exclusions for amounts paid by a Participating Employer to cover an Employees nonqualified deferred compensation FICA tax obligations and for gross-up payments on such FICA tax payments.
Determination Date means, for a Plan Year, the last day of the preceding Plan Year. If the Plan is part of an Aggregation Group, the Determination Date for each other plan will be, for any Plan Year, the Determination Date for that other plan that falls in the same calendar year as the Determination Date for the Plan.
Key Employee means an employee described in Code Section 416(i)(1), the regulations promulgated thereunder, and other guidance of general applicability issued thereunder. Generally, a Key Employee is an Employee or former Employee who, at any time during the Plan Year containing the Determination Date is:
(a) | an officer of the Company or an Affiliate with annual Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan years beginning after December 31, 2002); |
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(b) | a 5% owner of the Company or an Affiliate; or |
(c) | a 1% owner of the Company or an Affiliate with annual Compensation from the Company and all Affiliates of more than $150,000. |
Mandatory Aggregation Group means each plan (considering the Plan and Related Plans) that, during the Plan Year that contains the Determination Date or any of the 4 preceding Plan Years:
(a) | had a participant who was a Key Employee; or |
(b) | was required to be considered with a plan in which a Key Employee participated in order to enable the plan in which the Key Employee participated to meet the requirements of Code Section 401(a)(4) or 410(b). |
Non-key Employee means an Employee or former Employee who is not a Key Employee.
Permissive Aggregation Group means the group of plans consisting of the plans in a Mandatory Aggregation Group with the Plan, plus any other Related Plan or Plans that, when considered as a part of the Aggregation Group, does not cause the Aggregation Group to fail to satisfy the requirements of Code Section 401(a)(4) or 410(b).
Present Value of Accrued Benefits means, in the case of a defined benefit plan, a Participants present value of accrued benefits determined as follows:
(a) | as of the most recent Actuarial Valuation Date, which is the most recent valuation date within a 12-month period ending on the Determination Date; |
(b) | as if the Participant terminated service as of the actuarial valuation date; and |
(c) | the Actuarial Valuation Date must be the same date used for computing the defined benefit plan minimum funding costs, regardless of whether a valuation is performed that Plan Year. |
Present Value means, in calculating a Participants present value of accrued benefits as of a Determination Date, the sum of:
(a) | the Actuarial Equivalent present value of accrued benefits; |
(b) |
any Plan distributions made within the Plan Year that includes the Determination Date; provided, however, in the case of a distribution made for a reason other than separation from service, death or disability, this provision shall also include distributions made within the 4 preceding Plan Years. In the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for top heavy purposes to the extent that such distributions |
41
are already included in the Participants present value of accrued benefits as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted; |
(c) | any Employee Contributions, whether voluntary or mandatory. However, amounts attributable to tax deductible Qualified Voluntary Employee Contributions shall not be considered to be a part of the Participants present value of accrued benefits; |
(d) | with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Participant and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section 13.1. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers, as part of the Participants present value of accrued benefits; |
(e) | with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Participant or made to a plan maintained by the same employer), if this Plan provides the rollover or plan-to-plan transfer, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Participants present value of accrued benefits, irrespective of the date on which such rollover or plan-to-plan transfer is accepted; and |
(f) | if an individual has not performed services for a Participating Employer within the Plan Year that includes the Determination Date, any accrued benefit for such individual shall not be taken into account. |
Related Plan means any other defined contribution plan (a Related Defined Contribution Plan) or defined benefit plan (a Related Defined Benefit Plan) (both as defined in Code Section 415(k), maintained by the Company or an Affiliate.
A Super Top Heavy Aggregation Group exists in any Plan Year for which, as of the Determination Date, the sum of the present value of accrued benefits and the Aggregate Accounts of Key Employees under all plans in the Aggregation Group exceeds 90% of the sum of the present value of accrued benefits and the Aggregate Accounts of all employees under all plans in the Aggregation Group. In determining the sum of the Present Value of Accrued Benefits and/or Aggregate Accounts for all employees, the present value of accrued benefits and/or Aggregate Accounts for any Non-key Employee who was a Key Employee for any Plan Year preceding the Plan Year that contains the Determination Date will be excluded.
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Super Top Heavy Plan means the Plan when it is described in the second sentence of Section 13.2.
A Top Heavy Aggregation Group exists in any Plan Year for which, as of the Determination Date, the sum of the Present Value of Accrued Benefits for Key Employees under all plans in the Aggregation Group exceeds 60% of the sum of the Present Value of Accrued Benefits for all employees under all plans in the Aggregation Group. In determining the sum of the Present Value of Accrued Benefits for all employees, the Present Value of Accrued Benefits for any Non-key Employee who was a Key Employee for any Plan Year preceding the Plan Year that contains the Determination Date will be excluded.
Top Heavy Plan means the Plan when it is described in the first sentence of Section 13.2.
13.2 | Determination of Top Heavy Status |
This Plan is a Top Heavy Plan in any Plan Year in which it is a member of a Top Heavy Aggregation Group, including a Top Heavy Aggregation Group that includes only the Plan. The Plan is a Super Top Heavy Plan in any Plan Year in which it is a member of a Super Top Heavy Aggregation Group, including a Super Top Heavy Aggregation Group that includes only the Plan.
13.3 | Minimum Benefit Requirement for Top Heavy Plan |
13.3.1 Minimum Accrued Benefit : The minimum accrued benefit (expressed as an Individual Life Annuity commencing at Normal Retirement Date) derived from Company contributions to be provided under this Section for each Non-key Employee who is a Participant for any Plan Year in which this Plan is a Top Heavy Plan shall equal the product of (a) 1/12th of 416 Compensation averaged over 5 the consecutive Plan Years (or actual number of Plan Years if less) which produce the highest average and (b) the lesser of (i) 2% multiplied by Years of Vesting Service or (ii) 20%.
13.3.2 For purposes of providing the minimum benefit under Code Section 416, a Non-key Employee who is not a Participant solely because (a) his compensation is below a stated amount or (b) he declined to make mandatory contributions to the Plan will be considered to be a Participant.
13.3.3 For purposes of this Section 13.3, Years of Vesting Service for any Plan Year during which the Plan was not a Top Heavy Plan shall be disregarded.
13.3.4 For purposes of this Section 13.3, 416 Compensation for any Plan Year during which the Plan is a Top Heavy Plan shall be disregarded.
13.3.5 For the purposes of this Section 13.3, 416 Compensation shall mean W2 wages for the calendar year ending with or within the Plan Year, plus any elective deferral (as defined in Code section 402(g)), any amounts contributed to a plan described in Code Section 125 and any amounts contributed to a plan described in Code Section 132. 416 Compensation shall be limited to $200,000 (as adjusted for cost-of-living in accordance with Section 401(a)(17)(B) of the Code) in Top Heavy Plan Years.
43
13.3.6 If payment of the minimum accrued benefit commences at a date other than Normal Retirement Date, or if the form of benefit is other than on Individual Life Annuity, the minimum accrued benefit shall be the Actuarial Equivalent of the minimum accrued benefit expressed as an Individual Life Annuity commencing at Normal Retirement Date.
13.3.7 To the extent required to be nonforfeitable under Section 13.4, the minimum accrued benefit under this Section 13.3 may not be forfeited under Code Section 411(a)(3)(B) or Code Section 411(a)(3)(D).
13.3.8 In determining Years of Service, any service shall be disregarded to the extent such service occurs during a Plan Year when the Plan benefits (within the meaning of Code Section 410(b)) no Key Employee or Former Key Employee.
13.4 | Vesting Requirement for Top Heavy Plan |
13.4.1 Notwithstanding any other provision of this Plan, for any Top Heavy Plan Year, the vested portion of any Participants accrued benefit shall be determined on the basis of the Participants number of Years of Vesting Service according to the following schedule:
Years of Service |
Percentage Vested | ||
1 - 2 |
0 | % | |
3 |
100 | % |
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy Plan, the Company may, in its sole discretion, elect to continue to apply this vesting schedule in determining the vested portion of any Participants accrued benefit, or revert to the vesting schedule in effect before this Plan became a Top Heavy Plan. Any such reversion shall be treated as a Plan amendment.
13.4.2 The computation of the nonforfeitable percentage of the Participants interest in the Plan shall not be reduced as the result of any direct or indirect amendment to this Plan. In the event that this Plan is amended to change or modify any vesting schedule, a Participant with at least 3 Years of Service as of the expiration date of the election period may elect to have the Participants nonforfeitable percentage computed under the Plan without regard to such amendment. If a Participant fails to make such election, then such Participant shall be subject to the new vesting schedule. The Participants election period shall commence on the adoption date of the amendment and shall end 60 days after the latest of:
(a) | the adoption date of the amendment, |
(b) | the effective date of the amendment, or |
44
(c) | the date the Participant receives written notice of the amendment from the Company. |
IN WITNESS WHEREOF, the undersigned and duly authorized Committee member has executed the Plan, this 6 th day of June, 2008, to be effective as of June 30, 2008, except as otherwise expressly provided herein.
JOHN BEAN TECHNOLOGIES CORPORATION | ||
By: |
/s/ Jeffrey A. Carr |
|
Member, Employee Welfare Benefits Plan Committee |
45
SUPPLEMENTAL 1
JETWAY SYSTEMS DIVISION, OGDEN, UTAH
1-1 | Eligible Employees |
The terms of this Supplement apply only to Eligible Employees of the FMC Corporation Jetway Systems Division or, effective, June 30, 2008, the JBT Corporation Jetway Systems Division who work in Ogden, Utah and are covered by the Collective Bargaining Agreement between the Company and the United Steelworkers of America Local Union 6162.
1-2 | Actuarial Equivalent |
Actuarial Equivalent , other than for purposes of Section 12.8 of the Plan, shall be determined based on the UP-1983 Group Annuity Mortality table for males set back 1 year for the Participant and 5 years for the Beneficiary, and 8% interest compounded annually.
1-3 | Average Monthly Earnings |
Average Monthly Earnings means the average for each Participant determined by dividing total Considered Compensation during the Participants 9-year Period of Service ending on his retirement or Severance from Service Date by 108. The denominator of 108 shall be reduced to the number of months actually worked if the Participant was not employed by the Company during that entire 9-year period. The denominator shall also be reduced in the case of Disability Retirement by the number of months without pay because of Disability in the last 6 months before retirement, and in all other cases shall be reduced by the greater of the number of months without pay (a) in excess of 3, during each absence, or (b) in excess of 12.
1-4 | Considered Compensation |
Considered Compensation means the Base Pay paid to an individual by the Company and/or any Affiliate during a Plan Year while that individual is a Participant. Base Pay means a Participants regular hourly wage and does not include bonuses, amounts paid in lieu of regular vacation, overtime or other premium pay, deferred compensation, stock options, and other amounts that receive special tax treatment.
The annual amount of Considered Compensation taken into account for a Participant must not exceed $160,000 (as adjusted by the Internal Revenue Service for cost-of living increases in accordance with Code Section 40l (a)(17)(B)); provided, however in determining benefit accruals after December 31, 2001, the annual amount of Considered Compensation taken into account for a Participant must not exceed $200,000 (as adjusted by the Internal Revenue Service, for cost of living increases in accordance with Code Section 401(a)(17)(B)). For the purposes of determining benefit accruals in any Plan Year after December 31, 2001, Considered Compensation for any prior Plan Year shall be subject to the applicable limit on Earnings for that prior year.
46
1-5 | Normal Retirement Date |
Normal Retirement Date means the first day of the month coinciding with or next following the Participants 65th birthday.
1-6 | Normal Retirement Benefit |
A Participants monthly Normal Retirement Benefit shall be the greater of (a) or (b):
(a) | 1.025% of Average Monthly Earnings multiplied by the Participants Years of Credited Service. |
(b) | The product of the benefit rate provided below in effect at the termination of the Participants Years of Credited Service multiplied by the |
Participants Years of Credited Service.
Termination Date |
Benefit Rate | ||
On or after September 1, 1998 but before August 31, 1999 |
$ | 21.50 | |
On or after September 1, 1999 |
$ | 22.50 |
Effective October 8, 2000, each Participants monthly Normal Retirement Benefit accrued under the formula described above shall be calculated and maintained as a frozen benefit (Prior Formula Accrued Benefit). For periods beginning on or after October 9, 2000, a Participants Normal Retirement Benefit shall be equal to the greater of the prior Formula Accrued Benefit, if any, and the product of the benefit rate of $30.00 multiplied by the Participants Years of Credited Service.
1-7 | Early Retirement Date |
Early Retirement Date means the later of the Participants 55th birthday and the date the Participant acquires 15 (effective September 1, 2005, 10) years of Credited Service.
1-8 | Early Retirement Reduction Factor |
If a Participants Early Retirement Benefit commences prior to age 65, the Participants Early Retirement Benefit shall be paid according to the reduced percentage provided below.
47
Age Benefits Begin |
Reduced Percentage | ||
65 |
00.00 | % | |
64 |
93.00 | % | |
63 |
86.53 | % | |
62 |
80.60 | % | |
61 |
75.20 | % | |
60 |
70.33 | % | |
59 |
66.00 | % | |
58 |
62.20 | % | |
57 |
58.93 | % | |
56 |
56.20 | % | |
55 |
54.00 | % |
Notwithstanding the preceding to the contrary, effective September 1, 2005, the following reduced percentages shall apply:
Age Benefits Begin |
Reduced Percentage | ||
65 |
0 | % | |
64 |
96 | % | |
63 |
92 | % | |
62 |
88 | % | |
61 |
84 | % | |
60 |
80 | % | |
59 |
75 | % | |
58 |
70 | % | |
57 |
65 | % | |
56 |
60 | % | |
55 |
55 | % |
1-9 | Disability Retirement |
A Participant who has completed 10 Years of Vesting Service, has a Total and Permanent Disability for a period of at least 26 weeks and who retires due to Total and Permanent Disability shall be eligible for a Disability Retirement Benefit.
Total and Permanent Disability means a total and permanent mental or physical disability of a Participant and confirmed by medical examination of a physician selected by the Company or the Participant, and confirmed by medical examination of a physician selected by the other party, whether or not such disability arose out of or during the course of employment, of a nature preventing such Participant from engaging in any occupation for compensation for the balance of the Participants life.
1-10 | Disability Retirement Benefit |
If the Participant is eligible for unreduced Social Security benefits, the Participants Disability Retirement Benefit shall be determined pursuant to Section 3.1.2, without reduction for early commencement, but shall be no less than $100 per month. If
48
the Participant is not eligible for unreduced Social Security benefits, the Participants Disability Retirement Benefit shall be determined according to the preceding sentence, then increased by $100 per month.
1-11 | Normal Form of Benefit |
A Participants benefit shall be paid in the form of a 50% Joint and Survivors Annuity, with the Participants spouse as joint annuitant if the Participant is married on the Annuity Starting Date, and in the form of an Individual Life Annuity if the Participant is not married on the Annuity Starting Date, unless the Participant elects, in accordance with Section 6.3, not to receive payment in the normal form and to receive payment in one of the permitted optional forms.
1-12 | Optional Forms of Benefit |
A Participant may elect, in accordance with Section 6.3, to receive the Participants benefits in one of the following optional forms:
(a) | an Individual Life Annuity; or |
(b) | a 50% or 100% joint and survivor annuity, with the Participants Beneficiary as the survivor. |
1-13 | Surviving Spouses Benefit |
The surviving spouses benefit shall be equal to 60% of 90% of the amount the Participant would have received if the Participant had retired on the day before death and commenced payments on the Participants earliest early retirement date, unless the Participant waived such benefit with spousal consent, in which case the surviving spouses benefit shall be eliminated.
Payment of the survivors benefit shall commence on the first day of the month next following the later of the Participants 55 th birthday or the Participants death, unless the Participants spouse elects to commence payment of benefits as of the first day of any subsequent month, but not later than the Participants Normal Retirement Date.
49
SUPPLEMENTAL 2
PACKAGING MACHINERY DIVISION, GREEN BAY, WISCONSIN
2-1 | Eligible Employees |
The terms of this Supplement apply only to individuals participating in the FMC Corporation Retirement Plan for Hourly Employees - Packaging Machinery Division, Green Bay, Wisconsin (Prior Plan) on the Freeze Date who had not yet received a full distribution of their benefit under such Prior Plan, the FMC Plan, or the FMCTI Plan as of the Effective Date (Participant).
2-2 | Freeze Date |
Effective March 22, 1995 (Freeze Date) the union group covering the Participants was decertified and the Prior Plan was frozen. No new participants entered the Prior Plan after the Freeze Date, and no benefits accrued under the Prior Plan after the Freeze Date.
2-3 | Actuarial Equivalent |
Actuarial Equivalent , other than for purposes of Section 12.8 of the Plan, shall be determined based on the 1971 Group Annuity Table (weighted 95% male, 5% female) and 6% interest compounded annually.
2-4 | Normal Retirement Date |
Normal Retirement Date means the first day of the month coinciding with or next following the Participants 65th birthday.
2-5 | Normal Retirement Benefit |
A Participants monthly Normal Retirement Benefit shall be the Participants monthly normal retirement benefit accrued under the Prior Plan as of the Freeze Date.
2-6 | Early Retirement Date |
Early Retirement Date means the later of the Participants 55th birthday and the date the Participant acquires 15 Years of Credited Service.
2-7 | Early Retirement Reduction Factor |
The Participants Early Retirement Benefit shall be reduced by 4% per year for each year between the Participants Annuity Starting Date and the Participants 65th birthday.
2-8 | Surviving Spouses Benefit |
The amount of the surviving spouses benefit shall be determined pursuant to this Supplement as if the Participant had retired on the later of the Participants 55th birthday or the date of the Participants death. Payment of the survivors benefit shall commence
50
on the first day of the month next following the later of the Participants 55th birthday or the Participants death, unless the Participants spouse elects to commence payment of benefits as of the first day of any subsequent month, but not later than the Participants Normal Retirement Date.
2-9 | Participants who were Salaried Employees |
Participants who prior to the Freeze Date became salaried employees and as a result became covered under the FMC Corporation Salaried Employees Retirement Plan (Salaried Plan), or its predecessor plan, were given certain distribution rights as described in Section 6.2.5 of the Salaried Plan that applied to benefits payable under the Plan and the Salaried Plan.
51
SUPPLEMENTAL 3
SMITH METER PLANT, ERIE, PENNSYLVANIA
3-1 | Eligible Employees |
The terms of this Supplement apply only to Eligible Employees of the FMC Corporation Smith Meter Plan who work in Erie, Pennsylvania and who are covered by the Collective Bargaining Agreement between the Company and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America Local No. 714.
3-2 | Actuarial Equivalent |
Actuarial Equivalent , other than for purposes of Section 12.8 of the Plan, shall be determined based on the UP-1984 Mortality Table (for nondisabled participants) and the 1965 Railroad Board Total Disabled Annuitants Mortality Table - Ultimate Rates (for disabled participants) and the interest rate used by the Pension Benefit Guaranty Corporation for lump sum distributions occurring on the first day of the Plan Year that contains the Annuity Starting Date.
3-3 | Service |
Break-In-Service occurs when a nonvested Employee does not accrue at least 170 Hours of Service during a calendar year. Any such break shall cause a forfeiture of prior Years of Vesting Service if the total years of consecutive Breaks-in-Service equals or exceeds the greater of five or the number of Years of Vesting Service.
If the number of consecutive Breaks-in-Service do not operate to cause a forfeiture of prior Years of Vesting Service, the prior Years of Vesting Service shall be reinstated after the Employee is again credited with 1/10th Year of Vesting Service. Further, if an Employee becomes eligible for a Disability Retirement Benefit and recovers prior to his 65th birthday, he shall retain his Years of Vesting Service upon return to active employment with the Company within 30 days after Disability Retirement Benefits cease.
Hour of Service means:
(a) | Each hour during an applicable computation period for which an Employee is directly or indirectly paid or entitled to payment as an Employee for services performed, including back pay, irrespective of mitigation of damages, or such hours directly or indirectly paid for reasons other than the performance of duties during the applicable computation period, such as vacation, holidays, paid sick or funeral leaves, and similar paid periods of nonworking time, or periods of absence because of jury duty, military leaves and other Company approved leaves of absence. The number of Hours of Service to be credited to an Employee as a result of payment for other than duties performed shall be computed in accordance with such Employees hourly rate of pay during that computation period for which payment is made. |
52
(b) | Such Hours of Service which are paid for other than at the time they accrued shall be deemed accumulated for all purposes herein during the period for which they accrued irrespective of when payment is made. |
(c) | The number of Hours of Service to be credited to an Employee for any computation period shall be governed by Sections 2530.200b-2(b) and (c) of the Labor Department Regulations relating to ERISA. |
(d) | Anything contained herein to the contrary notwithstanding and solely for purposes of determining whether a Break-in-Service has occurred for purposes of Years of Vesting Service, an Employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such Employee but for such absence, or in any case in which Hours of Service cannot be determined, 8 Hours of Service per day of such absence. The total number of Hours of Service credited under this paragraph for any single continuous period shall not exceed 501 hours. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence, (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited in the Plan Year in which the absence begins if such crediting is required to prevent a Break-in-Service in such Plan Year, or (in all other cases) in the following Plan Year. |
One Year Break-In-Service means any calendar year during which an Employee completes less than 170 Hours of Service.
Year of Credited Service means (A) the Employees Years of Credited Service prior to the Effective Date, and (B) the Employees Years of Vesting Service while the Employee is an Eligible Employee and after the Employee becomes a Participant. Notwithstanding the foregoing, benefit payments under this Plan for periods of service credited under any other retirement plans sponsored by the Company or an Affiliate as certified by the Administrator shall be reduced (but not below zero) by the amount of any benefit payments under such other plan for the same period of time.
Year of Vesting Service means (A) the Employees Years of Service prior to the Effective Date, and (B) the total number of calendar years in which the Employee is credited with 1000 or more Hours of Service, or, subject to the provisions of this
53
Supplement on Break-In-Service, a proportionate credit for 1/10th of a Year of Vesting Service for each 100 Hours of Service credited during such calendar year if the Employee is credited with less than 1000 Hours of Service during such calendar year.
3-4 | Normal Retirement Date |
Normal Retirement Date means the earlier of (a) the first date the Participant has attained age 62 and completed 10 years of Vesting Service, or (b) the Participants 65th birthday.
3-5 | Normal Retirement Benefit |
A Participants monthly Normal Retirement Benefit shall be determined by multiplying the fixed rate provided below in effect on the date the Participants Years of Credited Service terminate, multiplied by the Participants Years of Credited Service:
Termination Date |
Benefit Rate | ||
On or after January 1, 1999 but prior to January 1, 2001 |
$ | 25.00 | |
On or after January 1, 2001 But prior to January 1, 2002 |
$ | 26.00 | |
On or after January 1, 2002 but prior to January 1, 2003 |
$ | 27.00 | |
On or after January 1, 2003 but prior to January 1, 2004 |
$ | 28.00 | |
On or after January 1, 2004 but prior to January 1, 2005 |
$ | 29.00 | |
On of after January 1, 2005 but prior to January 1, 2006 |
$ | 29.00 | |
On or after January 1, 2006 but prior to January 1, 2007 |
$ | 30.00 | |
On or after January 1, 2007 but prior to January 1, 2008 |
$ | 31.00 | |
On or after January 1, 2008 but prior to January 1, 2009 |
$ | 32.00 | |
On or after January 1, 2009 but prior to January 1, 2010 |
$ | 33.00 | |
On or after January 1, 2010 |
$ | 33.00 |
54
Each Participant whose Years of Credited Service terminates after January 1, 2001, but prior to January 1, 2004 as a result of Normal Retirement, Early Retirement, Disability Retirement or Deferred Retirement, but not including a Participant whose employment terminates prior to Early Retirement eligibility, shall have their Normal, Early, Disability or Deferred Retirement benefit, as applicable, recalculated effective January 1, 2004 using a monthly benefit rate of $29.00, provided that any such recalculation shall not increase the amount of Normal, Early, Disability or Deferred Retirement benefit, as applicable, already paid to such Participant, but shall be applied solely to any Normal, Early, Disability or Deferred Retirement benefit, as applicable, payable after January 1, 2004. A Participants monthly Normal, Early, Disability or Deferred Retirement benefit, as applicable shall be increased by $20.00 per month after the Participant attains age 65, and by an additional $20.00 per month after the Participants spouse attains age 65.
Effective January 1, 2009, each Participant whose Years of Credited Service terminates on or after April 3, 2006, but prior to January 1, 2009 as a result of Normal Retirement, Early Retirement, Disability Retirement or Deferred Retirement, but not including a Participant whose employment terminates prior to Early Retirement eligibility, shall have their Normal, Early, Disability or Deferred Retirement benefit, as applicable, recalculated effective on the Participants retirement anniversary date occurring in 2009 using a monthly benefit rate of $33.00, provided that any such recalculation shall not increase the amount of Normal, Early, Disability or Deferred Retirement benefit, as applicable, already paid to such Participant, but shall be applied solely to any Normal, Early, Disability or Deferred Retirement benefit, as applicable, payable after January 1, 2009.
3-6 | Early Retirement Date |
Early Retirement Date means the later of the Participants 57th birthday and the date the Participant acquires 10 Years of Credited Service.
3-7 | Early Retirement Reduction Factor |
If a Participants Early Retirement Benefit commences prior to age 62, the Participants Early Retirement Benefit shall be reduced by a percentage equal to 4% multiplied by the number of years (prorated for any fraction of a year) from the Annuity Starting Date to the first day of the month following the Participants 62nd birthday. The same reduction factor shall apply to a terminated Participant who is not Early Retirement eligible if the Participant has 10 Years of Vesting Service.
3-8 | Disability Retirement |
A Participant who has completed 10 Years of Credited Service and suffers a Total and Permanent Disability while he is an Employee and before he has attained age 62 shall be eligible for a Disability Retirement Benefit.
Total and Permanent Disability means total disability by bodily injury or disease, physical or mental, or both, sufficient to prevent the Employee from engaging in any regular occupation or employment for remuneration or profit, which disability will be
55
permanent and continuous during the remainder of the Employees life; provided, however, that no Employee shall be deemed to be totally and permanently disabled for the purposes of the Plan if his incapacity consists of chronic alcoholism or addiction to narcotics, or if such incapacity was contracted, suffered or incurred while he was engaged in a felonious enterprise or resulted therefrom or resulted from an intentionally self-inflicted injury or resulted from service in the armed forces of any country. The existence of total and permanent disability shall be determined by the Committee on the basis of medical evidence satisfactory to it.
3-9 | Disability Retirement Benefit |
The Participants Disability Retirement Benefit shall be determined by multiplying the fixed rate provided below in effect on the date his Total and Permanent Disability commences, multiplied by the Participants Years of Credited Service as of such date:
Termination Date |
Benefit Rate | ||
On or after January 1, 1999 and prior to January 1, 2001 |
$ | 50.00 | |
On or after January 1, 2001 and prior to January 1, 2002 |
$ | 52.00 | |
On or after January 1, 2002 and prior to January 1, 2003 |
$ | 54.00 | |
On or after January 1, 2003 and prior to January 1, 2004 |
$ | 56.00 | |
On or after January 1, 2004 and prior to January 1, 2005 |
$ | 58.00 | |
On or after January 1, 2005 |
$ | 58.00 |
All disability retirement benefits shall be reduced by the amount of (a) workers compensation benefits; and (b) any present or future payments on account of injury, disease or disability under the Federal Social Security Act, as amended, or any other Federal or State law under which the Company contributes through taxes or otherwise to benefits for injury, disease or disability of Employees whether occupational or non-occupational; provided however, that the provisions of this Section 3-9 shall not operate to reduce the disability retirement benefits to less than the retirement benefits to which the Participant would have been entitled had the Participant reached the Participants 62nd birthday at time of disability retirement.
3-10 | Normal Form of Benefit |
The normal form of benefit shall be a 50% Joint and Survivors Annuity with the Participants spouse as joint annuitant if he is married on the Annuity Starting Date, and an Individual Life Annuity if he is not married on the Annuity Starting Date.
3-11 | Optional Forms of Benefit |
A Participant who is eligible for an Early or Normal Retirement Benefit may, with spousal consent and in accordance with Section 6.3, waive the normal form of benefit and elect one of the optional forms which shall be the Actuarial Equivalent of the normal form of benefit.
(a) | an Individual Life Annuity, if the Participant is married; |
56
(b) | a 100% or 66 - 2/3% Joint and Survivors Annuity; or |
(c) | a joint and survivors annuity pursuant to which, upon the Participants death 50% of the amount paid to the Participant (reduced by 1% for each full year exceeding 10 by which the spouse is younger than the Participant) is paid to the Participants spouse until the earlier of (i) the spouses death; (ii) remarriage; or (iii) a total of 120 payments have been made to the Participant and spouse. No benefit shall be paid to the Participants spouse if the Participant and spouse were married less than 12 months at the time of the Participants death. |
3-12 | Surviving Spouses Benefit |
If the Participant had attained Early Retirement Date, the amount of the surviving spouses benefit shall be 50% of the benefit the Participant would have received if the Participant had elected an Individual Life Annuity commencing on the day before the Participants death.
If the Participant had not attained Early Retirement Date, the amount of the surviving spouses benefit shall be equal to the survivors benefit under the 50% Joint and Survivors Annuity the Participant would have received if the Participant had elected such annuity commencing at age 57 or the day before the Participants death, if later.
Monthly surviving spouse benefits payable under this Section 3-12 shall be reduced by 1% for each full year exceeding 10 years by which the surviving spouse is younger than the Participant.
57
SUPPLEMENTAL 4
FOOD PROCESSING MACHINERY DIVISION, HOOPESTON, ILLINOIS
4-1 | Eligible Employees |
The terms of this Supplement apply only to Eligible Employees of the FMC Corporation Food Processing Machinery Division who work in Hoopeston, Illinois and who are covered by the Collective Bargaining Agreement between the Company and the Allied Industrial Workers of America, AFL-CIO Local 985.
4-2 | Actuarial Equivalent |
Actuarial Equivalent , other than for purposes of Section 12.8 of the Plan, shall be determined based on the 1971 Group Annuity Table (weighted 95% male, 5% female) and 6% interest compounded annually.
4-3 | Commencement of Participation |
An Eligible Employee shall become a Participant as of the date the Participant completes 1 year of Credited Service.
4-4 | Normal Retirement Date |
Normal Retirement Date means the first day of the month coinciding with or next following the Participants 65th birthday.
4-5 | Normal Retirement Benefit |
A Participants monthly Normal Retirement Benefit shall be determined by multiplying the fixed rate provided below in effect on the date the Participants Years of Credited Service terminate, multiplied by his Years of Credited Service:
Termination Date |
Benefit Rate | ||
On or after December 1, 1998 |
$ | 26.00 | |
On or after December 1, 1999 |
$ | 30.00 | |
On or after December 1, 2002 |
$ | 33.00 |
4-6 | Early Retirement Reduction Factor |
If a Participants Early Retirement Benefit commences prior to age 65, the Participants Early Retirement Benefit shall be reduced by 4% for each full year between the Annuity Starting Date and the Participants 65th birthday.
4-7 | Optional Form of Benefits |
(a) | A married Participant may elect, with spousal consent and in accordance with Section 6.3, to receive the Participants benefits in one of the following forms: |
(i) | an Individual Life Annuity; |
58
(ii) | a 50% joint and survivors annuity with the Participants Beneficiary as survivor; or |
(iii) | a 100% joint and survivors annuity with the Participants Beneficiary as survivor. |
(b) | An unmarried Participant who is eligible for Normal Retirement, Early Retirement or Disability Retirement Benefits may elect, in accordance with Section 6.3, to receive the Participants benefits in one of the following forms: |
(i) | a 50% joint and survivors annuity with the Participants Beneficiary as survivor; or |
(ii) | a 100% joint and survivors annuity with the Participants Beneficiary as survivor. |
4-8 | Disability Retirement |
A Participant who has completed 15 Years of Credited Service as of the date Total and Permanent Disability has endured for a period of 13 weeks shall be eligible for a Disability Retirement Benefit.
Total and Permanent Disability means a total and permanent mental or physical disability of a Participant and confirmed by medical examination of a physician selected by the Company or the Participant, and confirmed by medical examination of a physician selected by the other party, whether or not such disability arose out of or during the course of employment, of a nature preventing such Participant from engaging in any occupation for compensation for the balance of the Participants life.
4-9 | Disability Retirement Benefit |
The Participants Disability Retirement Benefit shall be determined pursuant to Section 3.1.2, based on the Participants Years of Credited Service to the date of the Participants Disability Retirement.
The Disability Retirement payment shall commence with the first day of the month immediately following the expiration of the 13-week period described in Section 4-8 of this Supplement or medical certification of disability, whichever shall be later.
Such payment shall also take into account and have deducted therefrom any benefits paid or payable, now or in the future, to the Participant by way of (a) Workers Compensation payments; (b) public pension payments (except Social Security Disability and Military pension payments); and (c) 1/2 of any accident or health insurance benefit payment as may be provided by any program as now or in the future made available by the Company or placed in effect by any governmental authority for the benefit of Participants; however, any lump sum award under (a) and (c) above shall not be deducted. Any Participant who shall receive a Disability Retirement Benefit shall be subject to reexamination by a physician of the Company at any time the Company may so
59
request and if, in the opinion of the Company, the Total and Permanent Disability of the Participant shall no longer continue to exist, such Participants right to a continuance of Disability Retirement Benefit payment shall cease. Failure or refusal of a Participant to submit to medical examination as requested by the Company shall be cause of cancellation of the Disability Retirement Benefit. Such disabled Participant shall, however, be entitled to Early or Normal Retirement benefit payments upon qualification by the Participant under the requirements set forth in Section 3.1 and Section 3.2. In no event, however, shall any Participant be entitled to receive both a Disability Retirement Benefit and an Early or Normal Retirement Benefit, it being intended that there should be no duplication of retirement benefits.
60
SUPPLEMENTAL 5
AIRLINE EQUIPMENT DIVISION, SAN JOSE, CALIFORNIA
5-1 | Eligible Employees |
The terms of this Supplement apply only to individuals participating in the FMC Corporation Retirement Plan for San Jose Commercial Segment Hourly Employees (Prior Plan) on the Freeze Date who were a part of the Airline Equipment Division and who have not yet received a full distribution of their benefit under such Prior Plan as of the Effective Date (Participant).
5-2 | Freeze Date |
Effective July 28, 1982 (Freeze Date), the Participants had their benefits in the Prior Plan frozen as a result of the closure of the Airline Equipment Division in San Jose, California. No new Participants entered the Prior Plan after the Freeze Date, and no benefits accrued to Participants under the Prior Plan after the Freeze Date.
5-3 | Actuarial Equivalent |
Actuarial Equivalent, other than for purposes of Section 12.8 of the Plan, shall be determined based on the 1951 Group Annuity Mortality Table and 3.5% interest compounded annually.
5-4 | Normal Retirement Date |
Normal Retirement Date means the first day of the month coinciding with or next following the Participants 65th birthday.
5-5 | Normal Retirement Benefit |
A Participants monthly Normal Retirement Benefit shall be the Participants monthly normal retirement benefit accrued under the Prior Plan as of the Freeze Date.
5-6 | Early Retirement Date |
Early Retirement Date means the later of the Participants 55th birthday and the date the Participant acquires 10 Years of Vesting Service.
5-7 | Early Retirement Reduction Factor |
If a Participants Early Retirement Benefit commences prior to age 65, the Participants Early Retirement Benefit shall be reduced by 5/12 of 1% for each month between his Annuity Starting Date and the Participants 65th birthday.
5-8 | 5-8 Termination Benefits Reduction Factor |
If a Participants Termination Benefit commences prior to age 65, the Participants Termination Benefit shall be reduced to the Actuarial Equivalent of the Participants basic benefit in accordance with Tables A or B attached hereto.
61
Based on Age of Participant on Commencement of Early Retirement Benefit
MALE PARTICIPANT (Table A)
MONTHS | ||||||||||||||||||||||||||||||||||||
YEARS |
0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | ||||||||||||||||||||||||
55 |
44.74 | % | 45.01 | % | 45.28 | % | 45.56 | % | 45.83 | % | 46.10 | % | 46.37 | % | 46.64 | % | 46.91 | % | 47.19 | % | 47.46 | % | 47.73 | % | ||||||||||||
56 |
48.00 | 48.30 | 48.60 | 48.90 | 49.20 | 49.50 | 49.80 | 50.09 | 50.39 | 50.69 | 50.99 | 51.29 | ||||||||||||||||||||||||
57 |
51.59 | 51.92 | 52.25 | 52.58 | 52.91 | 53.24 | 53.57 | 53.91 | 54.24 | 54.57 | 54.90 | 55.23 | ||||||||||||||||||||||||
58 |
55.56 | 55.93 | 56.30 | 56.66 | 57.03 | 57.40 | 57.77 | 58.13 | 58.50 | 58.87 | 59.24 | 59.60 | ||||||||||||||||||||||||
59 |
59.97 | 60.38 | 60.79 | 61.19 | 61.60 | 62.01 | 62.42 | 62.83 | 63.24 | 63.64 | 64.05 | 64.46 | ||||||||||||||||||||||||
60 |
64.87 | 65.33 | 65.78 | 66.24 | 66.69 | 67.15 | 67.60 | 68.06 | 68.52 | 68.97 | 69.43 | 69.88 | ||||||||||||||||||||||||
61 |
70.34 | 70.85 | 71.36 | 71.88 | 72.39 | 72.90 | 73.41 | 73.92 | 74.43 | 74.95 | 75.46 | 75.97 | ||||||||||||||||||||||||
62 |
76.48 | 77.06 | 77.63 | 78.21 | 78.78 | 79.36 | 79.93 | 80.51 | 81.08 | 81.66 | 82.23 | 82.81 | ||||||||||||||||||||||||
63 |
83.38 | 84.03 | 84.68 | 85.32 | 85.97 | 86.62 | 87.27 | 87.92 | 88.57 | 89.21 | 89.86 | 90.51 | ||||||||||||||||||||||||
64 |
91.16 | 91.90 | 92.63 | 93.37 | 94.11 | 94.84 | 95.58 | 96.32 | 97.05 | 97.79 | 98.53 | 99.26 |
FEMALE PARTICIPANT (Table B)
MONTHS | ||||||||||||||||||||||||||||||||||||
YEARS |
0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | ||||||||||||||||||||||||
55 |
49.50 | % | 49.76 | % | 50.03 | % | 50.29 | % | 50.56 | % | 50.82 | % | 51.09 | % | 51.35 | % | 51.61 | % | 51.88 | % | 52.14 | % | 52.41 | % | ||||||||||||
56 |
52.67 | 52.96 | 53.25 | 53.54 | 53.83 | 54.12 | 54.41 | 54.69 | 54.98 | 55.27 | 55.56 | 55.85 | ||||||||||||||||||||||||
57 |
56.14 | 56.46 | 56.77 | 57.09 | 57.40 | 57.72 | 58.03 | 58.35 | 58.66 | 58.98 | 59.29 | 59.61 | ||||||||||||||||||||||||
58 |
59.92 | 60.27 | 60.61 | 60.96 | 61.31 | 61.65 | 62.00 | 62.35 | 62.69 | 63.04 | 63.39 | 63.73 | ||||||||||||||||||||||||
59 |
64.08 | 64.46 | 64.84 | 65.22 | 65.60 | 65.98 | 66.36 | 66.74 | 67.12 | 67.50 | 67.88 | 68.26 | ||||||||||||||||||||||||
60 |
68.64 | 69.06 | 69.48 | 69.90 | 70.32 | 70.74 | 71.16 | 71.57 | 71.99 | 72.41 | 72.83 | 73.25 | ||||||||||||||||||||||||
61 |
73.67 | 74.13 | 74.60 | 75.06 | 75.53 | 75.99 | 76.46 | 76.92 | 77.38 | 77.85 | 78.31 | 78.78 | ||||||||||||||||||||||||
62 |
79.24 | 79.76 | 80.27 | 80.79 | 81.30 | 81.82 | 82.33 | 82.85 | 83.36 | 83.88 | 84.39 | 84.91 | ||||||||||||||||||||||||
63 |
85.42 | 85.99 | 86.57 | 87.14 | 87.72 | 88.29 | 88.87 | 89.44 | 90.01 | 90.59 | 91.16 | 91.74 | ||||||||||||||||||||||||
64 |
92.31 | 92.95 | 93.59 | 94.23 | 94.87 | 95.51 | 96.15 | 96.80 | 97.44 | 98.08 | 98.72 | 99.36 |
62
SUPPLEMENTAL 6
FOOD PROCESSING MACHINERY DIVISION, SAN JOSE, CALIFORNIA
6-1 | Eligible Employees |
The terms of this Supplement apply only to individuals participating in the FMC Corporation Retirement Plan for San Jose Commercial Segment Hourly Employees (Prior Plan) on the Freeze Date who were a part of the Food Processing Division and who have not yet received a full distribution of their benefit under such Prior Plan as of the Effective Date (Participant).
6-2 | Freeze Date |
Effective December 31, 1980 (Freeze Date), the Participants had their benefits in the Prior Plan frozen. No new Participants entered the Prior Plan after the Freeze Date, and no benefits accrued to any Participants under the Prior Plan after the Freeze Date.
6-3 | Actuarial Equivalent |
Actuarial Equivalent , other than for purposes of Section 12.8 of the Plan, shall be determined based on the 1951 Group Annuity Mortality Table and 3.5% interest compounded annually.
6-4 | Normal Retirement Date |
Normal Retirement D ate means the first day of the month coinciding with or next following the Participants 65th birthday.
6-5 | Normal Retirement Benefit |
A Participants monthly Normal Retirement Benefit shall be the Participants monthly normal retirement benefit accrued under the Prior Plan as of the Freeze Date.
6-6 | Early Retirement Date |
Early Retirement Date means the later of the Participants 55th birthday and the date the Participant acquires 15 Years of Vesting Service.
6-7 | Early Retirement Reduction Factor |
If a Participants Early Retirement Benefit commences prior to age 65, the Participants Early Retirement Benefit shall be reduced to the Actuarial Equivalent of the Participants Normal Retirement Benefit in accordance with Tables A or B attached hereto.
6-8 | Termination Benefits Reduction Factor |
63
Based on Age of Participant on Commencement of Early Retirement Benefit
MALE PARTICIPANT (Table A)
MONTHS | ||||||||||||||||||||||||||||||||||||
YEARS |
0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | ||||||||||||||||||||||||
55 |
44.74 | % | 45.01 | % | 45.28 | % | 45.56 | % | 45.83 | % | 46.10 | % | 46.37 | % | 46.64 | % | 46.91 | % | 47.19 | % | 47.46 | % | 47.73 | % | ||||||||||||
56 |
48.00 | 48.30 | 48.60 | 48.90 | 49.20 | 49.50 | 49.80 | 50.09 | 50.39 | 50.69 | 50.99 | 51.29 | ||||||||||||||||||||||||
57 |
51.59 | 51.92 | 52.25 | 52.58 | 52.91 | 53.24 | 53.57 | 53.91 | 54.24 | 54.57 | 54.90 | 55.23 | ||||||||||||||||||||||||
58 |
55.56 | 55.93 | 56.30 | 56.66 | 57.03 | 57.40 | 57.77 | 58.13 | 58.50 | 58.87 | 59.24 | 59.60 | ||||||||||||||||||||||||
59 |
59.97 | 60.38 | 60.79 | 61.19 | 61.60 | 62.01 | 62.42 | 62.83 | 63.24 | 63.64 | 64.05 | 64.46 | ||||||||||||||||||||||||
60 |
64.87 | 65.33 | 65.78 | 66.24 | 66.69 | 67.15 | 67.60 | 68.06 | 68.52 | 68.97 | 69.43 | 69.88 | ||||||||||||||||||||||||
61 |
70.34 | 70.85 | 71.36 | 71.88 | 72.39 | 72.90 | 73.41 | 73.92 | 74.43 | 74.95 | 75.46 | 75.97 | ||||||||||||||||||||||||
62 |
76.48 | 77.06 | 77.63 | 78.21 | 78.78 | 79.36 | 79.93 | 80.51 | 81.08 | 81.66 | 82.23 | 82.81 | ||||||||||||||||||||||||
63 |
83.38 | 84.03 | 84.68 | 85.32 | 85.97 | 86.62 | 87.27 | 87.92 | 88.57 | 89.21 | 89.86 | 90.51 | ||||||||||||||||||||||||
64 |
91.16 | 91.90 | 92.63 | 93.37 | 94.11 | 94.84 | 95.58 | 96.32 | 97.05 | 97.79 | 98.53 | 99.26 |
FEMALE PARTICIPANT (Table B)
MONTHS | ||||||||||||||||||||||||||||||||||||
YEARS |
0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | ||||||||||||||||||||||||
55 |
49.50 | % | 49.76 | % | 50.03 | % | 50.29 | % | 50.56 | % | 50.82 | % | 51.09 | % | 51.35 | % | 51.61 | % | 51.88 | % | 52.14 | % | 52.41 | % | ||||||||||||
56 |
52.67 | 52.96 | 53.25 | 53.54 | 53.83 | 54.12 | 54.41 | 54.69 | 54.98 | 55.27 | 55.56 | 55.85 | ||||||||||||||||||||||||
57 |
56.14 | 56.46 | 56.77 | 57.09 | 57.40 | 57.72 | 58.03 | 58.35 | 58.66 | 58.98 | 59.29 | 59.61 | ||||||||||||||||||||||||
58 |
59.92 | 60.27 | 60.61 | 60.96 | 61.31 | 61.65 | 62.00 | 62.35 | 62.69 | 63.04 | 63.39 | 63.73 | ||||||||||||||||||||||||
59 |
64.08 | 64.46 | 64.84 | 65.22 | 65.60 | 65.98 | 66.36 | 66.74 | 67.12 | 67.50 | 67.88 | 68.26 | ||||||||||||||||||||||||
60 |
68.64 | 69.06 | 69.48 | 69.90 | 70.32 | 70.74 | 71.16 | 71.57 | 71.99 | 72.41 | 72.83 | 73.25 | ||||||||||||||||||||||||
61 |
73.67 | 74.13 | 74.60 | 75.06 | 75.53 | 75.99 | 76.46 | 76.92 | 77.38 | 77.85 | 78.31 | 78.78 | ||||||||||||||||||||||||
62 |
79.24 | 79.76 | 80.27 | 80.79 | 81.30 | 81.82 | 82.33 | 82.85 | 83.36 | 83.88 | 84.39 | 84.91 | ||||||||||||||||||||||||
63 |
85.42 | 85.99 | 86.57 | 87.14 | 87.72 | 88.29 | 88.87 | 89.44 | 90.01 | 90.59 | 91.16 | 91.74 | ||||||||||||||||||||||||
64 |
92.31 | 92.95 | 93.59 | 94.23 | 94.87 | 95.51 | 96.15 | 96.80 | 97.44 | 98.08 | 98.72 | 99.36 |
64
Exhibit 10.6
JOHN BEAN TECHNOLOGIES CORPORATION
SAVINGS AND INVESTMENT PLAN
(Adopted Effective as of June 1, 2008)
T ABLE OF C ONTENTS
P AGE | ||||||
ARTICLE I |
DEFINITIONS | 1 | ||||
Account |
1 | |||||
Account Balance |
1 | |||||
Administrator |
1 | |||||
Affiliate |
1 | |||||
After-Tax Contribution |
2 | |||||
After-Tax Contribution Account |
2 | |||||
After-Tax Contribution Election |
2 | |||||
Annuity Starting Date |
2 | |||||
Basic Contributions |
2 | |||||
Beneficiary |
2 | |||||
Break in Service |
3 | |||||
Catch-Up Contribution |
3 | |||||
Code |
3 | |||||
Committee |
3 | |||||
Company |
3 | |||||
Company Contributions |
3 | |||||
Company Contribution Account |
3 | |||||
Company Stock |
3 | |||||
Company Stock Fund |
3 | |||||
Compensation |
3 | |||||
Contingent Account |
4 | |||||
Direct Rollover |
4 | |||||
Disability |
5 | |||||
Distributee |
5 | |||||
Distribution Date |
5 | |||||
Effective Date |
5 | |||||
Eligible Employee |
5 | |||||
Eligible Retirement Plan |
5 | |||||
Eligible Rollover Distribution |
6 |
i.
T ABLE OF C ONTENTS
(CONTINUED)
P AGE | ||||||
Employee |
6 | |||||
Employment Commencement Date |
6 | |||||
ERISA |
6 | |||||
FMC |
6 | |||||
FMC Matched Plan |
6 | |||||
FMC Plans |
6 | |||||
FMC Stock |
6 | |||||
FMC Stock Fund |
6 | |||||
FMC Unmatched Plan |
7 | |||||
FMCTI |
7 | |||||
FMCTI Plan |
7 | |||||
Forfeiture |
7 | |||||
Funding Agent |
7 | |||||
Highly Compensated Employee |
7 | |||||
Hour of Service |
7 | |||||
Investment Fund |
8 | |||||
Leased Employee |
8 | |||||
Matched Participant |
8 | |||||
Nonhighly Compensated Employee |
8 | |||||
Participant |
8 | |||||
Participating Employer |
8 | |||||
Period of Separation |
8 | |||||
Plan |
9 | |||||
Plan Year |
9 | |||||
Pre-Tax Contribution |
9 | |||||
Pre-Tax Contribution Account |
9 | |||||
Pre-Tax Contribution Election |
9 | |||||
Required Beginning Date |
9 | |||||
Rollover Contribution |
9 | |||||
Rollover Contribution Account |
10 |
ii.
T ABLE OF C ONTENTS
(CONTINUED)
iii.
T ABLE OF C ONTENTS
(CONTINUED)
P AGE | ||||||
4.1 | Vesting in After-Tax, Pre-Tax and Rollover Contributions Accounts | 24 | ||||
4.2 | Vesting in Company Contribution and Contingent Accounts | 24 | ||||
4.3 | Forfeitures | 25 | ||||
ARTICLE V |
TIMING OF DISTRIBUTIONS TO PARTICIPANTS | 26 | ||||
5.1 | Separation from Service | 26 | ||||
5.2 | Start of Benefit Payments | 26 | ||||
5.3 | Distribution of Amounts held in a Participants Pre-Tax Contribution Account | 28 | ||||
ARTICLE VI |
DEATH BENEFITS | 32 | ||||
6.1 | Cashout of Small Amounts | 32 | ||||
6.2 | Medium of Distribution | 33 | ||||
6.3 | Forms of Benefit | 33 | ||||
6.4 | Change in Form, Timing or Medium of Benefit Payment | 33 | ||||
6.5 | Direct Rollover of Eligible Rollover Distributions | 33 | ||||
6.6 | In-service and Hardship Withdrawals | 34 | ||||
6.7 | Loans | 37 | ||||
ARTICLE VII |
DEATH BENEFIT | 38 | ||||
7.1 | Payment of Account Balance | 38 | ||||
7.2 | Failure to Name a Beneficiary | 38 | ||||
7.3 | Waiver of Spousal Beneficiary Rights | 39 | ||||
ARTICLE VIII |
SPECIAL FORMS OF BENEFIT AND DEATH BENEFIT TERMS FOR CERTAIN PARTICIPANTS PRIOR TO 2002 | 39 | ||||
8.1 | Applicability | 39 | ||||
8.2 | Forms of Benefit for Certain Transferred Participants | 40 | ||||
8.3 | Change in Form, Timing or Medium of Benefit Payment for Certain Transferred Participants | 41 | ||||
8.4 | Waiver of Normal Form of Benefit for Certain Transferred Participants | 41 | ||||
8.5 | Payment of Account Balances of Certain Transferred Participants Who Die Before Payment Begins | 43 | ||||
8.6 | Failure to Name a Beneficiary for Certain Transferred Participants | 44 |
iv.
T ABLE OF C ONTENTS
(CONTINUED)
P AGE | ||||||
8.7 | Waiver of Preretirement Survivor Annuity for Certain Transferred Participants | 44 | ||||
ARTICLE IX |
FIDUCIARIES | 45 | ||||
9.1 | Named Fiduciaries | 45 | ||||
9.2 | Employment of Advisers | 46 | ||||
9.3 | Multiple Fiduciary Capacities | 46 | ||||
9.4 | Payment of Expenses | 46 | ||||
9.5 | Indemnification | 46 | ||||
ARTICLE X |
PLAN ADMINISTRATION | 47 | ||||
10.1 | Powers, Duties and Responsibilities of the Administrator and the Committee | 47 | ||||
10.2 | Investment Powers, Duties and Responsibilities of the Administrator and the Committee | 47 | ||||
10.3 | Investment of Accounts | 48 | ||||
10.4 | Valuation of Accounts | 48 | ||||
10.5 | The Insurance Company | 48 | ||||
10.6 | Compensation | 48 | ||||
10.7 | Delegation of Responsibility | 49 | ||||
10.8 | Committee Members | 49 | ||||
ARTICLE XI |
APPOINTMENT OF TRUSTEE | 49 | ||||
ARTICLE XII |
PLAN AMENDMENT OR TERMINATION | 49 | ||||
12.1 | Plan Amendment or Termination | 49 | ||||
12.2 | Limitations on Plan Amendment | 50 | ||||
12.3 | Right to Terminate Plan or Discontinue Contributions | 50 | ||||
12.4 | Bankruptcy | 50 | ||||
ARTICLE XIII |
MISCELLANEOUS PROVISIONS | 50 | ||||
13.1 | Subsequent Changes | 50 | ||||
13.2 | Merger or Transfer of Assets | 51 | ||||
13.3 | Benefits Not Assignable | 51 | ||||
13.4 | Exclusive Benefit of Participants | 51 | ||||
13.5 | Benefits Payable to Minors, Incompetents and Others | 52 |
v.
T ABLE OF C ONTENTS
(CONTINUED)
vi.
INTRODUCTION
WHEREAS, the JOHN BEAN TECHNOLOGIES Corporation Savings and Investment Plan (Plan) is hereby established effective as of June 1, 2008, in connection with a spin-off of assets and liabilities from the FMC Technologies, Inc. Savings and Investment Plan (FMCTI Plan), which spin-off complies with the requirements of Code Section 414(l); and
WHEREAS, the FMCTI Plan was established effective as of September 28, 2001, in connection with a spin-off of assets and liabilities from the FMC Corporation Savings and Investment Plan and the FMC Corporation Savings and Investment Plan for Bargaining Unit Employees (FMCTI Plans); and
WHEREAS, the Company or its delegate may amend the Plan to meet applicable rules and regulations of the Internal Revenue Service and the United States Department of Labor, or, subject to the terms of any applicable collective bargaining agreements, for other reasons the Company or its delegate deems necessary or desirable; and
WHEREAS, the Plan is intended to be qualified under Code Section 401(a) and its associated trust is intended to be tax exempt under Code Section 501(a) and the Plan is intended also to meet the requirements of ERISA, and will be interpreted, wherever possible, to comply with the terms of the Code and ERISA;
NOW, THEREFORE, effective June 1, 2008, the Company hereby establishes the Plan to provide as follows:
ARTICLE I
Definitions
For purposes of the Plan, the following terms have the meanings described below.
Account means any Pre-Tax Contribution Account, After-Tax Contribution Account, Company Contribution Account, Contingent Account and Rollover Contribution Account established on behalf of a Participant.
Account Balance means the value of the Account maintained on behalf of a Participant, determined as of any Valuation Date.
Administrator means the Company. The Plan is administered by the Company through the Committee. The Administrator and the Committee have the responsibilities specified in Article X.
Affiliate means any corporation, partnership, or other entity that is:
(a) a member of a controlled group of corporations of which the Company is a member (as described in Code Section 414(b));
1.
(b) a member of any trade or business under common control with the Company (as described in Code Section 414(c));
(c) a member of an affiliated service group that includes the Company (as described in Code Section 414(m));
(d) an entity required to be aggregated with the Company pursuant to regulations promulgated under Code Section 414(o); or
(e) a leasing organization that provides Leased Employees to the Company or an Affiliate (as determined under paragraphs (a) through (d) above), unless: (i) the Leased Employees make up no more than 20% of the nonhighly compensated workforce of the Company and Affiliates (as determined under paragraphs (a) through (d) above); and (ii) the Leased Employees are covered by a plan described in Code Section 414(n)(5).
Leasing organization has the meaning ascribed to it in the definition of Leased Employee below.
For purposes of Section 3.7, the 80% thresholds of Code Sections 414(b) and (c) are deemed to be more than 50%, rather than at least 80%.
After-Tax Contribution means the amount a Participant contributes in accordance with Section 3.2. A Matched Participants After-Tax Contribution may be made up of Basic Contributions, Supplemental Contributions or both.
After-Tax Contribution Account means the Account established for a Participant pursuant to Section 3.6.2.
After-Tax Contribution Election means a Participants election to make After-Tax Contributions in accordance with Section 3.3.1.
Annuity Starting Date means the first day of the first period for which an amount is paid in an annuity or other form of benefit. In the case of a lump sum distribution, the Annuity Starting Date is the date payment is actually made.
Basic Contributions means a Matched Participants Pre-Tax Contributions and After-Tax Contributions not in excess of five percent of his or her annualized Compensation.
Beneficiary means any person designated or deemed designated by a Participant to receive any payment of Plan benefits due after the Participants death. A married Participant may name a primary Beneficiary other than his or her Surviving Spouse only if the Surviving Spouse consents to the election in the time frame and manner required by Section 7.3.
Board means the board of directors of the Company
-2-
Break in Service means a Period of Separation that lasts for at least 12 consecutive months, provided that, a Period of Separation beginning on the first date of a maternity or paternity leave of absence and ending on the 12-month anniversary of such date will not constitute a Break in Service. For purposes of this section, a maternity or paternity leave of absence means an absence from work for any period by reason of (a) the Employees pregnancy, (b) birth of the Employees child or (c) care of a child for a period immediately following the birth or placement with the Employee.
Catch-Up Contribution means, effective July 1, 2002, a Pre-Tax Contribution made by a Participant who has attained or will attain age fifty (50) before the close of the Plan Year, subject to the limitations of Code Section 414(v).
Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to a specific provision of the Code includes that provision, any successor to it and any valid regulation promulgated under the provision or successor provision.
Committee means the JBT Corporation Employee Welfare Benefits Plan Committee as described in Section 10.8, its authorized delegate and any successor to the JBT Corporation Employee Welfare Benefits Plan Committee.
Company means JOHN BEAN TECHNOLOGIES Corporation and any successor to it. Prior to June 1, 2008, Company meant FMC Technologies, Inc.
Company Contributions means the contributions made by the Participating Employer to Matched Participants under Section 3.4.
Company Contribution Account means an account maintained as to each Matched Participant, to which the Matched Participants share of Company contributions, FMCTI contributions made under the FMCTI Plan, FMC contributions made under the FMC Matched Plan for periods after March 31, 1982, and all earnings and losses attributable thereto it, are allocated.
Company Stock means the common stock of the Company.
Company Stock Fund means an Investment Fund established and maintained by the Trustee as part of the Trust Fund to invest in Company Stock. All Plan contributions placed in or directed to the Company Stock Fund and all dividends, other earnings and appreciation on those contributions must be invested in Company Stock, except as and to the extent it is deemed necessary or advisable to maintain cash and cash equivalents to meet the Company Stock Funds liquidity needs. The Company Stock Fund is subject to investment restrictions as detailed in Section 10.3.
Compensation means the total compensation paid by the Company or a Participating Employer to an Eligible Employee for each Plan Year that is currently includible in gross income for federal income tax purposes:
(a) |
including: overtime, administrative and discretionary bonuses (including completion bonuses, gainsharing bonuses and performance related bonuses); sales |
-3-
incentive bonuses; field premiums; back pay and sick pay; plus the Employees Pre-Tax Contributions and amounts contributed to a plan described in Code Section 125 or 132; and the incentive compensation (effective prior to January 1, 2007, 9/12 of the incentive compensation) (including management incentive bonuses paid in both cash and restricted stock and local incentive bonuses) paid during the Plan Year for services rendered in the preceding Plan Year, and the incentive compensation (effective prior to January 1, 2007, 3/12 of the incentive compensation) (of the same types) paid during the preceding Plan Year for services rendered in the Plan Year preceding the preceding Plan Year (unless, the Participant elects all such incentive compensation paid for prior Plan Years to be included in Compensation for the prior Plan Years, or unless the Participant elects that no such incentive compensation will be included in his or her Compensation); and |
(b) | but excluding: hiring bonuses; referral bonuses; stay bonuses; retention bonuses; awards (including safety awards, Gutbuster awards and other similar awards); amounts received as deferred compensation; disability payments from insurance or the Companys long-term disability plan; workers compensation benefits; state disability benefits; flexible credits (i.e., wellness awards and payments for opting out of benefit coverage); expatriate premiums; grievance or settlement pay; pay in lieu of notice; severance pay; incentives for reduction in force accrued (but not earned) vacation; other special payments such as reimbursements, relocation or moving expense allowances; stock options or other stock-based compensation (except as provided above); any gross-up paid by a Participating Employer on any amount paid that is Compensation (as defined herein); other distributions that receive special tax benefits; any amounts paid by a Participating Employer to cover an Employees FICA tax obligation as to amounts deferred or accrued under any nonqualified retirement plan of a Participating Employer; and any gross-up paid by a Participating Employer on any amount paid that is not Compensation (as defined herein). |
Notwithstanding anything herein to the contrary, no amounts paid to a Participant more than 30 days after his or her termination of employment with the Company or a Participating Employer will be considered Compensation.
The annual amount of Compensation taken into account for a Participant must not exceed $200,000 (as adjusted by Internal Revenue Service for cost-of-living increases in accordance with Code Section 401(a)(17)(B). A Participants Compensation will be conclusively determined according to the Companys records.
Contingent Account means an account maintained as to each applicable Participant, to which the Participants share of any FMC contributions made under the FMC Matched Plan for periods before April 1, 1982, and all earnings and losses attributable to it, are maintained and allocated.
Direct Rollover means a payment by the Plan to the Eligible Retirement Plan specified by a Distributee.
-4-
Disability means a medically determinable physical or mental impairment that makes the Participant unable to engage in any substantial gainful activity, can be expected to result in death or be of long and indefinite duration, or has lasted or can be expected to last for a continuous period of at least 12 months. For purposes of the Plan, a Participant will be considered to have a Disability at any time only if he or she is then eligible to receive Social Security disability benefits.
Distributee means an Employee or former Employee. In addition, the Employees or former Employees Surviving Spouse and the Employees or former Employees spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined under Code Section 414(p), are Distributees as to their Plan interests.
Distribution Date means the date FMC distributes its interest in the Company.
Effective Date means June 1, 2008.
Eligible Employee means an Employee of a Participating Employer, other than:
(a) | a Leased Employee; |
(b) | a member of a bargaining unit covered by a collective bargaining agreement that does not specifically provide for participation in the Plan by members of the bargaining unit, or that is not listed in Appendix A; |
(c) | an Employee who is a nonresident alien of the United States; or |
(d) | an individual working for a Participating Employer under a contract that designates him or her as an independent contractor. |
An employee who works for a non-US Affiliate, and who would be an Eligible Employee if the non-US Affiliate were a Participating Employer, will be an Eligible Employee during the period in which the employee has U.S. taxable income, and the Company will be deemed to be the Employees employer for Plan purposes.
An individuals status as an Eligible Employee or not will be conclusively determined by the Administrator, subject to the claims review procedure described in Section 13.11.
The bargaining units whose members are covered by the Plan, and the effective dates of that coverage, are listed in Appendix A.
Eligible Retirement Plan means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), a plan described in Code Section 401(a), an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. The definition of Eligible Retirement Plan shall also apply in the case of an Eligible Rollover Distribution paid to a Surviving Spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p).
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Eligible Rollover Distribution means any distribution of all or any portion of the balance to the credit of the Distributee, other than (a) a distribution that is one of a series of substantially equal periodic payments made (no less frequently than annually) for the life (or life expectancy) of the Distributee and the Distributees Beneficiary, or for a specified period of ten years or more; (b) the portion of a distribution that is required to be made under Code Section 401(a)(9); (c) the portion of a distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation for employer securities); provided however, a portion of the distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of After-Tax Contributions that are not includible in gross income, but only if such portion is transferred to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible in gross income; or (d) a hardship distribution within the meaning of Code Section 402(c)(4).
Employee means (a) a common law employee of the Company or an Affiliate who is paid as an employee from the payroll of the Company or an Affiliate and treated as an employee, or (b) a Leased Employee.
Employment Commencement Date means the date on which the Employee first performs an Hour of Service.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific provision of ERISA includes the provision, any successor provision and any valid regulation promulgated under the provision or successor provision.
FMC means FMC Corporation, a Delaware corporation.
FMC Matched Plan means the FMC Corporation Savings and Investment Plan.
FMC Plans means the FMC Corporation Savings and Investment Plan and the FMC Corporation Savings and Investment Plan for Bargaining Unit Employees.
FMC Stock means the common stock of FMC.
FMC Stock Fund means an Investment Fund established and maintained by the Trustee as part of the Trust Fund to invest in FMC Stock. All Plan Contributions placed in or directed to the FMC Stock Fund and all dividends, other earnings and appreciation on those contributions must be invested only in FMC Stock, except as and to the extent it is deemed necessary or advisable to maintain cash and cash equivalents to meet the FMC Stock Funds liquidity needs. The FMC Stock Fund is subject to investment restrictions as detailed in Section 10.3. Notwithstanding anything herein to the contrary, any dividend payable on FMC Stock as a result of FMCs distribution of its interest in the Company shall not be required to be reinvested in FMC Stock.
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FMC Unmatched Plan means the FMC Corporation Savings and Investment Plan for Bargaining Unit Employees.
FMCTI means FMC Technologies, Inc.
FMCTI Plan means the FMC Technologies, Inc. Savings and Investment Plan.
Forfeiture means any portion of a Matched Participants Company Contribution Account that is forfeited under Section 4.3.
Funding Agent means the Trustee or any legal reserve life insurance company selected by the Administrator or the Committee to receive Plan contributions and pay Plan benefits.
Highly Compensated Employee means an Employee who:
(a) | at any time during the Determination Year or the Look-Back Years owns (or is considered under Code Section 318 to own) more than five percent of the Company or an Affiliate; or |
(b) | had more than $80,000, as adjusted, in compensation (as defined in Code Section 415(c)(3)) from the Company and the Affiliates during the Look-Back Year. |
The Determination Year is the Plan Year for which the determination of who is a Highly Compensated Employee is being made, and the Look-Back year is the 12-month period immediately preceding the Determination Year.
A former Employee of the Company or an Affiliate is a Highly Compensated Employee for a given Determination Year if he or she separated from service (or was deemed to have separated) before the Determination Year, performs no services for a Participating Employer during the Determination Year, and was a Highly Compensated Employee for the Plan Year during which he or she separated from service (or was deemed to have separated) or for any Determination Year ending on or after his or her 55th birthday.
The Secretary of the Treasury or its delegate will adjust the $80,000 limit from time to time, to reflect increases in the cost of living. Employees who are nonresident aliens and receive no earned income (within the meaning of Code Section 911(d)(2)) from the Company and its Affiliates that constitutes income from sources within the United States (within the meaning of Code Section 861(a)(3)) are not treated as Employees for purposes of this definition.
Hour of Service means each hour for which an Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliate:
(a) | for the performance of duties; |
(b) | on account of a period of time during which no duties were performed, provided that Hours of Service will not be credited for payments made or due under a plan maintained solely for the purpose of complying with applicable workers compensation, unemployment compensation, or disability insurance laws, or for payments that reimburse an Employees for medically related expenses; and |
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(c) | for which back pay, irrespective of mitigation of damages, is awarded or agreed to by the Company, provided that, the same Hours of Service have not already been credited under (a) or (b) above. |
No more than 501 Hours of Service will be credited for any single continuous period of time during which the Employee performed no duties. The determination of Hours of Service for reasons other than the performance of duties shall be determined in accordance with the provisions of Labor Department Regulations Section 2530.200b-2(b), which are incorporated herein by reference, and Hours of Service shall be credited to computation periods in accordance with the provisions of Labor Department Regulations Section 2530.200b-2(c), which are incorporated herein by reference.
Investment Fund means an investment fund, if any, established or selected by the Administrator pursuant to Section 10.3.
Leased Employee means an individual who performs services for the Company or an Affiliate on a substantially full-time basis, for a period of at least one year, under the primary direction or control of the Company or Affiliate, and under an agreement between the Company or Affiliate and a leasing organization. The leasing organization can be a third party or the Leased Employee himself or herself.
Matched Participant means a Participant who is eligible to receive Company Contributions under Section 3.4, including, each (a) salaried Participant, (b) non-union hourly Participant and (c) Participant who is a member of a bargaining unit covered by a collective bargaining agreement that specifically provides for a Company Contribution under the Plan to the eligible members of the bargaining unit. The bargaining units whose members are eligible for a Company Contribution under Section 3.4, and the effective dates of eligibility for such contribution, are listed on Appendix B.
Nonhighly Compensated Employee means an Employee who is not a Highly Compensated Employee.
Participant means an Eligible Employee who has begun but not ended his or her participation in the Plan pursuant to the provisions of Article II.
Participating Employer means the Company and each other Affiliate that adopts the Plan with the consent of the Company, as provided in Section 13.12.
Period of Separation means a continuous period of time when the Employee is not employed by the Company or an Affiliate. A Period of Separation begins on the date an Employee retires, dies, separates from service due to Disability, quits or is discharged, or, if earlier, on the 12-month anniversary of the date the Employee was otherwise first absent from service. Notwithstanding the foregoing, a Period of Separation does not begin if the Employee is:
(a) | on a leave of absence authorized by the Company or an Affiliate in accordance with standard personnel policies applied in a nondiscriminatory manner to all similarly situated Employees, and returns to active employment with the Company or Affiliates as soon as the leave expires; |
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(b) | on a military leave while the Employees reemployment rights are protected by law, and returns to active employment with the Company or Affiliate within 90 days after his or her discharge or release (or such longer period as may be prescribed by law); or |
(c) | on a layoff, and returns to work with the Company or an Affiliate within the period of time and in the manner necessary to maintain seniority according to the rules of the Company or Affiliate in effect at the time of the return. |
Plan means the JOHN BEAN TECHNOLOGIES Corporation Savings and Investment Plan. The Plan is a single employer plan.
Plan Year means the 12-month period beginning on each January 1 and ending on the next December 31. The period from the Effective Date through December 31, 2008 is a short Plan Year.
Pre-Tax Contribution means the amount that otherwise would have been paid as Compensation that is, before taxes, converted to a Participating Employer contribution in accordance with Section 3.1. A Matched Participants Pre-Tax Contribution may be made up of Basic Contributions, Supplemental Contributions or both.
Pre-Tax Contribution Account means the Account established for a Participant pursuant to Section 3.6.1.
Pre-Tax Contribution Election means the Participants election to make Pre-Tax Contributions in accordance with Section 3.3.1.
Required Beginning Date is defined in Section 5.2.3.
Rollover Contribution means an amount received from a deferred compensation plan that is qualified under Code Section 401 or 403(a), and which is rolled over to the Plan pursuant to Code Section 402(c). A Rollover Contribution can be either a Direct Rollover or an amount distributed to a Participant and then rolled over. In addition, if an Employee had deposited an Eligible Rollover Distribution into an individual retirement account as defined in Code Section 408, he or she may transfer the amount of the distribution plus earnings from the individual retirement account to the Plan, if the rollover amount is deposited with the Trustee within 60 days after receipt from the individual retirement account, and the rollover meets the other requirements of Code Section 408(d)(3)(A)(ii). A Rollover Contribution also means an amount received from a qualified plan described in Code Section 401(a) or 403(a) attributable to after-tax contributions; from an annuity contract described in Code Section 403(b), including after-tax contributions; or an eligible plan under Code Section 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. To the extent a Rollover Contribution includes after-tax contributions, such amounts shall be credited to an After-Tax Contribution Account created for such individual in accordance with Section 3.6.2.
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Rollover Contribution Account means the Account established for a Participant pursuant to Section 3.6.3.
Supplemental Contributions means a Matched Participants Pre-Tax Contributions and After-Tax Contributions in excess of five percent of his or her annualized Compensation.
Surviving Spouse means the person legally married to a Participant on the date of his or her death or on his or her Annuity Starting Date, whichever is earlier.
Trust means the trust established under the Plan, to which Plan contributions are made and in which Plan assets are held.
Trust Fund means the assets of the Trust held by or in the name of the Trustee.
Trustee means the institution appointed as Trustee pursuant to Article XI of the Plan, and any successor Trustee.
Valuation Date means each business day of the Plan Year.
Year of Service means the total number of calendar months during which the Employee is employed by the Company or an Affiliate, divided by 12, including any Period of Separation that does not constitute a Break in Service. A partial month of employment counts as a whole month. An Employees Years of Service do not include any Breaks in Service.
ARTICLE II
Participation
2.1 | Admission as a Participant |
(a) | An Employee becomes a Participant as of the date he or she satisfies all of the following requirements: |
(b) | the Employee is an Eligible Employee; |
(c) | the Employee either (i) is a permanent, full-time Employee, (ii) is a permanent, part-time employee eligible for benefits, or (iii) has completed at least 1,000 Hours of Service in a 12-month period beginning on his or her Employment Commencement Date or an anniversary of his or her Employment Commencement Date; |
(d) | the Employee has filed with the Administrator a Pre-Tax Contribution Election or After-Tax Contribution Election; and |
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(e) | the Employees election has become effective according to uniform and nondiscriminatory rules established by the Administrator. |
2.2 | Admission as a Matched Participant |
A Participant becomes a Matched Participant as of the date he or she satisfies all of the following requirements:
(a) | the Participant satisfies one of the conditions for being a Matched Participant; |
(b) | the Participant has filed with the Administrator a Pre-Tax Contribution Election or After-Tax Contribution Election; and |
(c) | the Participants election has become effective according to uniform and nondiscriminatory rules established by the Administrator. |
2.3 | Rehires |
A Participant or Eligible Employee who is rehired as an Eligible Employee after a Period of Separation becomes an active Participant by filing with the Administrator a Pre-Tax Contribution Election or After-Tax Contribution Election. When the Employees election becomes effective, the Participant or Eligible Employee will again become an active Participant. If such a Participant satisfies one of the conditions for being a Matched Participant, the Participant becomes an active Matched Participant by filing with the Administrator a Pre-Tax Contribution Election or After-Tax Contribution Election. When the Pre-Tax Contribution Election or After-Tax Contribution Election becomes effective, the Matched Participant will become an active Matched Participant.
2.4 | Provision of Information |
The Administrator may provide for paper, telephonic or electronic means of enrollment. Each Participant must execute the forms or follow the telephonic or electronic procedures required by the Administrator and make available to the Administrator any information it reasonably requests. As a condition of participating in the Plan, an Employee agrees, on his or her own behalf and on behalf of all persons who may have or claim any right by reason of the Employees participation in the Plan, to be bound by all provisions of the Plan and by any agreement entered into pursuant to the Plan, each as interpreted by the Administrator in its uniform and nondiscriminatory discretion.
2.5 | Termination of Participation |
A Participant ceases to be a Participant when he or she dies or, if earlier, when his or her entire Account Balance has been paid to him or her. A Matched Participant ceases to be a Matched Participant when he or she no longer satisfies one of the conditions for being a Matched Participant.
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2.6 | Special Rules Relating to Veterans Reemployment Rights |
The following special provisions will apply to an Eligible Employee or Participant who is reemployed in accordance with the reemployment provisions of the Uniformed Services Employment and Reemployment Rights Act (USERRA) following a period of qualifying military service (as determined under USERRA) and will be interpreted in a manner consistent with Code Section 414(u).
2.6.1 Each period of qualifying military service served by an Eligible Employee or Participant will, upon his or her reemployment as an Eligible Employee, be deemed to constitute service with the Participating Employer for all Plan purposes.
2.6.2 The Participant will be permitted to make up Pre-Tax and/or After-Tax Contributions missed during the period of qualifying military service, so long as he or she does so during the period of time beginning on the date of the Participants reemployment with the Participating Employer following his or her period of qualifying military service and extending over the lesser of (a) three times the length of the Participants period of qualifying military service, and (b) five years.
2.6.3 The Participating Employer will not credit earnings to a Participants Account with respect to any Pre-Tax or After-Tax Contribution before the contribution is actually made.
2.6.4 A reemployed Matched Participant will be entitled to accrued benefits attributable to Pre-Tax or After-Tax Contributions only if they are actually made.
2.6.5 For all Plan purposes, including the Participating Employers liability for making contributions on behalf of a reemployed Participant as described above, the Participant will be treated as having received Compensation from the Participating Employer based on the rate of Compensation the Participant would have received during the period of qualifying military service, or if that rate is not reasonably certain, on the basis of the Participants average rate of Compensation during the 12-month period immediately preceding the period of qualifying military service.
2.6.6 If a Participant makes a Pre-Tax or After-Tax Contribution in accordance with the foregoing provisions of this Section 2.6:
(a) | those contributions will not be subject to any otherwise applicable limitation under Code Section 402(g), 404(a) or 415, and will not be taken into account in applying those limitations to other contributions under the Plan or any other plan, for the year in which the contributions are made; the contributions will be subject to the above-referenced limitations only for the year to which the contributions relate and only in accordance with regulations prescribed by the Internal Revenue Service; and |
(b) | the Plan will not be treated as failing to meet the requirements of Code Section 401(a)(4), 401(a)(26), 401(k)(3), 410(b) or 416 by reason of the contributions. |
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ARTICLE III
Contributions and Account Allocations
3.1 | Pre-Tax Contributions |
The Company will transmit to the Funding Agent the Pre-Tax Contributions for the Participants. To determine the amount it must transmit for each Participant, the Company will multiply the percentage elected by the Participant in his or her Pre-Tax Contribution Election by the Participants Compensation.
3.1.1 Effective as of July 1, 2002, and for each Plan Year commencing thereafter, all Participants who have attained or will attain age fifty (50) before the close of the Plan Year shall be eligible to make Catch-Up Contributions during such Plan Year in accordance with, and subject to the limitations of Code Section 414(v) as follows:
(a) | The Plan shall not be treated as failing to satisfy the requirements of Code Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416, as applicable, by reason of the making of such Catch-Up Contributions. Catch-Up Contributions shall be disregarded in determining the limitations on Pre-Tax Contributions as provided in Section 3.9. |
(b) | Pre-Tax Contributions (other than Catch-Up Contributions) determined to be Excess Pre-Tax Contributions as provided in Section 3.9.9, or determined to be in excess of the required limitations of Code Section 415 in a Plan Year may be recharacterized as a Catch-Up Contribution (to the extent available under the limitations of Code Section 414(v) as in effect for that Plan Year) for a Participant who is eligible to make Catch-Up Contributions, as described in the first paragraph of this Section 3.1.1. |
(c) | Catch-Up Contributions shall not be eligible for Company Contributions made on behalf of a Matched Participant pursuant to Section 3.4. |
(d) | Pre-Tax Contributions determined to be Excess Contributions as provided in Section 3.9.8 may be recharacterized as Catch-Up Contributions for a Participant who is eligible, as described in the first paragraph of this Section 3.1.1, but |
(i) | only after the application of Sections 3.12.7 and 3.13.7 regarding the recharacterization of Excess Contributions as After-Tax Contributions, to the extent available, and |
(ii) | only to the extent a Catch-Up Contribution amount is available under the limitations of Code Section 414(v) as in effect for that Plan Year. |
3.2 | After-Tax Contributions |
The Company will transmit to the Funding Agent the After-Tax Contributions for the Participants. To determine the amount it must transmit for each Participant, the Company will multiply the percentage elected by the Participant in his or her After-Tax Contribution Election by the Participants Compensation.
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3.3 | Rules Applicable to Both Pre-Tax and After-Tax Contributions |
3.3.1 In making his or her Pre-Tax Contribution Election and After-Tax Contribution Election, a Participant may choose to defer or contribute between 0% and 20% of his or her Compensation (effective April 19, 2007, between 0% and 20% or between 0% and 75% if the Participant is a Nonhighly Compensated Employee), in 1% increments. The Participants Pre-Tax Contribution Election and After-Tax Contribution Election cannot together total more than 20% of his or her Compensation (effective April 19, 2007, 75% in the case of a Nonhighly Compensated Employee). For certain Participants listed on Appendix C for periods beginning on the Effective Date through December 31, 2001, the minimum deferral or contribution election may be less than 2% under the Participants prior election under the FMC Plans. The Administrator may reduce the amount of any Pre-Tax Contribution Election, or make such other modifications it deems necessary, so that the Plan complies with the provisions of Code Section 401(k). Pre-Tax and After-Tax Contributions will be made on a payroll deduction basis and in accordance with uniform and nondiscriminatory rules and procedures established by the Administrator. A Participants Salary Deferral Election will apply only to Compensation paid to the Participant while he or she is an Eligible Employee.
3.3.2 A Participant may change his or her Pre-Tax or After-Tax Contribution Election percentage or discontinue making Pre-Tax Contributions or After-Tax Contributions, as frequently as permitted by the Administrator, by completing the form or following any other election change procedure prescribed by the Administrator. An election change will become effective according to the uniform and nondiscriminatory rules established by the Administrator.
3.3.3 Pre-Tax and After-Tax Contributions will be delivered to the Funding Agent as of the earliest date they are known and can reasonably be segregated from the general assets of the Participating Employer. In no event will that date be later than the 15th business day of the month following the month they would have been paid to the Participant if he or she had not chosen to defer their payment or contribute them to the Plan.
3.3.4 Notwithstanding any other provision of the Plan, the amount contributed by the Participating Employers as Pre-Tax Contributions and by Participants as After-Tax Contributions must not exceed, in the aggregate, 15% of the total Compensation for the Plan Year for those Participants employed by the Participating Employers eligible for an allocation for that Plan Year. In addition, the amount contributed by the Participating Employers to this Plan or any other qualified plan maintained by the Participating Employers pursuant to a Participants Pre-Tax Contribution Election must not exceed the Code Section 402(g) limit applicable for that calendar year.
3.3.5 Effective October 1, 2006, a Participant shall direct the investment of his or her Pre-Tax and After-Tax Contributions into any of the Investment Funds selected by the Administrator pursuant to Section 10.3, in accordance with the procedures established by the Administrator.
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3.4 | Company Contributions |
3.4.1 For each contribution period, as defined in Section 3.4.2, the Company will make a Company Contribution to the Company Contribution Account of each Matched Participant equal to:
(a) | the applicable percentage of all Basic Contributions made by the Matched Participant for that contribution period and initially invested in the Company Stock Fund, or, for periods beginning before the Distribution Date, the FMC Stock Fund; plus |
(b) | the applicable percentage of all Basic Contributions made by the Matched Participant for that contribution period and initially invested in any Investment Funds other than the Company Stock Fund, or, for periods beginning before the Distribution Date, the FMC Stock Fund; less |
(c) | any Forfeitures credited against the Company Contribution for that contribution period. |
No Company Contribution will be made with respect to Supplemental Contributions.
The applicable percentage for a Plan Year will be determined by the Company before the start of the Plan Year. It is currently anticipated that the applicable percentage will be different for Basic Contributions initially invested in the Company Stock Fund, or, for periods beginning before the Distribution Date, the FMC Stock Fund, than for Basic Contributions initially invested in other Investment Funds. The Company will communicate the applicable percentages for each Plan Year as soon as possible after they are determined.
Notwithstanding the above to the contrary, effective January 1, 2004, for each contribution period, as defined in Section 3.4.2, the Company will make a Company Contribution to the Company Contribution Account of each Matched Participant equal to 100% of all Basic Contributions made by the Matched Participant for that contribution period, less any Forfeitures credited against the Company Contribution for that contribution period. No Company Contributions will be made with respect to Supplemental Contributions or Catch-Up Contributions. Notwithstanding the foregoing, the Company reserves the right to reduce or eliminate the Company Contribution for prospective contribution periods.
3.4.2 Effective January 1, 2004, the following shall apply: the Company Contribution for each contribution period will be paid to the Funding Agent as soon as practicable. The Company Contribution will be allocated to the Company Contribution Account for each Matched Participant who made Basic Contributions during the contribution period, by multiplying the Matched Participants own Basic Contributions for the contribution period by the Company Contribution percentage as described in Section 3.4.1 for the contribution period. Each calendar week will be a contribution period. Subject to the special provisions of Section 3.13, all Company Contributions for a Plan Year will be allocated to Matched Participants Company Contribution Accounts no later than the due date (including all extensions) of the Companys federal tax return for the fiscal year of the Company ending with or within the Plan Year.
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3.4.3 Effective January 1, 2004 through September 30, 2006, it is contemplated that all Company contributions will be invested in the Company Stock Fund, but the Company reserves the right to change the investment of Company Contributions prospectively. Effective October 1, 2006, all Company Contributions made to a Matched Participants Company Contribution Account as a result of the Matched Participants Basic Contributions shall be invested in the same manner that the Matched Participant has elected pursuant to Section 3.3.5 to invest such Basic Contributions.
3.5 | Rollover Contributions |
With the approval of the Administrator, a Participant or Eligible Employee may make a Rollover Contribution to the Plan. A Participants Rollover Contribution will be allocated to his or her Rollover Contribution Account no later than the first day of the month following the month in which the contribution is made. A Rollover Contribution must be made in cash. If an Employee makes a contribution that was intended to be a Rollover Contribution and the Funding Agent later discovers it was not a Rollover Contribution, the Funding Agent will distribute the balance of the Participants Rollover Contribution Account to him or her as soon as practicable.
3.6 | Establishment of Accounts |
3.6.1 Each Participant to whom Pre-Tax Contributions are allocated will have a Pre-Tax Contribution Account. The Pre-Tax Contribution Account will be credited with the Pre-Tax Contributions allocable to the Participant and the income on those contributions, and will be debited with expenses, losses, withdrawals and distributions chargeable to those contributions.
3.6.2 Each Participant who makes After-Tax Contributions will have an After-Tax Contribution Account. The After-Tax Contribution Account will be credited with the After-Tax Contributions the Participant makes and the income on those contributions, and will be debited with expenses, losses, withdrawals and distributions chargeable to those contributions.
3.6.3 Each Matched Participant who makes Basic Contributions will have a Company Contribution Account. The Company Contribution Account will be credited with any Company Contributions made on behalf of the Matched Participant under Section 3.4, and the income on those contributions, and will be debited with expenses, losses, withdrawals and distributions chargeable to those contributions.
3.6.4 Each Participant who makes a Rollover Contribution to the Plan pursuant to Section 3.5 will have a Rollover Contribution Account. The Rollover Contribution Account will be credited with all Rollover Contributions made by the Participant and the income on those contributions, and will be debited with expenses, losses, withdrawals and distributions chargeable to those contributions.
3.7 | Limitation on Annual Additions to Accounts |
(a) |
For purposes of this Section 3.7, the term annual additions includes all Pre-Tax Contributions, After-Tax Contributions, Company Contributions and Forfeitures allocated to the Participants Accounts for the Plan Year, but shall not include Catch-Up Contributions pursuant to Code Section 414(v) (as described in Section |
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3.1.1), and Excess Pre-Tax Contributions (as described in Section 3.11.4) that are distributed to the Participant by April 15th following the year for which they were contributed to the Plan. |
Annual Additions also includes any employer and employee contributions and forfeitures allocated for the Plan Year under other defined contribution plans of the Company and the Affiliates, including (i) an individual medical benefit account (as defined in Code Section 415(l)(2)) which is a part of any such plan, or (ii) amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits, allocated to the separate account of a Key Employee (as defined in Code Section 419A(d)(3)) and under a welfare benefit fund (as defined in Code Section 419(e)) maintained by the Company.
(b) | Notwithstanding any provision of the Plan to the contrary, the total annual additions allocated for any Plan Year to the Account of a Participant and to his or her accounts under any other defined contribution plan maintained by the Company or an Affiliate shall not exceed the lesser amount of (a) $40,000, as adjusted in accordance with Code Section 415(d), or (b) 100% of the Participants Compensation, except that the compensation limitation described herein shall not apply to any employer contribution for medical benefits (within the meaning of Code Section 401(h) or 419A(f)(2)) which is otherwise treated as an annual addition under Code Section 415(l)(1) or 419A(d)(2). |
3.8 | Reduction of Annual Additions |
If the annual additions allocated to a Participants Accounts for the Plan Year exceed the limitation described in Section 3.7, annual additions, with their earnings, will be returned to the Participant in the minimum amount necessary to meet the limitation on annual additions. Supplemental Contributions (both After-Tax Contributions and Pre-Tax Contributions, in that order) will be returned first, and if there are not enough to satisfy the limitation on annual additions, Basic Contributions (both After-Tax Contributions and Pre-Tax Contributions, in that order) will be returned. If, after all of the Participants Supplemental and Basic Contributions have been returned, the annual additions allocated to the Participants Account for the Plan Year still exceed the limitation described in Section 3.7, the excess amounts attributable to Company Contributions will be held in a suspense account containing the excess amounts attributable to Company Contributions for all Matched Participants, and will be used to reduce the Company Contributions for the following Plan Year (and later Plan Years, if necessary), before any Company Contributions that would be annual additions for the next Plan Year (or later Plan Years, if necessary) are made to the Plan.
3.9 | Limitations on Pre-Tax Contributions, After-Tax Contributions and Company Contributions Definitions |
For purposes of Sections 3.9 through 3.15, the terms defined below have the meanings ascribed to them in this Section 3.9.
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3.9.1 Actual Contribution Percentage means the sum of any After-Tax Contributions and Company Contributions allocated to the Eligible Participant for the Plan Year, plus any of the Eligible Participants Pre-Tax Contributions treated as Company Contributions for the Plan Year, divided by the Eligible Participants Plan Year Compensation, and stated as a percentage. All after-tax employee contributions and employer matching contributions made on behalf of a Highly Compensated Employee under all plans of the Company and its Affiliates will be aggregated to determine the Highly Compensated Employees Actual Contribution Percentage. A Company Contribution that is treated as a Pre-Tax Contribution under Section 3.13.7 is subject to Section 3.13 and is not taken into account in calculating an Eligible Participants Actual Contribution Percentage. A Company Contribution that is forfeited to correct Excess Aggregate Contributions, or because the contribution to which it relates is treated as an Excess Contribution, Excess Pre-Tax Contribution or Excess Aggregate Contribution is not taken into account in calculating the Eligible Participants Actual Contribution Percentage. The Actual Contribution Percentage of an Eligible Participant who does not make a Pre-Tax Contribution Election or an After-Tax Contribution Election is 0.0%.
3.9.2 Actual Deferral Percentage means the amount of Pre-Tax Contributions allocated to the Eligible Participant for the Plan Year, divided by his or her Plan Year Compensation, stated as a percentage. In calculating the Actual Deferral Percentage, Pre-Tax Contributions include Excess Pre-Tax Contributions for Highly Compensated Employees (whether they were made under plans of unrelated employers or plans of the same or related employers) but do not include Excess Pre-Tax Contributions for Nonhighly Compensated Employees. The Actual Deferral Percentage of an Eligible Participant who does not make a Pre-Tax Contribution Election is 0.0%.
3.9.3 Aggregate Limit means the greater of:
(a) | the sum of: |
(i) | 1.25 times the Average Actual Deferral Percentage or the Average Actual Contribution Percentage of the group, whichever is larger; and |
(ii) | two percentage points plus the Average Actual Deferral Percentage or the Average Actual Contribution Percentage of the group, whichever is less, but in no event more than twice the lesser of the groups Average Actual Deferral Percentage and its Average Actual Contribution Percentage; and |
(b) | the sum of: |
(i) | 1.25 times the Average Actual Deferral Percentage or the Average Actual Contribution Percentage of the group, whichever is less; and |
(ii) | two percentage points plus the Average Actual Deferral Percentage or the Average Actual Contribution Percentage of the group, whichever is larger, but in no event more than twice the larger of the groups Average Actual Deferral Percentage and its Average Actual Contribution Percentage. |
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For purposes of this Section 3.10.3, the group is the group of Eligible Participants who are Nonhighly Compensated Employees for the preceding Plan Year.
3.9.4 Average Actual Contribution Percentage means the average of the Actual Contribution Percentages of the Eligible Participants in a group.
3.9.5 Average Actual Deferral Percentage means the average of the Actual Deferral Percentages of the Eligible Participants in a group.
3.9.6 Eligible Participant means any Employee who is eligible to make a Pre-Tax Contribution Election or an After-Tax Contribution Election any time during the Plan Year.
3.9.7 Excess Aggregate Contributions means, for any Plan Year in which the Actual Contribution Percentage Test under Section 3.13 of the Plan is not satisfied, the excess of the Company and After-Tax Contributions (and any Pre-Tax Contributions or pre-tax salary deferrals under other plans, taken into account in determining the Actual Contribution Percentages) actually made on behalf of Highly Compensated Employees for the Plan Year, over the maximum amount of such contributions permitted under Section 3.13 of the Plan for the Plan Year. The amount of Excess Aggregate Contributions will be determined by first reducing the Company and After-Tax Contributions to the Highly Compensated Employees with the highest Actual Contribution Percentage by the lesser of (a) the amount necessary for the Actual Contribution Percentage of that Highly Compensated Employee to equal the Actual Contribution Percentage of the Highly Compensated Employee with the next highest Actual Contribution Percentage; and (b) the amount necessary for the Plan to satisfy the Actual Contribution Percentage Test under Section 3.13 of the Plan. This process will be repeated until the Plan satisfies the Actual Contribution Percentage Test under Section 3.13 of the Plan. Then, the aggregate amount of such reductions will be distributed by reducing the Company and After-Tax Contributions for the Highly Compensated Employee with the highest combined dollar amount of Company and After-Tax Contributions by the lesser of (a) the amount necessary for the dollar amount of that Highly Compensated Employees combined Company and After-Tax Contributions to equal the combined dollar amount of the Company and After-Tax Contributions of the Highly Compensated Employee with the next highest combined dollar amount of Company and After-Tax Contributions; and (b) the amount necessary for the Plan to satisfy the Actual Contribution Percentage Test. For each Highly Compensated Employees reductions, the Administrator will begin by making reductions in his or her Company Contributions, and will reduce the Highly Compensated Employees After-Tax Contributions only if his or her Company Contributions for the Plan Year have been reduced to zero and it is still necessary to reduce his or her Plan Year contributions. The amount of any Highly Compensated Employees Excess Aggregate Contributions is calculated after determining the Excess Contribution to be recharacterized as After-Tax Contributions for the Plan Year. To the extent required, if the Aggregate Limit in Section 3.9.3 of the Plan is exceeded, further reduction of the Actual Deferral Percentage for all Highly Compensated Employees will be made in a similar manner so that the Aggregate Limit is not exceeded.
3.9.8 Excess Contributions means for any Plan Year in which the Actual Deferral Percentage Test under Section 3.12 of the Plan is not satisfied, the excess of the Pre-Tax Contributions (and any Company Contributions taken into account in determining the Actual
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Deferral Percentages) actually made on behalf of Highly Compensated Employees for the Plan Year, over the maximum amount of such contributions permitted under Section 3.12 of the Plan for the Plan Year. The amount of Excess Contributions will be determined by first reducing the Pre-Tax Contributions of the Highly Compensated Employee with the highest Actual Deferral Percentage by the lesser of (a) the amount necessary for the Actual Deferral Percentage of that Highly Compensated Employee to equal the Actual Deferral Percentage of the Highly Compensated Employee with the next highest Actual Deferral Percentage; and (b) the amount necessary for the Plan to satisfy the Actual Deferral Percentage Test under Section 3.13 of the Plan. This process will be repeated until the Plan satisfies the Actual Deferral Percentage Test under Section 3.12 of the Plan. Then, the aggregate amount of such reductions will be distributed by reducing the Pre-Tax Contributions for the Highly Compensated Employee with the highest dollar amount of Pre-Tax Contributions by the lesser of (a) the amount necessary for the dollar amount of that Highly Compensated Employees Pre-Tax Contributions to equal the Pre-Tax Contributions of the Highly Compensated Employee with the next highest dollar amount of Pre-Tax Contributions; and (b) the amount necessary for the Plan to satisfy the Actual Deferral Percentage Test.
3.9.9 Excess Pre-Tax Contribution means the amount of Pre-Tax Contributions for a calendar year that are includible in a Participants gross income under Code Section 402(g) because the Participants elective deferrals exceed the dollar limitation under Code Section 402(g) as determined under Sections 3.11 and 3.12.
3.10 | Maximum Amount of Pre-Tax Contributions |
The total amount of Pre-Tax Contributions, 401(k) contributions under another qualified plan, and deferrals under a Code Section 403(b) annuity, a simplified employee pension and/or a simple retirement account allocated to a Participant in any calendar year cannot exceed the dollar limitation in effect under Code Section 402(g) for that year.
3.11 | Correction of Excess Pre-Tax Contributions |
3.11.1 Excess Pre-Tax Contributions, as adjusted per Section 3.12.2, will be distributed to each Participant on whose behalf they were made no later than the first April 15 following the close of the taxable year of the Participant for which they were allocated. In no event may the amount distributed under this Section 3.12 exceed the Participants total Pre-Tax Contributions (as adjusted under Section 3.12.2 for income and losses allocable to them) for the taxable year for which he or she had Excess Pre-Tax Contributions.
3.11.2 The Excess Pre-Tax Contributions to be distributed to a Participant will be adjusted for income or losses through the close of the Plan Year for which they were made, with such income or losses determined in a nondiscriminatory manner (within the meaning of Code Section 401(a)(4)) consistent with the valuation of Participant Accounts under Section 10.4. Notwithstanding the preceding to the contrary, effective January 1, 2006, the Excess Pre-Tax Contributions to be distributed to a Participant will be adjusted for income or losses up to the date of the distribution of such Excess Pre-Tax Contributions; however, such income or losses may be determined on a date that is not more than 7 days before such distribution.
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3.11.3 If a Participant has Excess Pre-Tax Contributions, but only when taking into account his or her pre-tax contributions under another plan, in order to receive a distribution of Excess Pre-Tax Contributions, he or she must make a written claim to the Administrator no later than the March 15 following the taxable year of the Participant for which the contributions were made. The claim must specify the amount of the Participants Excess Pre-Tax Contributions for the preceding taxable year and be accompanied by the Participants written statement that if those amounts are not distributed, the Participants Pre-Tax Contributions, when added to amounts deferred under other plans or arrangements described in Code Sections 401(k), 402(h)(1)(B) (a simplified employee pension), 403(b) (an annuity plan) or 408(p)(2)(A)(i) (a simple retirement plan) will exceed the limit imposed on the Participant by Code Section 402(g) for the year in which the deferral occurred.
3.11.4 Excess Pre-Tax Contributions distributed prior to the first April 15 following the close of the Participants taxable year will not be treated as Annual Additions under Section 3.7 for the preceding Limitation Year.
3.11.5 Any Pre-Tax Contributions that are properly distributed under Section 3.8 as excess Annual Additions are disregarded in determining if there are any Excess Pre-Tax Contributions.
3.12 | Actual Deferral Percentage Test |
3.12.1 The Average Actual Deferral Percentage for Eligible Participants who are Highly Compensated Employees for the Plan Year may not exceed the greater of:
(a) | the Average Actual Deferral Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; and |
(b) | the lesser of: |
(i) | the Average Actual Deferral Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by two and |
(ii) | the Average Actual Deferral Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year plus two percentage points. |
3.12.2 The provisions of Code Section 401(k)(3) are incorporated by reference.
3.12.3 If this Plan satisfies the requirements of Code Sections 401(a)(4), 401(k), and 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of those Code sections only if aggregated with this Plan, then this Section 3.13 is applied by determining the Actual Deferral Percentages of Eligible Participants as if all the plans were a single plan.
3.12.4 The Administrator also may treat one or more plans as a single plan with the Plan whether or not the aggregated plans must be aggregated to satisfy Code Sections 401(a)(4)
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and 410(b). However, those plans must then be treated as one plan under Code Sections 401(a)(4), 401(k), and 410(b). Plans may be aggregated under this Section 3.13.4 only if they have the same plan year.
3.12.5 Pre -Tax Contributions may be considered made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year.
3.12.6 The determination and treatment of the Pre-Tax Contributions and Actual Deferral Percentage of any Participant must satisfy all requirements prescribed by the Secretary of the Treasury, including, without limitation, record retention requirements.
3.12.7 The Administrator will limit the election and allocation of Pre-Tax Contributions in order to avoid the creation of Excess Contributions. If and to the extent necessary or desirable, the Administrator will recharacterize Excess Contributions as After-Tax Contributions, or will distribute Excess Contributions. Recharacterized Excess Contributions will be treated as required in Treasury Regulations Section 1.401(k)-1(f)(3). The Administrator will recharacterize Excess Contributions within two and one-half months after the close of the Plan Year in which they arose. A distribution of Excess Contributions will normally be made within the same time frame. At all events, a corrective distribution of Excess Contributions must be made no later than 12 months after the end of the Plan Year in which they arose, and will include income allocable to the excess Contributions for the Plan Year in which they arose; provided, effective January 1, 2006, such Excess Contributions shall be adjusted for income or losses up to the date of the distribution of such Excess Contributions; however, such income or losses may be determined on a date that is not more than 7 days before such distribution. The method used to determine the income allocable to Excess Contributions that are distributed will not violate Code Section 401(a)(4), and will be applied consistently for all Participants and all corrective distributions for any Plan Year. Any distribution to a Participant of less than the entire amount of his or her Excess Contributions will be treated as a pro rata distribution of Excess Contributions and income. The Administrator may combine the correction methods described in this Section 3.12.7. The amount of Excess Contributions to be recharacterized or distributed to a Participant under this Section 3.13.7 will be reduced by any Excess Pre-Tax Contributions previously distributed to the Participant for his or her taxable year ending with or within the Plan Year. Similarly, the amount of Excess Pre-Tax Contributions to be distributed for a Participants taxable year will be reduced by the amount of any Excess Contributions previously distributed or recharacterized as to that Participant for the Plan Year beginning with or within the Participants taxable year.
3.12.8 Effective January 1, 2006, for purposes of this Section 3.12, if a Highly Compensated Employee is a Participant under two or more cash or deferred arrangements, all such cash or deferred arrangements shall be treated as one cash or deferred arrangement for the purpose of determining the Average Actual Deferral Percentage with respect to such Highly Compensated Employee. However, if the cash or deferred arrangements have different Plan Years, then all Pre-Tax Contributions made during the Plan Year being tested under all such cash or deferred arrangements shall be aggregated, without regard to the plan years of the other plans. Notwithstanding the foregoing, plans that are not permitted to be aggregated under Treas. Reg. section 1. 401(k) 1(b)(4) are not required to be aggregated for purposes of this Section 3.12.8.
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3.13 | Actual Contribution Percentage Test |
3.13.1 The Average Actual Contribution Percentage for Eligible Participants who are Highly Compensated Employees for the Plan Year may not exceed the greater of:
(a) | the Average Actual Contribution Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; and |
(b) | the lesser of: |
(i) | the Average Actual Contribution Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by two; and |
(ii) | the Average Actual Contribution Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year plus two percentage points. |
3.13.2 The provisions of Code Section 401(m)(2) are incorporated by reference.
3.13.3 If this Plan satisfies the requirements of Code Section 401(a)(4), 401(k) and 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of those Code sections only if aggregated with this Plan, then this Section 3.14 is applied by determining the Actual Contribution Percentage of Eligible Participants as if all the plans were a single plan.
3.13.4 The Administrator also may treat one or more plans as a single plan with the Plan, whether or not the aggregated plans must be aggregated to satisfy Code Sections 401(a)(4) and 410(b). However, those plans must then be treated as one plan under Code Sections 401(a)(4), 401(m) and 410(b). Plans may be aggregated under this Section 3.14.4 only if they have the same plan year.
3.13.5 An After-Tax Contribution is considered made for a Plan Year if it is deducted from the Participants Compensation during the Plan Year and transmitted to the Trustee within a reasonable period after that. A Company Contribution is considered made for a Plan Year if it is allocated to a Matched Participants Account as of a date within the Plan Year, is actually paid to the Trust no later than 12 months after the Plan Year, and is made on account of the Matched Participants Basic Contributions for the Plan Year. A Pre-Tax Contribution may be considered made under this Section 3.14 for a Plan Year if it is recharacterized for purposes of Section 3.13, and if it is includible in the gross income of the Participant as of a date during that Plan Year. A recharacterized Pre-Tax Contribution is includible in a Participants gross income as of the date it would have been paid to the Participant, had the Participant not elected to defer it into the Plan.
3.13.6 The determination and treatment of After-Tax and Company Contributions and the Actual Contribution Percentage of any Participant must satisfy all requirements prescribed by the Secretary of Treasury, including, without limitation, record retention requirements.
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3.13.7 The Administrator will limit the making of After-Tax Contributions in order to avoid the creation of Excess Aggregate Contributions. If and to the extent necessary or desirable, the Administrator will forfeit any Excess Aggregate Contributions that were Company Contributions and that were not vested, and will distribute to the Participant who made them any Excess Aggregate Contributions that were After-Tax Contributions, and will distribute to the Matched Participant to whom they were allocated any Excess Aggregate Contributions that were Company Contributions and were vested. A distribution of Excess Aggregate Contributions will normally be made within two and one-half months after the close of the Plan Year in which they arose. At all events, a corrective distribution of Excess Aggregate Contributions must be made no later than 12 months after the end of the Plan Year in which they arose, and will be adjusted for income allocable to the Excess Aggregate Contributions for the Plan Year in which they arose; provided, effective January 1, 2006, such Excess Aggregate Contributions shall be adjusted for income or losses up to the date of the distribution of such Excess Aggregate Contributions; however, such income or losses may be determined on a date that is not more than 7 days before such distribution. The method used to determine the income allocable to any Excess Aggregate Contributions that are distributed will not violate Code Section 401(a)(4), and will be applied consistently for all Participants and all corrective distributions for any Plan Year. Any distribution to a Participant of less than the entire amount of his or her Excess Aggregate Contributions will be treated as a pro rata distribution of Excess Aggregate Contributions and income. The Administrator may combine the correction methods described in this Section 3.14.7.
3.13.8 Effective January 1, 2006, for purposes of this Section 3.13, if a Highly Compensated Employee is a Participant under two or more cash or deferred arrangements, all such cash or deferred arrangements shall be treated as one cash or deferred arrangement for the purpose of determining the Average Actual Contribution Percentage with respect to such Highly Compensated Employee. However, if the cash or deferred arrangements have different Plan Years, then all After-Tax Contributions and Company Contributions made during the Plan Year being tested under all such cash or deferred arrangements shall be aggregated, without regard to the plan years of the other plans.
ARTICLE IV
Vesting
4.1 | Vesting in After-Tax, Pre-Tax and Rollover Contributions Accounts |
A Participant is always 100% vested in the balance of his or her After-Tax Contribution Account, Pre-Tax Contribution Account and Rollover Contribution Account.
4.2 | Vesting in Company Contribution and Contingent Accounts |
4.2.1 A Participant becomes vested in any balance of his or her Company Contribution Account and Contingent Account according to the following Schedule:
Years of Service |
Percent | ||
Fewer than 2 |
0 | % | |
2 but fewer than 3 |
20 | % | |
3 but fewer than 4 |
40 | % | |
4 but fewer than 5 |
60 | % | |
5 or more |
100 | % |
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4.2.2 Notwithstanding the foregoing, a Participant will become 100% vested in the balance of his or her Company Contribution Account and Contingent Account if:
(a) | he or she reaches age 55 while employed by the Company or one of its Affiliates; |
(b) | he or she separates from service due to Disability; |
(c) | he or she dies while employed by the Company or one of its Affiliates; |
(d) | he or she ceases to be an Employee because of the permanent shutdown of a single site of employment or of one or more facilities or operating unites within a single site of employment; or |
(e) | he or she is employed by the Company or one of its Affiliates involved in a transaction and the Committee, in its discretion, fully vests the Participant in connection with the transaction. |
4.2.3 If a Participant is hired by the Company or one of its Affiliates as a result of an acquisition, the Committee (or its delegate) may, in its discretion, give the Participant and all other Participants hired under the same circumstances as a result of the same acquisition credit for service with a prior employer for purposes of vesting.
4.3 | Forfeitures |
4.3.1 A Participant forfeits the non-vested portion of his or her Company Contribution and Contingent Accounts on the earlier of: (a) the date as of which he or she receives a distribution of his or her entire Company Contribution and Contingent Accounts and (b) the date his or her Period of Separation equals five years. The nonvested amount so forfeited is a Forfeiture. If the Participant incurs a Forfeiture under clause (a) above and his or her Period of Separation is shorter than five years, the Forfeiture is restored, and the Period of Separation counts towards the Participants Years of Service, along with service before and after the Period of Separation, in determining the Participants Years of Service for purposes of Section 4.2. If the Period of Separation is five years or longer, the Forfeiture will not be restored, but the Period of Separation counts towards the Participants Years of Service, along with service before and after the Period of Separation, in determining the Participants Years of Service for purposes of Section 4.2. If a Participant begins a Period of Separation by way of a maternity or paternity leave, this Section 4.3.1 will be read by substituting the number six for the number five wherever the latter number appears. A maternity or paternity leave is an absence from work because of the Participants pregnancy, the birth of a child to or placement of a child for adoption with the Participant, or the need to care for the Participants child immediately following its birth to or placement with the Participant.
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4.3.2 Amounts that become Forfeitures during a month will be used to restore Forfeitures to rehired Participants as provided in Section 4.3.1. Any remaining Forfeitures during a month will be used to pay the administrative expenses of the Plan in the following order: Trustees fees, communications to Participants, nondiscrimination testing, qualified domestic relations order administration, enrollment fees, required minimum distribution fees, auditors fees, consulting and legal fees and other similar administrative expenses. Any remaining Forfeitures during a month will be used to reduce the Companys obligation to make Company Contributions in that month or succeeding months. Any remaining Forfeitures during a month will be used to pay fees associated with Participant communications to Participants involved in an acquisition or divestiture and Participant Account adjustments, as determined by the Committee or its delegate. While awaiting allocation, until such time as the Company applies Forfeitures to the purposes described above, they will be invested in a default fund selected by the Company.
ARTICLE V
Timing of Distributions to Participants
5.1 | Separation from Service |
Upon his or her separation from service with the Company and all Affiliates for any reason, a Participant will be entitled to receive the vested portion of his or her Account Balance, determined in accordance with the provisions of Article IV and the valuation rules established for each Investment Fund. The date as of which the Participants Account Balance is determined will be the Valuation Date preceding the date of distribution.
5.2 | Start of Benefit Payments |
5.2.1 Except as provided in Sections 5.2.2 and 5.2.3, unless a Participant otherwise elects, payment of benefits will begin no later than the 60th day after the close of the Plan Year in which the latest of the following events occurs:
(a) | the Participants 65th birthday; |
(b) | the 10th anniversary of the year in which the Participant commenced participation; and |
(c) | the Participants separation from service. |
If the amount of benefits payable to or in respect of a Participant cannot be determined by the benefit commencement date described in the preceding sentence, or if the Administrator cannot locate the Participant (or, if the Participant has died, his or her Beneficiary) after making a reasonable effort to do so, benefit payments will begin no later than 60 days after the amount of the Participants benefits can first be determined or the Participant (or his or her Beneficiary) is located, in the amount necessary to bring the payments up to date, as if they had begun on the benefit commencement date described in the preceding sentence.
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5.2.2 The Participants Account Balance will be distributed as soon as practicable after the Participant elects a distribution following the Participants separation from service. Effective prior to January 1, 2005, upon separation of service, a Participant may elect to defer distribution of the Participants Account Balance until a date that is no later than the Participants Required Beginning Date only if such Account Balance exceeds $5,000. Effective January 1, 2005, the Participant may elect to defer distribution of his or her Account Balance until a date no later than his or her Required Beginning Date. A Participant will be deemed to have elected to defer payment of benefits from the Plan until the date the Participant requests a distribution from the Plan in a manner consistent with the uniform and nondiscriminatory rules established by the Administrator.
5.2.3 Notwithstanding any other provision of this Plan, a Participant must begin to receive his or her benefit no later than his or her Required Beginning Date. The amount to be distributed each year will be the minimum amount required to satisfy Code Section 401(a)(9) and the regulations promulgated thereunder, determined with no recalculation of life expectancy. The Required Beginning Date of a Participant is April 1 of the calendar year following the later of the calendar year in which the Participant reaches age 70 1 / 2 or, retires. Notwithstanding any other provision of this Section 5.2.3, if a Participant is a five percent owner (as defined in Code Section 416) for the Plan Year ending in the calendar year in which he or she reaches age 70 1 / 2 , his or her Required Beginning Date is April 1 of the following calendar year.
5.2.4 Notwithstanding any other provision of this Plan, all Plan distributions will comply with Code Section 401(a)(9), including Department of Treasury Regulation Section 1.401(a)(9)-2 through 1.401(a)(9)-9, as promulgated under Final and Temporary Regulations published in the Federal Register on April 17, 2002 (the 401(a)(9) Regulations), with respect to minimum distributions under Code Section 401(a)(9). In addition, the benefit payments distributed to any Participant will satisfy the incidental death benefit provisions under Code Section 401(a)(9)(G) and Department of Treasury Regulation Section 1.401(a)(9)-5(d), as promulgated in the 401(a)(9) Regulations.
5.2.5 If the Participant dies after beginning distribution of his or her Account Balance, the remainder of the Account Balance will be payable in accordance with Section 7.1. Notwithstanding the foregoing, the Participants Account Balance must continue to be distributed at least as rapidly as under the method of distribution in effect before the Participant died.
5.2.6 If the Participant dies before beginning distribution of his or her Account Balance, the Participants Account Balance will be distributed as provided under Section 7.1, but distribution must be completed within five years after the Participant dies. Notwithstanding the foregoing, the Participants Beneficiary may receive the Account Balance over his or her life or over a period not extending beyond his or her life expectancy, so long as distribution begins within one year after the Participant dies, or, if the Beneficiary is the Participants Surviving Spouse, by the date the Participant would have reached age 70- 1 / 2 . Furthermore, if the Participants Surviving Spouse is the Beneficiary and dies before distribution begins, the next Beneficiary to take may receive benefits over his or her life or a period not exceeding his or her life expectancy, so long as distribution begins by the date the Surviving Spouse would have reached age 70- 1 / 2 .
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5.3 | Distribution of Amounts held in a Participants Pre-Tax Contribution Account. |
Effective January 1, 2006, amounts held in a Participants Pre-Tax Contribution Account are not distributable earlier than upon:
(1) | the Participants severance from employment. Notwithstanding anything herein to the contrary, a severance from employment shall not occur when an individual changes status from an Eligible Employee to a Leased Employee; |
(2) | the Participants death; |
(3) | the Participants Disability; |
(4) |
the Participants attainment of age 59- 1 / 2 ; |
(5) | the proven financial hardship of the Participant as described in Section 6.6.3; or |
(6) | the termination of the Plan without the employer maintaining an alternative defined contribution plan at any time during the period beginning on the date of plan termination and ending 12 months after all assets have been distributed from the Plan. Such a distribution must be made in a lump sum. For purposes of this Section, the terms employer, alternative defined contribution plan, and lump sum are as defined under Treasury Regulation Section 1.401(k)-1(d)(4). |
ARTICLE V-A
Required Minimum Distributions For Calendar Years
Beginning On Or After January 1, 2003
Section 5-A.1 General Rules .
5-A.1.1. Effective Date . The provisions of this Article 5-A will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year, as well as required minimum distributions for the 2002 calendar year that are made on or after January 1, 2002.
5-A.1.2. Coordination With Minimum Distribution Requirements Previously in Effect . Required minimum distributions for 2002 under this Article 5-A will be determined as follows. If the total amount of 2002 required minimum distributions under the Plan made to the distributee prior to the effective date of this Article 5-A, equals or exceeds the required minimum distributions determined under this Article 5-A, then no additional distributions will be required to be made for 2002 on or after such date to the distributee. If the total amount of 2002 required minimum distributions under the Plan made to the distributee prior to the effective date of this Article 5-A is less than the amount determined under this Article 5-A, then required minimum distributions for 2002 on or after such date will be determined so that the total amount of required minimum distributions for 2002 made to the distributee will be the amount determined under this Article 5-A.
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5-A.1.3. Precedence . The requirements of this Article 5-A will take precedence over any inconsistent provisions of the Plan.
5-A.1.4. Requirements of Treasury Regulations Incorporated . All distributions required under this Article 5-A will be determined and made in accordance with the Treasury regulations under Section 401(a)(9) of the Code.
5-A.1.5. TEFRA Section 242(b)(2) Elections . Notwithstanding the other provisions of this Article 5-A, other than Section 5-A.1.4, distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA.
Section 5-A.2 Time and Manner of Distribution .
5-A.2.1. Required Beginning Date . The Participants entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participants required beginning date.
5-A.2.2. Death of Participant Before Distribution Begin . If the Participant dies before distributions begin, the Participants entire interest will be distributed, or begin to be distributed, no later than as follows:
(a) |
If the Participants Surviving Spouse is the Participants sole designated Beneficiary, then distributions to the Surviving Spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70- 1 / 2 , if later. |
(b) | If the Participants Surviving Spouse is not the Participants sole designated Beneficiary, then distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died. |
(c) | If there is no designated Beneficiary as of September 30 of the year following the year of the Participants death, the Participants entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participants death. |
(d) | If the Participants Surviving Spouse is the Participants sole designated Beneficiary and the Surviving Spouse dies after the Participant but before distributions to the Surviving Spouse begin, this Section 5-A.2.2, other than section 5-A.2.2(a), will apply as if the Surviving Spouse were the Participant. |
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For purposes of this Section 5-A.2.2 and Section 5-A.4, unless Section 5-A.2.2(d) applies, distributions are considered to begin on the Participants Required Beginning Date. If Section 5-A.2.2(d) applies, distributions are considered to begin on the date distributions are required to begin to the Surviving Spouse under Section 5-A.2.2(a). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participants Required Beginning Date (or to the Participants Surviving Spouse before the date distributions are required to begin to the Surviving Spouse under Section 5-A.2.2(a)), the date distributions are considered to begin is the date distributions actually commence.
5-A.2.3. Forms of Distribution . Unless the Participants interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first distribution calendar year distributions will be made in accordance with Sections 5-A.3 and 5-A.4. If the Participants interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the Code of the Treasury regulations.
Section 5-A.3 Required Minimum Distributions During Participants Lifetime .
5-A.3.1. Amount of Required Minimum Distribution For Each Distribution Calendar Year . During the Participants lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:
(a) | the quotient obtained by dividing the Participants account balance by the distribution period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations using the Participants age as of the Participants birthday in the distribution calendar year; or |
(b) | if the Participants sole designated Beneficiary for the distribution calendar year is the Participants spouse, the quotient obtained by dividing the Participants account balance by the number in the Joint and Last Survivor Table set forth in Section 1.4019a)(9)-9 of the Treasury regulations, using the Participants and spouses attained ages as of the Participants and spouses birthdays in the distribution calendar year. |
5-A.3.2. Lifetime Required Minimum Distributions Continue Through Year of Participants Death . Required minimum distributions will be determined under this Section 5-A.3 beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participants date of death.
Section 5-A.4 Required Minimum Distributions After Participants Death .
5-A.4.1. Death On or After Date Distributions Begin .
(a) |
Participant Survived by Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of |
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the Participants death is the quotient obtained by dividing the Participants account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participants designated Beneficiary, determined as follows: |
(1) | The Participants remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year. |
(2) | If the Participants Surviving Spouse is the Participants sole designated Beneficiary, the remaining life expectancy of the Surviving Spouse is calculated for each distribution calendar year after the year of the Participants death using the surviving spouses age as of the spouses birthday in that year. For distribution calendar years after the year of the Surviving Spouses death, the remaining life expectancy of the surviving spouse is calculated using the age of the Surviving Spouse as of the spouses birthday in the calendar year of the spouses death, reduced by one for each subsequent calendar year. |
(3) | If the Participants Surviving Spouse is not the Participants sole designated Beneficiary, the designated Beneficiarys remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participants death, reducing by one for each subsequent year. |
(b) | No Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participants death, the minimum amount that will be distributed for each distribution calendar year after the of the Participants death is the quotient obtained by dividing the Participants account balance by the Participants remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year. |
5-A.4.2. Death Before Date Distributions Begin .
(a) | Participant Survived by Designated Beneficiary . If the Participant dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participants death is the quotient obtained by dividing the Participants account balance by the remaining life expectancy of the Participants designated Beneficiary, determined as provided in Section 5-A.4.1. |
(b) | No Designated Beneficiary . If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participants death, distribution of the Participants entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participants death. |
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(c) | Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin . If the Participant dies before the date distributions begin, the Participants Surviving Spouse is the Participants sole designated Beneficiary, and the Surviving Spouse dies before distributions are required to begin to the Surviving Spouse under Section 5-A.2.2.(a), this Section 5-A.4.2 will apply as if the Surviving Spouse were the Participant. |
Section 5-A.5 Definitions .
5-A.5.1. Designated Beneficiary . The individual who is designated as the Beneficiary under the Plan and is the designated Beneficiary under Section 401(a)(9) of the Code and Section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.
5-A.5.2. Distribution Calendar Year . A calendar year for which a minimum distribution is required. For distributions beginning before the Participants death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participants Required Beginning Date. For distributions beginning after the Participants death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 5-A.2.2. The required minimum distribution for the Participants first distribution calendar year will be made on or before the Participants Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participants Required Beginning Date occurs, will be made on or before December 31 of that distribution calendar year.
5-A.5.3. Life Expectancy . Life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury regulations.
5-A.5.4. Participants Account Balance . The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of the dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.
5-A.5.5. Required Beginning Date . The date specified in Section 5.2.3 of the Plan.
ARTICLE VI
Death Benefits
6.1 | Cashout of Small Amounts |
Effective prior to January 1, 2005, and notwithstanding any other Plan provision, if a Participants Account Balance is not larger than $5,000 the Account Balance will be paid in one lump sum to the Participant as soon as practicable after the Participants separation from service, without his or her consent or the consent of his or her spouse. Effective January 1, 2005, this Section 6.1 shall be of no further force and effect.
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6.2 | Medium of Distribution |
A Participants Account Balance will be distributed by check to the Participant or Beneficiary entitled to it (or to his or her designated agent). Alternatively, as to any amount invested in the Company Stock Fund and the FMC Stock Fund at the time of distribution, the Participant or, where applicable, his or her Beneficiary, may request a certificate representing the whole shares of Company Stock and/or FMC Stock held for him or her, and a check representing any fractional share. The Administrator will establish uniform and nondiscriminatory rules governing the timing, content and manner of elections under this Section 6.2.
6.3 | Forms of Benefit |
6.3.1 A Participant or Beneficiary may elect to have his or her Account Balance distributed in any of the forms described below.
(a) | Lump Sum : This form of benefit pays the entire Account Balance in one payment. |
(b) | Installments for a Fixed Period : The Participant or Beneficiary may elect to receive annual, quarterly or monthly installments over a fixed period of 20 years or less. |
6.3.2 If the Participant chooses to receive installments, the size of each installment will be calculated by dividing the Account Balance determined as of the date described in Section 5.1 by the total number of installments remaining to be paid.
6.3.3 The Administrator will establish uniform and nondiscriminatory rules governing the timing, content and manner of elections under this Section 6.3.
6.4 | Change in Form, Timing or Medium of Benefit Payment |
Any former Employee, former employee of FMCTI, or former employee of FMC who is a Participant and who has chosen to defer payment of his or her Account Balance may request a change in the form, timing or medium in which his or her Account Balance will be paid, so long as the revised election conforms to Section 6.3. Once benefit payments have begun, no Participant may change the form, timing or medium of payment of his or her Account Balance.
6.5 | Direct Rollover of Eligible Rollover Distributions |
6.5.1 Notwithstanding any provision of the Plan, a Distributee may elect, at the time and in the manner prescribed below, to have any portion of an Eligible Rollover Distribution paid in a Direct Rollover to an Eligible Retirement Plan specified by the Distributee.
6.5.2 At least 30, but no more than 90, days before the Annuity Starting Date, the Administrator will furnish the Participant with a notice containing information regarding his or
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her right to take distribution directly or to elect a Direct Rollover, and some of the federal tax consequences of the alternative types of distribution. The notice must meet the requirements of Code Section 402(f). The Administrator will give the Participant an election period of at least 30 days to decide whether to elect a Direct Rollover. Notwithstanding the foregoing, the election period may end immediately after the Participant makes an affirmative election as to whether to receive the distribution directly or in the form of a Direct Rollover, so long as the Participant is properly informed of his or her right to a full 30-day election period, and waives the remainder of the election period.
6.5.3 Effective January 1, 2007, and notwithstanding any provision herein to the contrary, with respect to any portion of a distribution from the Plan of a deceased Employee, an individual who is the designated Beneficiary (as defined by Code Section 401(a)(9)(E)) of the Employee and who is not the Surviving Spouse of the Employee shall be permitted to make a direct trustee-to-trustee transfer of the distribution to an individual retirement plan described in Code Section 402(c)(8)(B)(i) or (ii) established for the purposes of receiving the distribution on behalf of such designated Beneficiary. In such event, the transfer shall be treated as an Eligible Rollover Distribution, the individual retirement plan shall be treated as an inherited individual retirement account or individual retirement annuity (within the meaning of Code Section 408(d)(3)(C)) and Code Section 401(a)(9)(B) (other than clause (iv) thereof) shall apply to such individual retirement plan.
6.6 | In-service and Hardship Withdrawals |
6.6.1 An active Participant who has reached age 59 1 / 2 may elect to withdraw all or any part of his or her Account. The Administrator will establish uniform and nondiscriminatory procedures for requesting, granting and processing in-service withdrawals under this Section 6.6.1, which may include telephonic or electronic procedures, as and to the extent permitted by applicable law or regulation.
6.6.2 An active Participant who has not reached age 59 1 / 2 may make a withdrawal of the following portions of the Participants Account Balance in the order listed below:
(a) | all or part of the After-Tax Contributions he or she made to the FMC Plans after March 31, 1986 and before January 1, 1987; |
(b) | all earnings or appreciation attributable to After-Tax Contributions he or she made to the FMC Plans after March 31, 1986 and before January 1, 1987; |
(c) | all or part of the After-Tax Contributions he or she made to the FMC Plans, the FMCTI Plan, or to the Plan after December 31, 1986; |
(d) | all or part of his or her After-Tax Contributions made to the FMC Plans before April 1, 1982, or, if less, the amount in the Participants After-Tax Contribution Account allocable to those contributions; |
(e) | any amount remaining in the Participants After-Tax Contribution Account that is allocable to After-Tax Contributions made to the FMC Plans before April 1982; |
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(f) | all earnings or appreciation attributable to the After-Tax Contributions he or she made to the FMC Plans, the FMCTI Plan, or to the Plan after December 31, 1986; |
(g) | all the vested value of his or her Contingent Account; and |
(h) | all of the current value of vested Company Contributions and FMC contributions made as to After-Tax Contributions he or she made to the Plan, the FMCTI Plan, or FMC Plans after December 31, 1986. |
The Administrator will establish uniform and nondiscriminatory procedures for requesting, granting and processing in-service withdrawals under this Section 6.6.2, which may include electronic or telephonic procedures, as and to the extent permitted by applicable law or regulation.
6.6.3 An active Participant may make a hardship withdrawal from his or her Pre-Tax Contribution Account if he or she demonstrates to the Administrator that the withdrawal is necessary to satisfy the Participants immediate and heavy financial need. A hardship withdrawal cannot exceed 100% of such Participants Pre-Tax Contribution Account (excluding adjustment for any income credited to such Participants Pre-Tax Contribution Account) at the date of the withdrawal. In addition, the minimum hardship withdrawal permitted is $500, or, if less, the total amount of a Participants Pre-Tax Contribution Account (excluding adjustment for any income credited to such Participants Pre-Tax Contribution Account) at the date of withdrawal.
(a) | A distribution is on account of an immediate and heavy financial need if it is for: |
(1) | Expenses for (or necessary to obtain) medical care that would be deductible under Code Section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income); |
(2) | Costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments); |
(3) | Payment of tuition, related educational fees and room and board expenses for up to the next 12 months of post-secondary education for the Participant, the Participants spouse, children or dependents (as defined in Code Section 152, determined without regard to Code Sections 152(b)(1), 152(b)(2) and 152(d)(1)(B)); |
(4) | Payments necessary to prevent the Participants eviction from his or her principal residence, or foreclosure on the mortgage on the Participants principal residence; |
(5) | Payments for funeral (and effective January 1, 2006, burial) expenses for the Participants deceased parent, spouse, children or dependents (as defined in Code Section 152, determined without regard to Code Section 152(d)(1)(B)); |
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(6) | Legal expenses incurred by the Participant in obtaining a divorce; |
(7) | Effective January 1, 2006, expenses for the repair of damage to the Participants principal residence that would qualify for the casualty loss deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); |
(8) | Expenses incurred by the Participant in remedying an uninsured property loss; |
(9) | Expenses incurred by the Participant in adopting or attempting to adopt a child; |
(10) | Emergency expenses of the Participant in personal bankruptcy; or |
(11) | Other expenses deemed by the Administrator to constitute an immediate and heavy financial need and formally adopted under the rules of the Administrator as eligible for a hardship withdrawal. |
(b) | In the event that the Administrator determines that a Participant has an immediate and heavy financial need in accordance with Section 6.6.3(a), a hardship withdrawal may be made from the Plan only if the amount of such distribution is considered as necessary to satisfy such immediate and heavy financial need of the Participant pursuant to the following standards: |
(1) | The distribution is not in excess of the amount of the immediate and heavy financial need (including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution), and |
(2) | The Participant makes a representation (made in writing or such other form as may be prescribed the Commissioner of the Internal Revenue Service), unless the Participating Employer has actual knowledge to the contrary, that such immediate and heavy financial need cannot reasonably be relieved (i) through reimbursement or compensation by insurance or otherwise; (ii) by liquidation of the Participants assets, (iii) by cessation of Pre-Tax Contributions under the Plan; (iv) by other currently available distributions (including distribution of ESOP dividends under Code Section 404(k)) and nontaxable (at the time of the loan) loans, under plans maintained by the Participating Employer or any other employer; or (v) by borrowing from commercial sources on reasonably commercial terms in an amount sufficient to satisfy the need. |
6.6.4 The Administrator will establish uniform and nondiscriminatory procedures for requesting, granting and processing hardship withdrawals.
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6.7 | Loans |
6.7.1 An active Participant may submit an application to the Administrator to borrow from his or her Account (on such uniform and nondiscriminatory terms and conditions as the Administrator shall prescribe) an amount, when added to the amount of any then outstanding loan, does not exceed the lesser of:
(a) | $50,000, reduced by the excess (if any) of the Participants highest outstanding Plan loan balance during the one-year period ending on the day before the loan is made over the Participants outstanding Plan loan balance on the day the loan is made; and |
(b) | 50% of the Participants Account as of the Valuation Date coincident with or immediately preceding the date the Administrator receives the application. |
In calculating the Participants loan limit, all loans from qualified plans of the Company and all Affiliates will be aggregated.
6.7.2 Each loan granted under the Plan will meet the following requirements:
(a) | it must be evidenced by a negotiable promissory note; |
(b) | the rate of interest payable on the unpaid balance of the loan will be reasonable; |
(c) | the amount of the loan must be at least $1,000; |
(d) | the loan, by its terms, must require repayment within five years; |
(e) | the loan will be secured by the Participants interest in the Account Balance of his or her Account, but not to exceed 50% of such Account; and |
(f) | the loan must be repaid through payroll deduction, or, if the loan has been outstanding for at least three months, the Participant may make one payment by check or money order of the full amount of principal and interest then outstanding. |
6.7.3 If a Participant is granted a loan, a Loan Account will be established for the Participant. All Loan Accounts will be held by the Funding Agent, as part of the Trust Fund. The loan amount will be transferred from a Participants other Accounts according to uniform and nondiscriminatory ordering rules adopted by the Administrator, and will be disbursed from the Loan Account. Principal and interest payments of a loan will be credited initially to the Loan Account of the Participant, and will be transferred as soon as reasonably practicable thereafter to the other Accounts of the Participant according to uniform and nondiscriminatory ordering rules adopted by the Administrator. All fees and expenses incurred in connection with a loan obligation of a Participant will be borne solely by the Participants Account.
6.7.4 Loan repayments will be made through payroll withholding during a Participants employment. Each Participant who requests a loan consents to such payroll withholding for
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repayment of the loan. Upon termination of employment, a Participant may elect to continue to repay the loan under such uniform and nondiscriminatory rules as the Administrator has established. The Administrator will cease payroll reduction for loan repayments as soon as reasonably practicable after receipt of a court order to do so in the event of a Participants bankruptcy, and the loan will immediately be deemed to be in default. Any fees and expenses incurred in connection with a loan and loss caused by nonpayment or other default on a loan obligations will be borne solely by the Loan Account of the Participant. A default will constitute a taxable event to the Participant, necessitating certain reporting obligations on the Administrators part, and the note evidencing a loan in default will be executed upon and processed in accordance with the uniform and nondiscriminatory rules adopted by the Administrator. A Participants loan repayments will, at his or her request, be suspended during the time he or she is absent as a result of qualifying military service (as determined under USERRA), as permitted under Code Section 414(u)(4).
6.7.5 A Participant may not have more than two loans outstanding at any given time.
6.7.6 Upon termination of employment, a Participant who has an outstanding loan under the Plan must repay his or her loan in a lump sum or the loan will be in default. Notwithstanding the above, the Committee (or its delegate) may, in its sole discretion, allow terminated Participants to continue to repay loans under such uniform and nondiscriminatory rules as the Committee (or its delegate) determines.
ARTICLE VII
Death Benefit
7.1 | Payment of Account Balance |
7.1.1 Subject to the provisions of Section 5.2, if a Participant dies before payment of his or her Account Balance has begun, his or her Account Balance will be paid to the Participants Beneficiary in the form of benefit chosen by the Beneficiary under Sections 6.2 and 6.3. The Beneficiary of a Participant who is married on the date of his or her death will be the Participants Surviving Spouse, unless the Participant has designated another Beneficiary and the Surviving Spouse consented to the designation, both as provided in Section 7.3.
7.2 | Failure to Name a Beneficiary |
If a Participant fails to name a Beneficiary and dies before payment of his or her Account Balance begins, or if no designated Beneficiary survives the Participant, the Administrator will pay any amounts due after the Participants death to the Participants surviving spouse or, if there is no surviving spouse, to the Participants surviving children, in equal shares. If the Participant leaves behind no surviving spouse or children, the Administrator will pay any amounts then due to the Participants estate.
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7.3 | Waiver of Spousal Beneficiary Rights |
7.3.1 A Participant may designate someone other than his or her Surviving Spouse as his or her primary Beneficiary only if the designation or election meets the requirements of this Section 7.3 outlined below.
7.3.2 The Administrator will provide each Participant with a written explanation of:
(a) | the right of the Participant to name someone other than his or her Surviving Spouse as a Beneficiary; |
(b) | the right of the Participants spouse to be named as the primary Beneficiary for all of the Participants Account Balance and the effect of waiving that right; and |
(c) | the Participants right to revoke a previous designation of someone other than the Surviving Spouse as a Beneficiary, and the effect of such a revocation. |
7.3.3 A designation of someone other than the Surviving Spouse as a primary Beneficiary will be effective only if it is made in writing and consented to by the Participants spouse, with the spouses consent witnessed by a notary public or the Administrator. Any subsequent change of Beneficiary to an individual who is not the Participants Surviving Spouse must also be in writing and consented to by the Participants spouse, with the spouses consent witnessed by a notary public or the Administrator. Spousal consent is not necessary if the Participant establishes to the satisfaction of a Plan representative that the Participant does not have a spouse, or that the Participants spouse cannot be located. Spousal consent is also unnecessary if the Participant produces a court order to the effect that the Participant is legally separated from his or her spouse or has been abandoned by the spouse, within the meaning of the law of the Participants state of residence, unless a qualified domestic relations order requires otherwise. If the Participants spouse is legally incompetent to give consent, the spouses legal guardian may give the spouses consent, even if the legal guardian is the Participant. A spouses consent will be valid only as to that spouse, and an election deemed effective without the spouses consent will be valid only as to the spouse designated as to that election. A Participant may revoke a prior designation of someone other than the Surviving Spouse as a primary Beneficiary without the consent of his or her spouse, and may revoke such a designation an unlimited number of times.
7.3.4 A Participants former spouse will be treated as the spouse or Surviving Spouse only to the extent provided under a qualified domestic relations order as described in Code Section 414(p).
ARTICLE VIII
Special Forms of Benefit and Death Benefit Terms for Certain Participants Prior to 2002
8.1 | Applicability |
For periods prior to January 1, 2002, the provisions of this Article VIII apply, instead of Sections 6.3, 6.4, 7.1, 7.2 and 7.3, to the entire Account Balance of each Participant who was: (a)
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a participant in the FMC Corporation Savings and Investment 401(k) Plan for Bargaining Unit Employees (FMC Unmatched Plan) immediately before his or her collective bargaining unit became covered under the FMC Corporation Savings and Investment (FMC Matched Plan) Plan, and whose account balance in the FMC Unmatched Plan was transferred to the FMC Matched Plan; or (b) transferred to FMC as part of its acquisition from Stein, Inc. or Frigoscandia Equipment Holding AB. Sections 6.1, 6.2, 6.5, 6.6 and 6.7 continue to apply to the Account Balances of Participants described in the preceding sentence, but this Article VIII does not apply to any other Participant.
8.2 | Forms of Benefit for Certain Transferred Participants |
8.2.1 The normal form of benefit for a Participant to whom this Article VIII applies is the 50% Joint and Survivor-Ten Year Certain Annuity with the Participants spouse as the Beneficiary, if the Participant is married on the Annuity Starting Date. If the Participant is not married on the Annuity Starting Date, the normal form of benefit is the Life and Ten Year Certain Annuity. If the Participant fails to make an election under Section 8.4, his or her Account Balance will be paid in the normal form of benefit. A Participant covered by this Article VIII who is married on the Annuity Starting Date may elect a benefit other than the normal form of benefit only if his or her spouse consents to the election within the time frame and in the manner required by Section 8.4.
8.2.2 Subject to Sections 8.2.1 and 8.4, and except as otherwise provided herein, a Participant covered by this Article VIII may elect to have his or her benefit under this Plan paid in the form of a lump sum distribution or a fixed dollar annuity purchased on his or her behalf. A Plan annuity is a fixed dollar annuity if it provides a stream of monthly payments that do not vary in amount.
8.2.3 If a Participant to whom this Article VIII applies elects to have a fixed dollar annuity purchased on his or her behalf, he or she may select any of forms of annuity described in this Section 8.2.3.
(a) | Life and Ten Year Certain Annuity : This form of annuity pays the Participant a fixed amount each month beginning with the month in which the Annuity Starting Date occurs and ending when the Participant dies. If the Participant dies before 120 monthly payments have been made, payments will continue to the Participants Beneficiary until 120 monthly payments have been made to the Participant and Beneficiary under the annuity. |
(b) |
Joint and Survivor-Ten Year Certain Annuity : This form of annuity pays the Participant a fixed amount each month beginning with the month in which the Annuity Starting Date occurs and ending when the Participant dies. If the Participants Beneficiary survives the Participant, payments will continue to the Participants primary Beneficiary until the Beneficiary dies. If the Participant and Beneficiary both die before 120 monthly payments have been made to the Participant and Beneficiary under the annuity, payments will continue to the Participants contingent Beneficiary until 120 monthly payments in all have been made under the annuity. The monthly payment payable to the primary or |
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contingent Beneficiary before 120 payments have been made under the annuity equals the monthly payment made during the Participants lifetime. The monthly payment payable to the primary Beneficiary after 120 payments have been made under the annuity equals 100% or 50% of the monthly payment made during the Participants lifetime, as specified in the Participants election. Both the primary and contingent Beneficiaries must be named at the time this annuity is elected. |
(c) | Period Certain Annuity : This form of annuity pays the Participant a fixed amount each month beginning with the month in which the Annuity Starting Date occurs and ending when the specified number of monthly payments have been made to the Participant and, if he or she dies before receiving the specified number of payments, to the Participants Beneficiary. The Participant may specify 60, 120 or 180 monthly payments. The Participant specifies the number of monthly payments and names his or her Beneficiary at the time he or she elects the annuity. |
(d) | Other : This form of payment includes any other alternative form of distribution, including installment distributions, provided for by the Funding Agent. Notwithstanding the foregoing, a Participant may not elect any form of distribution providing only for the payment of interest or income earned on his or her Accounts. |
8.2.4 An annuity under this Plan must provide that payments will be made over a period no longer than the life of the Participant, the lives of the Participant and his or her Beneficiary, the Participants life expectancy or the life expectancy of the Participant and his or her Beneficiary. A Participant to whom this Article VIII applies may not elect any form of annuity providing monthly payments to a Beneficiary who is other than his or her spouse, unless the amount distributed each year equals or exceeds the quotient obtained by dividing the Participants Account Balances by the divisor determined under Department of Treasury Regulation Section 1.401(a)(9)-2. Further, the amount of the monthly payment made to a Beneficiary cannot under any circumstances be larger than the amount of the monthly payment made to the Participant.
8.3 | Change in Form, Timing or Medium of Benefit Payment for Certain Transferred Participants |
Any former Employee, former employee of FMCTI, or former employee of FMC who is a Participant to whom this Article VIII applies and who has chosen to defer payment of his or her Account Balance may request a change in the form, timing or medium in which his or her Account Balances will be paid, so long as the revised election conforms to Sections 8.2 through 8.4. Once payments have begun, no Participant may change the form, timing or medium of payment of his or her Account Balance.
8.4 | Waiver of Normal Form of Benefit for Certain Transferred Participants |
8.4.1 The Account Balance of a Participant to whom this Article VIII applies will be distributed in the normal form of benefit, regardless of what form of benefit the Participant
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chooses, unless the Participant makes an effective waiver under this Section 8.4 and, if the Participant is married on the Annuity Starting Date, unless the Participants spouse consents to the Participants choice of another form of benefit in the manner described in this Section 8.4. No sooner than 30, and no more than 90, days before the Annuity Starting Date, the Administrator will provide the Participant with a written explanation of:
(a) | the terms and conditions of the normal form of benefit; |
(b) | the Participants right to waive the normal form of benefit and the effect of waiving the normal form of benefit; |
(c) | the right of the Participants spouse to consent or withhold his or her consent to the Participants choice of another form of benefit; and |
(d) | the Participants right to revoke a waiver of the normal form of benefit, and the effect of revoking the waiver. |
A Participant may revoke his or her waiver of the normal form of benefit at any time before the payment begins, without his or her spouses consent. For purposes of the previous sentence, if the Participants Account Balance is to be paid in the form of an annuity, payment will be deemed to begin when the annuity has been purchased.
8.4.2 A Participants waiver of the normal form of benefit will be effective only if:
(a) | the Participants spouse consents in writing to the waiver; |
(b) | the waiver includes an election of a form of benefit that cannot be changed without the spouses consent, or the spouses consent specifically permits the Participant to make other elections of forms of benefit; |
(c) | the spouses consent acknowledges the effect of the waiver; and |
(d) | the spouses consent is witnessed by a notary public or the Administrator. |
Spousal consent to the Participants waiver of the normal form of benefit is not necessary if the Participant establishes to the satisfaction of a Plan representative that the Participant does not have a spouse, or that the Participants spouse cannot be located. Spousal consent is also unnecessary if the Participant produces a court order to the effect that the Participant is legally separated from his or her spouse or has been abandoned by the spouse, within the meaning of the law of the Participants state of residence, unless a qualified domestic relations order requires otherwise. If the Participants spouse is legally incompetent to give consent, the spouses legal guardian may give the spouses consent, even if the legal guardian is the Participant. A spouses consent will be valid only as to that spouse, and an election deemed effective without the spouses consent will be valid only as to the spouse designated as to that election.
8.4.3 Notwithstanding the foregoing, the first payment of the Participants Account Balance may be made as early as seven days after the Participant makes an affirmative election to receive his or her Account Balance in a particular form of payment, even if that means the
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Participant has fewer than 30 days to decide on a form of payment, if the Annuity Starting Date is after the date of the Participants affirmative election and, if the Participant is married on the Annuity Starting Date, the Participants spouse consents to the form of payment in the manner required by Section 8.4.2.
8.4.4 If the Administrator believes that any spouse might, under the law of any jurisdiction, have any interest in any benefit that might become payable to a Participant, the Administrator may, as a condition precedent to the Participants making any distribution or withdrawal election, require a written release or releases, or other documents that it believes are necessary, desirable, or appropriate to prevent or avoid any conflict or multiplicity of claims regarding payment of any Plan benefits.
8.5 | Payment of Account Balances of Certain Transferred Participants Who Die Before Payment Begins |
8.5.1 If a Participant to whom this Article VIII applies dies before payment of his or her Account Balance has begun, 50% of the Participants Account Balance will be paid to his or her Surviving Spouse in the form of a life annuity, and the remainder will be paid to his or her Surviving Spouse in the form of a lump sum within 90 days after the Administrator receives notice of the Participants death. If the Participant has no Surviving Spouse, the Participants Account Balance will be paid to his or her Beneficiary in the form of a lump sum within 90 days after the Administrator receives notice of the Participants death.
8.5.2 The Participant may choose a form of benefit other than the life annuity for the 50% of his or her Account Balance that will be paid to the Surviving Spouse, so long as the Participants election meets the requirements of Section 8.7 and his or her Spouse consents in the time and manner required by Section 8.7. The Participant may also designate a Beneficiary other than his or her Surviving Spouse as the primary Beneficiary to receive some or all of his or her Account Balance, so long as the Surviving Spouse consents to the designation in the time and manner required by Section 8.7.
8.5.3 Unless the Participant has chosen a form of benefit for his or her Beneficiary or Surviving Spouse, the Beneficiary or Surviving Spouse may choose to have any amounts payable to him or her paid in any of the forms of benefit described under Section 8.2 other than the Joint and Survivor-Ten Year Certain Annuity. Payments to a Surviving Spouse must begin no later than the April 1 following the year in which the Participant would have reached age 70 1 / 2 , and payments to a Beneficiary who is not the Surviving Spouse must begin no later than one year after the Participants death. Amounts payable to a Beneficiary or Surviving Spouse must be made within five years after the Participants death, or over a period not exceeding the life or life expectancy of the Surviving Spouse. A Participants Surviving Spouse who chooses to waive his or her right to receive 50% of the Participants Account Balances in the form of a life annuity must waive the right in the time and manner described in Section 8.7.
8.5.4 Notwithstanding Section 8.5.3 above, if at the time the Participant dies his or her Account Balance does not exceed $5,000 the Account will be distributed in the form of a single sum payment. In addition. if more than one Beneficiary is concurrently entitled to receive annuity payments, or if the monthly annuity payment to any Beneficiary would be less than $50
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(or another amount established from time to time by the Administrator), the Administrator may choose to pay the value of the annuity in a single sum, so long as the single sum would not exceed the dollar limit of the previous sentence. Participant may change the form, timing or medium of payment of his or her Account Balance.
8.6 | Failure to Name a Beneficiary for Certain Transferred Participants |
If a Participant to whom this Article VIII applies fails to name a Beneficiary and dies before payment of his or her Account Balance begins, or if no designated Beneficiary survives the Participant, the Administrator will pay any amounts due after the Participants death to the Participants Surviving Spouse or, if there is no Surviving Spouse, to the Participants surviving children in equal shares. If the Participant leaves behind no Surviving Spouse or surviving children, the Administrator will pay any amounts then due to the Participants estate.
8.7 | Waiver of Preretirement Survivor Annuity for Certain Transferred Participants |
8.7.1 A Participant to whom this Article VIII applies may designate someone other than his or her Surviving Spouse as a primary Beneficiary to receive any portion of his or her Account Balance payable after his or her death, or the Participant or his or her Surviving Spouse may choose a form of benefit other than the life annuity for the 50% of the Account Balances that will automatically be paid to the Surviving Spouse as a life annuity only if the designation or election meets the requirements of this Section 8.7 outlined below.
8.7.2 The Administrator will provide each Participant with a written explanation of:
(a) | the 50% preretirement life annuity payable to the Participants Surviving Spouse; |
(b) | the Participants right to waive that annuity and the effect of such a waiver; |
(c) | the right of the Participants spouse to the 50% preretirement life annuity and the effect of waiving that right; and |
(d) | the Participants right to revoke a previous waiver and the effect of such a revocation; |
(e) | the right of the Participant to name someone other than his or her Surviving Spouse as a Beneficiary; |
(f) | the right of the Participants spouse to be named as the primary Beneficiary for all of the Participants Account Balance and the effect of waiving that right; and |
(g) | the Participants right to revoke a previous designation of someone other than the Surviving Spouse as a Beneficiary, and the effect of such a revocation. |
The Administrator will provide the above explanation to the Participant during the period that begins on the first day of the Plan Year in which the Participant reaches age 32 and ends on the last day of the Plan Year in which the Participant reaches age 34. If a Participant first becomes a Participant after the start of that period, the Administrator will provide the explanation no later than the end of the second Plan Year after the Participant first becomes a Participant.
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8.7.3 A designation of someone other than the Surviving Spouse as a primary Beneficiary, or the election of a form of benefit other than the 50% preretirement life annuity will be effective only if it is made in writing and consented to by the Participants spouse, with the spouses consent witnessed by a notary public or the Administrator. Moreover, the election must be made during the period that begins on the first day of the Plan Year in which the Participant reaches age 35 (or, if earlier, the date the Participant separates from service) and ends on the date of the Participants death. Any subsequent change of Beneficiary to an individual who is not the Participants Surviving Spouse must also be in writing and consented to by the Participants spouse, with the spouses consent witnessed by a notary public or the Administrator. Spousal consent is not necessary if the Participant establishes to the satisfaction of a Plan representative that the Participant does not have a spouse, or that the Participants spouse cannot be located. Spousal consent is also unnecessary if the Participant produces a court order to the effect that the Participant is legally separated from his or her spouse or has been abandoned by the spouse, within the meaning of the law of the Participants state of residence, unless a qualified domestic relations order requires otherwise. If the Participants spouse is legally incompetent to give consent, the spouses legal guardian may give the spouses consent, even if the legal guardian is the Participant. A spouses consent will be valid only as to that spouse, and an election deemed effective without the spouses consent will be valid only as to the spouse designated as to that election. A Participant may revoke a prior waiver of the 50% preretirement life annuity or a prior designation of someone other than the Surviving Spouse as a primary Beneficiary without the consent of his or her spouse, and may revoke such a waiver or designation an unlimited number of times.
8.7.4 A Participants former spouse will be treated as the spouse or Surviving Spouse only to the extent provided under a qualified domestic relations order as described in Code Section 414(p).
ARTICLE IX
Fiduciaries
9.1 | Named Fiduciaries |
9.1.1 The Company is the Plan sponsor and a named fiduciary, as that term is defined in ERISA Section 402(a)(2), with respect to control over and management of the Plans assets only to the extent that it (a) appoints the members of the Committee which administers the Plan at the Administrators direction; (b) delegates its authorities and duties as plan administrator (as defined under ERISA) to the Committee; and (c) continually monitors the performance of the Committee.
9.1.2 The Company as Administrator, and the Committee, which administers the Plan at the Administrators direction, are named Fiduciaries of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to control and manage the operation and administration of the Plan. The Administrator is also the administrator and plan administrator of the Plan, as those terms are defined in ERISA Section 3(16)(A) and Code Section 414(g), respectively.
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9.1.3 The Trustee is a named fiduciary of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to manage and control all Trust assets, except to the extent that authority is allocated under the Plan and Trust to the Administrator or is delegated to an Investment Manager, an insurance company, or the Plan Participants at the direction of the Administrator or the Committee.
9.1.4 The Company, Committee, Administrator and Trustee are the only named fiduciaries of the Plan.
9.2 | Employment of Advisers |
A named fiduciary, and any fiduciary appointed by a named fiduciary, may employ one or more persons to render advice regarding any of the named fiduciarys or fiduciarys responsibilities under the Plan.
9.3 | Multiple Fiduciary Capacities |
Any named fiduciary and any other fiduciary may serve in more than one fiduciary capacity with respect to the Plan.
9.4 | Payment of Expenses |
All Plan expenses, including expenses of the Administrator, the Committee, the Trustee, any Investment Manager and any insurance company, will be paid by the Trust Fund, unless a Participating Employer elects to pay some or all of those expenses. All or a portion of the recordkeeping costs or charges imposed or incurred (if any) in maintaining the Plan will be charged on a per capita basis to the Account of each Participant. In addition, all charges imposed or incurred (if any) for an Investment Fund or a transfer between Investment Funds will be charged to the Account of the Participant directing that investment. In addition, all charges imposed or incurred for a Participant loan will be charged to the Account of the Participant requesting the loan.
9.5 | Indemnification |
To the extent not prohibited by state or federal law, each Participating Employer agrees to, and will indemnify and save harmless the Administrator, any past, present, additional or replacement member of the Committee, and any other Employee, officer or director of that Participating Employer, from all claims for liability, loss, damage (including payment of expenses to defend against any such claim) fees, fines, taxes, interest, penalties and expenses which result from any exercise or failure to exercise any responsibilities with respect to the Plan, other than willful misconduct or willful failure to act.
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ARTICLE X
Plan Administration
10.1 | Powers, Duties and Responsibilities of the Administrator and the Committee |
10.1.1 The Administrator and the Committee have full discretion and power to construe the Plan and to determine all questions of fact or interpretation that may arise under it. An interpretation of the Plan or determination of questions of fact regarding the Plan by the Administrator or Committee will be conclusively binding on all persons interested in the Plan.
10.1.2 The Administrator and the Committee have the power to promulgate such rules and procedures, to maintain or cause to be maintained such records and to issue such forms as they deem necessary or proper to administer the Plan.
10.1.3 Subject to the terms of the Plan, the Administrator and/or the Committee will determine the time and manner in which all elections authorized by the Plan must be made or revoked.
10.1.4 The Administrator and the Committee have all the rights, powers, duties and obligations granted or imposed upon them elsewhere in the Plan.
10.1.5 The Administrator and the Committee have the power to do all other acts in the judgment of the Administrator or Committee necessary or desirable for the proper and advantageous administration of the Plan.
10.1.6 The Administrator and the Committee will exercise all of their responsibilities in a uniform and nondiscriminatory manner.
10.2 | Investment Powers, Duties and Responsibilities of the Administrator and the Committee |
10.2.1 The Administrator and the Committee have the power to make and deal with any investment of the Trust in any manner it deems advisable and which is consistent with the Plan. Notwithstanding the foregoing, the power to make and deal with Trust investments does not extend to any assets subject to the direction and control of Plan Participants as described in Section 10.3.2.
10.2.2 The Administrator and/or the Committee will establish and carry out a funding policy and method consistent with the objectives of the Plan and the requirements of ERISA.
10.2.3 The Administrator and the Committee have the power to direct that assets of the Trust be held in a trust or a master trust consisting of assets of plans maintained by a Participating Employer that are qualified under Code Section 401(a).
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10.3 | Investment of Accounts |
10.3.1 The Administrator or, as delegated by the Administrator, the Committee, may establish such different Investment Funds as it from time to time determines to be necessary or advisable for the investment of Participants Accounts, including Investment Funds pursuant to which Accounts can be invested in qualifying employer securities, as defined in Part 4 of Title I of ERISA. Each Investment Fund will have the investment objective or objectives established by the Administrator or Committee. Except to the extent investment responsibility is expressly reserved in another person, the Administrator or the Committee, in its sole discretion, will determine what percentage of the Plan assets is to be invested in qualifying employer securities. The percentage designated by the Administrator can exceed ten percent of the Plans assets, up to a maximum of all of the Plans assets.
10.3.2 Except as provided in Section 10.3.3, the Administrator or, as delegated by the Administrator, the Committee may in its sole discretion permit Participants to determine the portion of their Accounts that will be invested in each Investment Fund. The frequency with which a Participant may change his or her investment election concerning future Pre-Tax Contributions or his or her existing Account will be governed by uniform and nondiscriminatory rules established by the Administrator or the Committee. To the extent permitted under ERISA, the Plan is intended to comply with and be governed by Section 404(c) of ERISA.
10.4 | Valuation of Accounts |
A Participants Accounts will be revalued at fair market value on each Valuation Date. On each Valuation Date, the earnings and losses of the Trust will be allocated to each Participants Account in the ratio that his or her total Account Balance bears to all Account Balances. Notwithstanding the foregoing, if the Administrator or Committee establishes Investment Funds pursuant to Section 10.3, the earnings and losses of the particular Investment Funds will be allocated in the ratio that the portion of each Participants Account Balance invested in a particular Investment Fund bears to the total amount invested in that fund. If and to the extent the rules of any Investment Fund require a different method of valuation, those rules will be followed.
10.5 | The Insurance Company |
The Administrator or the Committee may appoint one or more insurance companies as Funding Agents, and may purchase insurance contracts, annuity contracts or policies from one or more insurance companies with Plan assets. Neither the Administrator nor the Committee, nor any other Plan fiduciary will be liable for any act or omission of an insurance company with respect to any duties delegated to any insurance company.
10.6 | Compensation |
Each person providing services to the Plan will be paid such reasonable compensation as is from time to time agreed upon between the Company and that service provider, and will have his, her or its expenses reimbursed. Notwithstanding the foregoing, no person who is an Employee will be paid any compensation for his or her services to the Plan.
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10.7 | Delegation of Responsibility |
The Administrator and the Committee may designate by written instrument one or more actuaries, accountants or consultants as fiduciaries to carry out, where appropriate, their administrative responsibilities, including their fiduciary duties. The Committee may from time to time allocate or delegate to any subcommittee, member of the Committee and others, not necessarily employees of the Company, any of its duties relative to compliance with ERISA, administration of the Plan and other related matters, including those involving the exercise of discretion. The Companys duties and responsibilities under the Plan will be carried out by its directors, officers and employees, acting on behalf of and in the name of the Company in their capacities as directors, officers and employees, and not as individual fiduciaries. No director, officer or employee of the Company will be a fiduciary with respect to the Plan unless he or she is specifically so designated and expressly accepts such designation.
10.8 | Committee Members |
The Committee will consist of at least three people, who need not be directors, and will be appointed by the Chief Executive Officer of the Company. Any Committee member may resign and the Chief Executive Officer may remove any Committee member, with or without cause, at any time. A majority of the members of the Committee will constitute a quorum for the transaction of business, and the act of a majority of the Committee members at a meeting at which a quorum is present will be an act of the Committee. The Committee can act by written consent signed by all of its members. Any member of the Committee who is an Employee cannot receive compensation for his or her services for the Committee. No Committee member will be entitled to act on or decide any matter relating solely to his or her status as a Participant.
ARTICLE XI
Appointment of Trustee
The Committee or its authorized delegate will appoint the Trustee and either may remove it. The Trustee accepts its appointment by executing the trust agreement. A Trustee will be subject to direction by the Committee or its authorized delegate or, to the extent specified by the Company, by an Investment Manager or other Funding Agent, and will have the degree of discretion to manage and control Plan assets specified in the trust agreement. Neither the Administrator nor the Committee, nor any other Plan fiduciary will be liable for any act or omission to act of a Trustee, as to duties delegated to the Trustee. Any Trustee appointed under this Article XI will be an institution.
ARTICLE XII
Plan Amendment or Termination
12.1 | Plan Amendment or Termination |
The Company may amend, modify or terminate this Plan at any time by resolution of its Board or by resolution of or other action recorded in the minutes of the Administrator or the Committee. Execution and delivery by the Chairman of the Board, the President, any Vice President of the Company or the Committee of an amendment to the Plan is conclusive evidence of the amendment, modification or termination.
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12.2 | Limitations on Plan Amendment |
No Plan amendment can:
(a) | authorize any part of the Trust Fund to be used for, or diverted to, purposes other than the exclusive benefit of Participants or their Beneficiaries; |
(b) | decrease the accrued benefits of any Participant or his or her Beneficiary under the Plan; or |
(c) | except to the extent permitted by law, eliminate or reduce an early retirement benefit or retirement-type subsidy (as defined in Code Section 411) or an optional form of benefit with respect to service prior to the date the amendment is adopted or effective, whichever is later. |
12.3 | Right to Terminate Plan or Discontinue Contributions |
The Participating Employers intend and expect to continue this Plan in effect and to make the contributions provided for in this Plan. However, the Company reserves the right to terminate the Plan at any time in the manner set forth in Section 12.1. In addition, each Participating Employer reserves the right to completely discontinue contributions to the Plan for its Employees at any time. Upon termination of the Plan, each affected Participants Account Balance will be vested and nonforfeitable and the Trust will continue until the Trust Fund has been distributed.
12.4 | Bankruptcy |
If the Company is ever judicially declared bankrupt or insolvent, and no provisions to continue the Plan are made in the bankruptcy or insolvency proceeding, the Plan will, to the extent permissible under federal bankruptcy law, be completely terminated.
ARTICLE XIII
Miscellaneous Provisions
13.1 | Subsequent Changes |
All benefits to which any Participant, Surviving Spouse or Beneficiary may be entitled under this Plan will be determined under the Plan as in effect when the Participant ceases to be an Eligible Employee, and will not be affected by any subsequent change in the provisions of the Plan, unless either the Participant again becomes an Eligible Employee or the subsequent change expressly applies to the Participant.
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13.2 | Merger or Transfer of Assets |
13.2.1 Neither the merger or consolidation of a Participating Employer with any other person, nor the transfer of the assets of a Participating Employer to any other person, nor the merger of the Plan with any other plan will constitute a termination of the Plan.
13.2.2 The Plan may not merge or consolidate with, or transfer any assets or liabilities to, any other plan, unless each Participant would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated).
13.3 | Benefits Not Assignable |
13.3.1 A Participants Account Balance may not be assigned or alienated either voluntarily or involuntarily.
13.3.2 Notwithstanding the foregoing, a Participant may pledge his or her Pre-Tax Account as security for a loan under Section 6.7. In addition, the Administrator or Committee will comply with the terms of any qualified domestic relations order, as defined in Code Section 414(p). Notwithstanding any other provision of the Plan, the Funding Agent has all powers that would otherwise be assigned to the Administrator, regarding the interpretation of and compliance with qualified domestic relations orders, including the power make and enforce rules regarding segregations of or holds on a Participants Account to comply with a qualified domestic relations order, or when a domestic relations order is reasonably expected, or is under examination of its status.
13.3.3 The prohibition of Section 13.3.1 will not apply to any offset of a Participants Account Balance against an amount the Participant is ordered or required to pay to the Plan under a judgment, order, decree or settlement agreement that meets the requirements of this Section 13.3.3. The requirement to pay must arise under a judgment of conviction for a crime involving the Plan, under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA, or pursuant to a settlement agreement between the Secretary of Labor and the Participant in connection with a violation (or alleged violation) of that part 4. In addition, the judgment, order, decree or settlement agreement must expressly provide for the offset of all or part of the amount that must be paid to the Plan against the Participants Account Balance.
13.4 | Exclusive Benefit of Participants |
Notwithstanding any other provision of the Plan, no part of the Trust Fund must ever be used for, or diverted to, any purpose other than the exclusive providing benefits to Participants and their Beneficiaries and defraying the reasonable expenses of the Plan, except that, upon the direction of the Administrator:
(a) | any contribution made by a Participating Employer by a mistake of fact will be returned within one year after payment of the contribution; |
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(b) | any contribution made by a Participating Employer that was conditioned upon its deductibility shall be returned to the extent disallowed as a deduction under Code Section 404 within one year after the deduction is disallowed; and |
(c) | any contribution that was initially conditioned on the Plans satisfying the requirements of Code Section 401(a) will be returned to the Participating Employer who made it, if the Plan is initially determined not to satisfy the requirements of Code Section 401(a). |
Any amount a Participating Employer seeks to recover under paragraph (a) or (b) will be reduced by the amount of any losses attributable to it, but will not be increased by the amount of any earnings attributable to it.
13.5 | Benefits Payable to Minors, Incompetents and Others |
If any benefit is payable to a minor, an incompetent, or a person otherwise under a legal disability, or to a person the Administrator reasonably believes to be physically or mentally incapable of handling and disposing of his or her property, whether because of his or her advanced age, illness, or other physical or mental impairment, the Administrator has the power to apply all or any part of the benefit directly to the care, comfort, maintenance, support, education, or use of the person, or to pay all or any part of the benefit to the persons parent, guardian, committee, conservator, or other legal representative, wherever appointed, to the individual with whom the person is living or to any other individual or entity having the care and control of the person. The Plan, the Administrator and any other Plan fiduciary will have fully discharged their responsibilities to the Participant, Surviving Spouse or Beneficiary entitled to a payment by making payment under the preceding sentence.
13.6 | Plan Not A Contract of Employment |
The Plan is not a contract of Employment, and the terms of Employment of any Employee will not be affected in any way by the Plan or any related instruments, except as specifically provided in the Plan or related instruments.
13.7 | Source of Benefits |
Plan benefits will be paid or provided for solely from the Trust or applicable insurance or annuity contracts, and the Participating Employers assume no liability for Plan benefits.
13.8 | Proof of Age and Marriage |
Participants and Beneficiaries must furnish proof of age and marital status satisfactory to the Administrator or Committee when and if the Administrator or Committee reasonably requests it. The Administrator or Committee may delay the payment of any benefits under the Plan until all pertinent information regarding age and marital status has been presented to it, and then, if appropriate, make payment retroactively.
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13.9 | Controlling Law |
The Plan is intended to qualify under Code Section 401(a) and to comply with ERISA, and its terms will be interpreted accordingly. If any Plan provision is subject to more than one construction, the ambiguity will be resolved in favor of the interpretation or construction consistent with that intent. Similarly, if there is a conflict between any Plan provisions, or between any Plan provision and any Plan administrative form submitted to the Administrator, the Plan provisions necessary to retain qualified status under Code Section 401(a) will govern. Otherwise, to the extent not preempted by ERISA or as expressly provided herein, the laws of the State of Delaware (other than its conflict of laws provisions) will control the interpretation and performance of the Plan.
13.10 | Income Tax Withholding |
The Administrator or Committee may direct that any amounts necessary to comply with applicable employment tax law be withheld from any payment due under this Plan.
13.11 | Claims Procedure |
13.11.1 Any application for benefits under the Plan and all inquiries concerning the Plan shall be submitted to the Company at such address as may be announced to Participants from time to time. Applications for benefits shall be in the form and manner prescribed by the Company and shall be signed by the Participant or, in the case of a benefit payable after the death of the Participant, by the Participants Surviving Spouse or Beneficiary, as the case may be.
13.11.2 The Plan Administrator shall give written or electronic notice of its decision on any application to the applicant within 90 days of receipt of the application. Electronic notification may be used, at the discretion of the Plan Administrator (or Review Panel, as discussed below). If special circumstances require a longer period of time, the Plan Administrator shall provide notice to the applicant within the initial 90-day period, explaining the special circumstances requiring the extension of time and the date by which the Plan expects to render a benefit determination. A decision will be given as soon as possible, but no later than 180 days after receipt of the application. In the event any application for benefits is denied in whole or in part, the Plan Administrator shall notify the applicant in writing or electronic notification of the right to a review of the denial. Such notice shall set forth, in a manner calculated to be understood by the applicant: the specific reasons for the denial; the specific references to the Plan provisions on which the denial is based; a description of any information or material necessary to perfect the application and an explanation of why such material is necessary; and a description of the Plans review procedures and the applicable time limits to such procedures, including a statement of the participants right to bring a civil action under ERISA Section 502(a) following a denial on review.
13.11.3 The Company shall appoint a Review Panel, which shall consist of three or more individuals who may (but need not) be employees of the Company. The Review Panel shall be the named fiduciary that has the authority to act with respect to any appeal from a denial of benefits under the Plan, and shall hold meetings at least quarterly, as needed. The Review Panel shall have the authority to further delegate its responsibilities to two or more individuals who may (but need not) be employees of the Company.
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13.11.4 Any person (or his authorized representative) whose application for benefits is denied in whole or in part may appeal the denial by submitting to the Review Panel a request for a review of the application within 60 days after receiving notice of the denial. The Review Panel shall give the applicant or such representative the opportunity to submit written comments, documents, and other information relating to the claim; and an opportunity to review, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other relevant information (other than legally privileged documents) in preparing such request for review. The request for review shall be in writing and addressed as follows: Review Panel of the Employee Welfare Benefits Plan Committee, 1803 Gears Road, Houston, Texas 77067-4097. The request for review shall set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents, or other material as it may deem necessary or appropriate in making its review. The Review Panel will consider all comments, documents, and other information submitted by the applicant regardless of whether such information was submitted or considered during the initial benefit determination.
13.11.5 The Review Panel shall act upon each request for review within 60 days after receipt thereof. If special circumstances require a longer period of time, the Review Panel shall so notify the applicant within the initial 60 days, explaining the special circumstances requiring the extension of time and the date by which the Review Panel expects to render a benefit determination. A decision will be given as soon as possible, but no later than 120 days after receipt of the request for review. The Review Panel shall give notice of its decision to the Company and the applicant. In the event the Review Panel confirms the denial of the application for benefits in whole or in part, such notice shall set forth in a manner calculated to be understood by the applicant, the specific reasons for such denial and specific references to the Plan provisions on which the decision is based. If such an extension of time for review is required because of special circumstances, the Plan Administrator shall provide the applicant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. In the event the Review Panel confirms the denial of the application for benefits in whole or in part, such notice shall set forth in a manner calculated to be understood by the applicant: the specific reasons for such denial; the specific references to the Plan provisions on which the decision is based; the applicants right, upon request and free of charge, to receive reasonable access to, and copies of, all documents and other relevant information (other than legally-privileged documents and information); and a statement of the applicants right to bring a civil action under ERISA Section 502(a).
13.11.6 The Review Panel shall establish such rules and procedures, consistent with ERISA and the Plan, as it may deem necessary or appropriate in carrying out its responsibilities under this Section 13.11.
13.11.7 To the extent an application for accelerated vesting as a result of a Disability requires the Plan Administrator or the Review Panel, as applicable, to make a determination of Disability under the terms of the Plan, such determination shall be subject to all of the general rules described in this Section 13.11, except as they are expressly modified by this Section 13.11.7.
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(a) | If the applicants claim is for benefits as a result of Disability, then the initial decision on a claim for disability benefits will be made within 45 days after the Plan receives the applicants claim, unless special circumstances require additional time, in which case the Plan Administrator will notify the applicant before the end of the initial 45-day period of an extension of up to 30 days. If necessary, the Plan Administrator may notify the applicant, prior to the end of the initial 30-day extension period, of a second extension of up to 30 days. If an extension is due to the applicants failure to supply the necessary information, the notice of extension will describe the additional information and the applicant will have 45 days to provide the additional information. Moreover, the period for making the determination will be delayed from the date the notification of extension was sent out until the applicant responds to the request for additional information. No additional extensions may be made, except with the applicants voluntary consent. The contents of the notice shall be the same as described in Section 13.11.2 above. If a benefit claim as a result of Disability is denied in whole or in part, the applicant (or his authorized representative) will receive written or electronic notification, as described in Section 13.11.2. |
(b) | If an internal rule, guideline, protocol or similar criterion is relied upon in making the adverse determination, then the notice to the applicant of the adverse decision will either set forth the internal rule, guideline, protocol or similar criterion, or will state that such was relied upon and will be provided free of charge to the applicant upon request (to the extent not legally-privileged) and if the applicants claim was denied based on a medical necessity or experimental treatment or similar exclusion or limit, then the applicant will be provided a statement either explaining the decision or indicating that an explanation will be provided to the applicant free of charge upon request. |
(c) |
The Review Panel, as described above in Section 13.11.3 shall be the named fiduciary that has the authority to act on with respect to any appeal from a denial of benefits as a result of Disability under the Plan. Any applicant (or his authorized representative) whose application for benefits as a result of Disability is denied in whole or in part may appeal the denial by submitting to the Review Panel a request for a review of the application within 180 days after receiving notice of the denial. The request for review shall be in the form and manner prescribed by the Review Panel and addressed as follows: Review Panel of the Employee Welfare Benefits Plan Committee, 1803 Gears Road, Houston, Texas 77067-4097. In the event of such an appeal for review, the provisions of Section 13.11.4 regarding the applicants rights and responsibilities shall apply. Upon request, the Review Panel will identify any medical or vocational expert whose advice was obtained on behalf of the Review Panel in connection with an adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination. The entity or individual appointed by the Review Panel to review the claim will consider the appeal de novo, without any |
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deference to the initial benefit denial. The review will not include any person who participated in the initial benefit denial or who is the subordinate of a person who participated in the initial benefit denial. |
(d) | If the initial disability benefit denial was based in whole or in part on a medical judgment, then the Review Panel will consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment, and who was neither consulted in connection with the initial benefit determination nor is the subordinate of any person who was consulted in connection with that determination; and upon notifying the applicant of an adverse determination on review, include in the notice either an explanation of the clinical basis for the determination, applying the terms of the Plan to the applicants medical circumstances, or a statement that such explanation will be provided free of charge upon request. |
(e) | A decision on review shall be made promptly, but not later than 45 days after receipt of a request for review, unless special circumstances require an extension of time for processing. If an extension is required, the applicant will be notified before the end of the initial 45-day period that an extension of time is required and the anticipated date that the review will be completed. A decision will be given as soon as possible, but not later than 90 days after receipt of a request for review. The Review Panel shall give notice of its decision to the applicant; such notice shall comply with the requirements set forth in Section 13.11.5. In addition, if the applicants claim was denied based on a medical necessity or experimental treatment or similar exclusion, the applicant will be provided a statement explaining the decision, or a statement providing that such explanation will be furnished to the applicant free of charge upon request. The notice shall also contain the following statement: You and your Plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency. |
13.11.8 No legal or equitable action for benefits under the Plan shall be brought unless and until the applicant (a) has submitted a written application for benefits in accordance with Section 13.11.1 (or 13.11.7(a), as applicable), (b) has been notified by the Plan Administrator that the application is denied, (c) has filed a written request for a review of the application in accordance with Section 13.11.4 (or 13.11.7(c), as applicable); and (d) has been notified that the Review Panel has affirmed the denial of the application; provided that legal action may be brought after the Review Panel has failed to take any action on the claim within the time prescribed in Section 13.11.5 (or 13.11.7(e), as applicable). A applicant may not bring an action for benefits in accordance with this Section 13.11.8 later than 90 days after the Review Panel denies the applicants application for benefits.
13.12 | Participation in the Plan by An Affiliate |
13.12.1 With the consent of the Board or an authorized delegate of the Board, any Affiliate, by appropriate action of its board of directors, a general partner or the sole proprietor,
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as the case may be, may adopt the Plan. Each Affiliate will determine the classes of its Employees that will be Eligible Employees and the amount of its contribution to the Plan on behalf of its Eligible Employees.
13.12.2 With the consent of the Board or an authorized delegate of the Board, a Participating Employer, by appropriate action, may terminate its participation in the Plan.
13.12.3 With the consent of the Board or an authorized delegate of the Board, a Participating Employer, by appropriate action, may withdraw from the Plan and the Trust. A Participating Employers withdrawal will be deemed to be an adoption by that Participating Employer of a plan and trust identical to the Plan and the Trust, except that all references to the Company will be deemed to refer to that Participating Employer. At such time and in such manner as the Administrator directs, the assets of the Trust allocable to Employees of the Participating Employer will be transferred to the trust deemed adopted by the Participating Employer.
13.12.4 A Participating Employer will have no power with respect to the Plan except as specifically provided herein.
13.13 | Action by Participating Employers |
Any action required to be taken by the Company pursuant to any Plan provisions will be evidenced in the manner set forth in Section 12.1. Any action required to be taken by a Participating Employer will be evidenced by a resolution of the Participating Employers board of directors or an authorized delegate of that board. Participating Employer action may also be evidenced by a written instrument executed by any person or persons authorized to take the action by the Participating Employers board of directors, any authorized delegate of that board, or the stockholders. A copy of any written instrument evidencing the action by the Company or Participating Employer must be delivered to the secretary or assistant secretary of the Company or Participating Employer.
13.14 | Dividends |
Any dividends credited to a group annuity contract between the Participating Employer and the Funding Agent will be used to provide additional benefits under the Plan.
ARTICLE XIV
Top Heavy Provisions
14.1 | Top Heavy Definitions |
For purposes of this Article XIV and any amendments to it, the terms listed in this Section 14.1 have the meanings ascribed to them below.
14.1.1 Aggregate Employer Contributions means the sum of all Company Contributions and Forfeitures allocated under this Plan for a Matched Participant, and all employer contributions and forfeitures allocated for the Matched Participant to all Related Defined Contributions in the Aggregation group.
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14.1.2 Aggregation Group means the group of plans in a Mandatory Aggregation Group, if any, that includes the Plan, unless including additional Related Plans in the group would prevent the Plan for being a Top Heavy Plan, in which case Aggregation Group means the group of plans in a Permissive Aggregation Group, if any, that includes the Plan.
14.1.3 Determination Date means, for a Plan Year, the last day of the preceding Plan Year. If the Plan is part of an Aggregation Group, the Determination Date for each other plan will be, for any Plan Year, the Determination Date for that other plan that falls in the same calendar year as the Determination Date for the Plan.
14.1.4 Key Employee means an employee described in Code Section 416(i)(1) and the regulations promulgated thereunder. Generally, a Key Employee is an Employee or former Employee (including a deceased Employee) who, at any time during the Plan Year containing the Determination Date is:
(a) | an officer of the Company or an Affiliate with annual Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning on and after January 1, 2002); |
(b) | a five percent owner of the Company or an Affiliate; or |
(c) | a one percent owner of the Company or an Affiliate having annual Compensation of more than $150,000. |
For purposes of determining who is a Key Employee, the Plans definition of Compensation will be applied by taking into account amounts paid by Affiliates who are not Participating Employers, as well as amounts paid by Participating Employers, and without applying the exclusions for amounts paid by a Participating Employer to cover an Employees nonqualified deferred compensation FICA tax obligations and for gross-up payments on such FICA tax payments.
14.1.5 Mandatory Aggregation Group means each plan (considering the Plan and Related Plans) that, during the Plan Year that contains the Determination Date or any of the four preceding Plan Years:
(a) | had a participant who was a Key Employee; or |
(b) | was required to be considered with a plan in which a Key Employee participated in order to enable the plan in which the Key Employee participated to meet the requirements of Code Section 401(a)(4) or 410(b). |
14.1.6 Non-key Employee means an Employee or former Employee who is not a Key Employee.
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14.1.7 Permissive Aggregation Group means the group of plans consisting of the plans in a Mandatory Aggregation Group with the Plan, plus any other Related Plan or Plans that, when considered as a part of the Aggregation Group, does not cause the Aggregation Group to fail to satisfy the requirements of Code Section 401(a)(4) or 410(b).
14.1.8 Present Value of Accrued Benefits means, for any Plan Year, an amount equal to the sum of (a), (b) and (c) for each person who, in the Plan Year containing the Determination Date, was a Key Employee or a Non-key Employee.
(a) | The value of a persons full Account Balance under the Plan, plus his or her total account balances under each Related Defined Contribution Plan in the Aggregation Group, determined as of the valuation date coincident with or immediately preceding the Determination Date, adjust for contributions due as of the Determination Date, as follows: |
(i) | in the case of a plan not subject to the minimum funding requirements of Code Section 412, by including the amount of any contributions actually made after the valuation but on or before the Determination Date and, in the first plan year of a plan, by including contributions made after the Determination Date that are allocated as of a date in the first plan year; and |
(ii) | in the case of a plan that is subject to the minimum funding requirements of Code Section 412, by including the amount of any contributions that would be allocated as of a date no later than the Determination Date, plus adjustments to those amounts required under applicable rulings, even though those amounts are not yet required to be contributed or allocated (e.g., because they have been waived) and by including the amount of any contributions actually made (or due to be made) after the valuation date but before the expiration of the extended payment period in Code Section 412(c)(10). |
(b) | The sum of the actuarial present value of a persons accrued benefits under each Related Defined Benefit Plan in the Aggregation Group, determined for any person who is employed by a Participating Employer on a Determination Date, expressed as a benefit commencing at normal retirement date (or, if later, the persons attained age). The present value of an accrued benefit under a Related Defined Benefit Plan is determined as of the most recent valuation date that is within the 12-month period ending on the Determination Date. |
(c) | The aggregate value of amounts distributed under the Plan and any plan in an Aggregation Group (as defined in Code Section 416(g)(2)) during the one (1) year period ending on the Determination Date, including amounts distributed under a terminated plan that, if it had not been terminated, would have been in a Mandatory Aggregation Group. In the case of a distribution from any such plan made for a reason other than separation from service, death or Disability, this provision shall be applied by substituting five (5) year period for one (1) year period. |
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(d) | The Present Value of Accrued Benefit of any individual who has not performed services for the Company or an Affiliate during the one (1) year period ending on the Determination Date shall not be taken into account. |
14.1.9 Related Plan means any other defined contribution plan (a Related Defined Contribution Plan) or defined benefit plan (a Related Defined Benefit Plan) (both as defined in Code Section 415(k), maintained by the Company or an Affiliate.
14.1.10 A Super Top Heavy Aggregation Group exists in any Plan Year for which, as of the Determination Date, the sum of the Present Value of Accrued Benefits for Key Employees under all plans in the Aggregation Group exceeds 90% of the sum of the Present Value of Accrued Benefits for all employees under all plans in the Aggregation Group. In determining the sum of the Present Value of Accrued Benefits for all employees, the Present Value of Accrued Benefits for any Non-key Employee who was a Key Employee for any Plan Year preceding the Plan Year that contains the Determination Date will be excluded.
14.1.11 Super Top Heavy Plan means the Plan when it is described in the second sentence of Section 14.2.
14.1.12 A Top Heavy Aggregation Gro up exists in any Plan Year for which, as of the Determination Date, the sum of the Present Value of Accrued Benefits for Key Employees under all plans in the Aggregation Group exceeds 60% of the sum of the Present Value of Accrued Benefits for all employees under all plans in the Aggregation Group. In determining the sum of the Present Value of Accrued Benefits for all employees, the Present Value of Accrued Benefits for any Non-key Employee who was a Key Employee for any Plan Year preceding the Plan Year that contains the Determination Date will be excluded.
14.1.13 Top Heavy Plan means the Plan when it is described in the first sentence of Section 14.2.
14.2 | Determination of Top Heavy Status |
This Plan is a Top Heavy Plan in any Plan Year in which it is a member of a Top Heavy Aggregation Group, including a Top Heavy Aggregation Group that includes only the Plan. The Plan is a Super Top Heavy Plan in any Plan Year in which it is a member of a Super Top Heavy Aggregation Group, including a Super Top Heavy Aggregation Group that includes only the Plan.
14.3 | Minimum Allocation for Top Heavy Plan |
14.3.1 For any Plan Year that the Plan is a Top Heavy Plan, the sum of the Company Contributions and Forfeitures allocated to the Accounts of each Matched Participant who is a Non-key Employee will be at least three percent of the Matched Participants Compensation. However, if the sum of the Company contributions and Forfeitures allocated to the Accounts of each Matched Participant who is a Key Employee for the Plan Year is less than three percent of
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his or her Compensation and this Plan is not required to be included in an Aggregation Group to enable a defined benefit plan to meet the requirements of Code Section 401(a)(4) or 410(b), the sum of the Company Contributions and Forfeitures allocated to the Accounts of each Matched Participant who is a Non-key Employee for the Plan Year will be equal to the largest percentage of Compensation allocated to the Accounts of any Matched Participant who is a Key Employee. Notwithstanding the foregoing, no minimum allocation will be required for any Non-key Employee who participates in another defined contribution plan subject to Code Section 412 and included with this Plan in a Mandatory Aggregation Group.
14.3.2 For any Plan Year when the Plan is a Top Heavy Plan but not a Super Top Heavy Plan and a Key Employee is a participant in both this Plan and a defined benefit plan included in a Mandatory Aggregation Group that is top heavy, the extra minimum allocation will be provided only in this Plan, and by substituting four percent for three percent, where the latter percentage appears in Section 14.3.1.
14.3.3 For any Plan Year that the Plan is a Top 1-levy Plan, the minimum allocations set forth in this Section 14.3 will be allocated to the Accounts of all Non-key Employees who are Matched Participants and who are employed by the Company on the last day of the Plan Year, regardless of their service during the Plan Year, and whether or not they have made contributions of their own to the Plan.
14.3.4 In lieu of the above, if a Non-key Employee participates in this Plan and a Related Defined Benefit Plan included with this Plan in a Mandatory Aggregation Group that is a Top Heavy Aggregation Group, a minimum allocation of five percent of Compensation will be provided under this Plan. However, for any Plan Year when the Plan is a Top Heavy Plan but not a Super Top Heavy Plan and a Key Employee is a participant in both this Plan and a Related Defined Benefit Plan included with this Plan in a Mandatory Aggregation Group, seven and one-half percent will be substituted for five percent where the latter percentage appears in this Section 14.3.4, and the extra minimum allocation will be provided only in this Plan.
14.3.5 Company Contributions made on behalf of a Matched Participant pursuant to Section 3.4 of the Plan shall be taken into account for purposes of satisfying the minimum allocation requirements of Section 14.3 of the Plan and Code Section 416(c)(2). Company Contributions made on behalf of a Matched Participant that are used to satisfy the minimum contribution requirements shall be treated as Company Contributions for purposes of the Actual Contribution Percentage Test and other requirements of Code Section 401(m).
IN WITNESS WHEREOF, the undersigned Committee member has executed this Plan this day of May, 2008, to be effective as of June 1, 2008, except as otherwise expressly provided herein.
JBT CORPORATION |
||
By: |
/s/ Jeffrey A. Carr |
|
Member, Employee Welfare Benefits Plan Committee |
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EXHIBIT 21.1
JOHN BEAN TECHNOLOGIES CORPORATION SUBSIDIARY LIST
Effective as of the Date of the Spin-Off
Name |
Jurisdiction of Organization |
|
John Bean Technologies Corporation |
Delaware | |
John Bean Technologies LLC |
Delaware | |
Jetway Systems Asia, Inc. |
Delaware | |
John Bean Technologies Holding AB |
Delaware/Sweden | |
John Bean Technologies International AB |
Sweden | |
John Bean Technologies AB |
Sweden | |
John Bean Technologies GmbH |
Germany | |
John Bean Technologies Sp z.o.o. |
Poland | |
John Bean Technologies SA |
France | |
John Bean Technologies BV |
Netherlands | |
John Bean Technologies Spain Holding BV |
Netherlands | |
John Bean Technologies South Africa Holding BV |
Netherlands | |
John Bean Technologies SLU |
Spain | |
John Bean Technologies AeroTech SL |
Spain | |
John Bean Technologies FoodTech SL |
Spain | |
John Bean Technologies IbericaSL |
Spain | |
John Bean Technologies (Pty) Ltd. |
South Africa | |
John Bean Technologies LLC |
Russia | |
John Bean Technologies Ltd. |
United Kingdom | |
John Bean Technologies NV |
Belgium | |
John Bean Technologies SpA |
Italy | |
John Bean Technologies Argentina s.r.l. |
Argentina | |
John Bean Technologies Máquinas e Equipamentos Industriais Ltda. |
Brazil | |
John Bean Technologies Canada Ltd. |
Canada | |
John Bean Technologies de Mexico S. de R.L. de C.V. |
Mexico | |
EMD S.A. de C.V. |
Mexico | |
John Bean Technologies Hong Kong Ltd. |
Hong Kong | |
JBT Ningbo Holdings Limited |
Hong Kong | |
JBT Shanghai Holdings Limited |
Hong Kong | |
John Bean Technologies (Ningbo) Co. Ltd. |
China | |
John Bean Technologies (Shanghai) Co. Ltd. |
China | |
John Bean Technologies Australia Ltd. |
Australia | |
John Bean Technologies K.K. |
Japan | |
John Bean Technologies NZ Ltd. |
New Zealand | |
John Bean Technologies Thailand Ltd. |
Thailand | |
John Bean Technologies Singapore Pte. Ltd. |
Singapore |
Exhibit 99.1
Exhibit 99.1
[ ], 2008
Dear FMC Technologies, Inc. Stockholder:
We are pleased to inform you that the Board of Directors of FMC Technologies, Inc. (FMC Technologies) has approved the spin-off of John Bean Technologies Corporation (JBT Corporation), a wholly owned subsidiary of FMC Technologies. Following the spin-off, FMC Technologies business will consist entirely of the Energy Systems business. JBT Corporation will consist of the former FoodTech and Airport Systems business segments of FMC Technologies.
The spin-off of JBT Corporation will occur by way of a pro rata distribution of JBT Corporations common stock to FMC Technologies stockholders. In the distribution, each FMC Technologies stockholder will receive .216 of a share of JBT Corporation common stock for every share of FMC Technologies common stock held at 5:00 p.m., New York City time, on , 2008, which is the record date of the spin-off. The dividend will be paid in book-entry form and physical stock certificates will be issued only upon request. Stockholder approval of the spin-off is not required, and you are not required to take any action to receive your JBT Corporation common stock.
We believe that the separation of JBT Corporation from FMC Technologies will provide a better focus for each company to pursue strategies in their own distinct businesses and markets. Accordingly, we believe the spin-off will build long-term stockholder value.
Following the spin-off, you will own shares in both FMC Technologies and JBT Corporation. FMC Technologies common stock will continue to trade on the New York Stock Exchange under the symbol FTI. We intend to apply to have JBT Corporation common stock authorized for listing on the New York Stock Exchange under the symbol JBT.
We intend for the spin-off to be tax-free for stockholders. To that end, we expect to receive a favorable ruling from the U.S. Internal Revenue Service and a favorable opinion of Kirkland & Ellis LLP confirming the spin-offs tax-free status. You should, of course, consult your own tax advisor as to the particular consequences of the spin-off to you.
The enclosed information statement, which is being mailed to all FMC Technologies stockholders, describes the spin-off in detail and contains important information about JBT Corporation, including its financial statements.
We look forward to your continued support as a stockholder of FMC Technologies. We remain committed to working on your behalf to build long-term stockholder value.
Sincerely, |
Peter D. Kinnear |
FMC Technologies, Inc. |
Chief Executive Officer and President |
[ ], 2008
Dear John Bean Technologies Corporation Stockholder:
It is my pleasure to welcome you as a shareholder of our new company, John Bean Technologies Corporation (JBT Corporation). As an independent, publicly-traded company, we believe we can more effectively focus on our objectives and satisfy the strategic needs of our company.
Following the spin-off, we will be a leading provider of customized solutions that are engineered for the viable and growing food processing and air transportation industries. We will design, manufacture, test and service technologically sophisticated systems and products through two business segments, JBT FoodTech and JBT AeroTech. JBT FoodTech will market its solutions and services to multi-national and regional industrial food processing companies. JBT AeroTech will market its solutions and services to domestic and international airport authorities, passenger airlines, air freight and ground handling companies and the United States military. We believe our experienced management team, blue chip customer base and global presence are representative of the strengths that will position us to excel as a stand-alone entity. Going forward, our core strategies will be to:
|
maintain and extend our technological leadership positions to capture the growth created by the trends in the food processing and air transportation industries; |
|
leverage our large installed base of food processing and airport equipment to generate new aftermarket business and to grow our offering of aftermarket products, parts and services; |
|
capture international growth opportunities through our strong global presence, which includes manufacturing, sales and service organizations located on six continents; and |
|
pursue external growth through select, value-accretive acquisitions of companies and technologies. |
We intend to apply to have JBT Corporation common stock authorized for listing on the New York Stock Exchange under the symbol JBT. We invite you to learn more about us by reviewing the enclosed information statement. We look forward to our future as a separate publicly-traded company and to your support as a holder of JBT Corporation common stock.
Sincerely, |
Charles H. Cannon, Jr. |
John Bean Technologies Corporation |
Chairman of the Board, Chief Executive Officer and President |
Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the United States Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended.
SUBJECT TO COMPLETION, DATED JULY 3, 2008
PRELIMINARY INFORMATION STATEMENT
John Bean Technologies Corporation
Common Stock
(par value $0.01 per share)
This information statement is being furnished in connection with the distribution to holders of common stock, par value $0.01 per share, of FMC Technologies, Inc. (FMC Technologies) of all the outstanding shares of common stock, par value $0.01 per share, of John Bean Technologies Corporation (JBT Corporation).
We are currently a subsidiary of FMC Technologies. Following the spin-off, our business will consist of the assets and liabilities that currently comprise the FoodTech and Airport Systems businesses of FMC Technologies.
Shares of our common stock will be distributed to holders of FMC Technologies common stock of record as of 5:00 p.m., New York City time, [ ], 2008, which will be the record date. These stockholders will receive .216 of a share of our common stock for every share of FMC Technologies common stock held on the record date. The spin-off of our shares will be made in book-entry form, and physical stock certificates will be issued only upon request. The spin-off will be effective at 11:59 p.m., New York City time on [ ], 2008. FMC Technologies expects to receive a private letter ruling from the U.S. Internal Revenue Service to the effect that the spin-off will be tax-free to FMC Technologies and its stockholders for U.S. federal income tax purposes.
No stockholder approval of the spin-off is required or sought. We are not asking you for a proxy and you are requested not to send us a proxy . FMC Technologies stockholders will not be required to pay for the shares of our common stock to be received by them in the spin-off or to surrender or exchange shares of FMC Technologies common stock in order to receive our common stock or to take any other action in connection with the spin-off.
Currently, there is no trading market for our common stock. However, we expect that a limited market, commonly known as a when-issued trading market, for our common stock will develop on or shortly before the record date for the spin-off, and we expect that regular way trading of our common stock will begin the first trading day after the spin-off. We intend to apply to have our common stock authorized for listing on the New York Stock Exchange, or the NYSE, under the symbol JBT.
In reviewing this information statement, you should carefully consider the matters described under Risk Factors beginning on page 9 for a discussion of certain factors that should be considered by recipients of our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
The date of this information statement is [ ] , 2008.
This information statement was first mailed to FMC Technologies stockholders on or about , 2008.
This information statement is being furnished solely to provide information to FMC Technologies stockholders who will receive shares of our common stock in the distribution. This information statement is not, and is not to be construed as, an inducement or encouragement to buy or sell any of our securities or any securities of FMC Technologies. This information statement describes our business, the relationship between FMC Technologies and us, and how the spin-off affects FMC Technologies and its stockholders, and provides other information to assist you in evaluating the benefits and risks of holding or disposing of our common stock that you will receive in the distribution. You should be aware of certain risks relating to the spin-off, our business and ownership of our common stock, which are described under the heading Risk Factors.
i
You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information, except in the normal course of our public disclosure obligations and practices.
Unless the context indicates otherwise, all references in this information statement:
|
to JBT Corporation, us, we, or our include John Bean Technologies Corporation and its subsidiaries; and |
|
to FMC or FMC Technologies are to FMC Technologies, Inc. and its subsidiaries, and, with respect to periods following the spin-off, FMC Technologies, Inc. and its subsidiaries other than JBT Corporation and its subsidiaries. |
The transaction in which we will be separated from FMC Technologies and become a separately-traded public company is referred to in this information statement as the separation, the distribution or the spin-off.
We obtained the market and industry data and other statistical information used throughout this information statement from our own research, surveys or studies conducted by third parties, independent industry or general publications and other published independent sources. In particular, we have based much of our discussion of the food processing industry on information published by Euromonitor International. We have based much of our discussion of the air transportation industry on information published by The Boeing Company. References to Euromonitor International are to Euromonitor International Inc., an industry-leading market research firm, whose most recent report on the world market for packaged food referenced herein was published in June 2006. The Boeing Company is the worlds largest aerospace company, whose most recent annual market outlook on the air transportation industry was published in 2007. None of these publications were prepared on our behalf. While we believe that each of these sources is reliable, we have not independently verified such data. Similarly, we believe our internal research is reliable, but it has not been verified by any independent sources.
ii
QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF:
Q: | Why am I receiving this document? |
A: | FMC Technologies is delivering this document to you because you were a holder of FMC Technologies common stock on the record date for the distribution of our shares of common stock. Accordingly, you are entitled to receive .216 of a share of our common stock for every share of FMC Technologies common stock that you held on the record date. No action is required for you to participate in the distribution. |
Q: | What is the spin-off? |
A: | The spin-off is the overall transaction of separating our company from FMC Technologies, which will be accomplished through a series of transactions resulting in us owning what are currently the FoodTech and Airport Systems business segments of FMC Technologies. The final step of the transactions will be the pro rata distribution of our common stock by FMC Technologies to holders of FMC Technologies common stock. We refer to this last step as the distribution. For additional information regarding these transactions, see The Spin-OffManner of Effecting the Spin-Off beginning on page 27. |
Q: | Who is JBT Corporation? |
A: | Up to the time of the spin-off, we will be a wholly owned subsidiary of FMC Technologies that will own the assets and liabilities that currently comprise FMC Technologies FoodTech and Airport Systems business segments. Following the spin-off, we will be a separate publicly-traded company. We are a leading provider of customized solutions that are engineered for the viable and growing food processing and air transportation industries. We design, manufacture, test and service technologically sophisticated systems and products through our JBT FoodTech and JBT AeroTech business segments. JBT FoodTech markets its solutions and services to multi-national and regional industrial food processing companies. JBT AeroTech markets its solutions and services to domestic and international airport authorities, passenger airlines, air freight and ground handling companies and the United States military. |
Q: | Why is FMC Technologies separating our businesses and distributing our stock? |
A: | FMC Technologies Board of Directors and management believe the separation will provide the benefits set forth below under the caption The Spin-OffReasons for the Spin-Off beginning on page 26, and that achieving those benefits will result in greater aggregate value to stockholders who retain their FMC Technologies and JBT Corporation shares than would be obtained under the current structure. |
Q: | Why is the separation of the two companies structured as a spin-off? |
A: | FMC Technologies Board of Directors believes that a tax-free spin-off of our shares is a cost-effective and tax efficient way to separate the companies. |
Q: | What is the record date for the distribution? |
A: | The record date is [ ], 2008, and ownership will be determined as of 5:00 p.m., New York City time, on that date. When we refer to the record date, we are referring to that time and date. |
Q: | What will be our relationship with FMC Technologies after the spin-off? |
A: | FMC Technologies and JBT Corporation each will be independent, publicly-traded companies. However, we will enter into agreements with FMC Technologies that will ease our transition from consolidated operating segments to an independent company following the spin-off. For example, FMC Technologies will continue to provide certain administrative services for an agreed period following the spin-off. For additional information regarding our relationship with FMC Technologies after the spin-off, see Our Relationship with FMC Technologies After the Spin-Off beginning on page 113. |
iii
Q: | When will the spin-off be completed? |
A: | Shares of our common stock will be distributed on or about [ ], 2008. We refer to this date as the distribution date. |
Q: | Can FMC Technologies decide to cancel the distribution of our common stock even if all the conditions have been met? |
A: | Yes. The distribution is conditioned upon satisfaction or waiver of certain conditions. See The Spin-OffSpin-Off Conditions and Termination beginning on page 31. FMC Technologies has the right to terminate the stock distribution, even if all of these conditions are met, if at any time FMC Technologies Board of Directors determines, in its sole discretion, that FMC Technologies and JBT Corporation are better served being a combined company or that business conditions are such that it is not advisable to complete the spin-off. Business conditions that could cause FMC Technologies Board of Directors to terminate the spin-off include, among other things, deterioration in business value caused by either a decline in the outlook for our FoodTech and Airport Systems businesses or a decline in the equity market valuation for such businesses. |
Q: | What will happen to the listing of FMC Technologies common stock? |
A: | Nothing. FMC Technologies common stock will continue to be traded on the New York Stock Exchange (NYSE) under the symbol FTI. |
Q: | Will the spin-off affect the market price of my FMC Technologies shares? |
A: | Yes. As a result of the spin-off, we expect the trading price of FMC Technologies shares immediately following the distribution to be lower than immediately prior to the distribution because the trading price will no longer reflect the value of our business. In addition, until the market has fully analyzed the operations of FMC Technologies without these business segments, the price of FMC Technologies shares may fluctuate significantly. Furthermore, the combined trading prices of FMC Technologies common stock and our common stock after the distribution may be higher or lower than the trading price of FMC Technologies common stock prior to the distribution. |
Q: | What will FMC Technologies stockholders receive in the spin-off? |
A: | In the spin-off, FMC Technologies stockholders will receive .216 of a share of our common stock for every share of FMC Technologies common stock they own as of the record date of the spin-off. Immediately after the spin-off, FMC Technologies stockholders will still own all of FMC Technologies current business segments, but they will own them as two separate investments rather than as a single investment. |
After the spin-off, the certificates and book-entry interests representing the old FMC Technologies common stock will represent such stockholders interests in the FMC Technologies businesses (other than our business) following the spin-off, and the certificates and book-entry interests representing our common stock that stockholders receive in the spin-off will represent their interest in our business only.
Q: | What does an FMC Technologies stockholder need to do now? |
A: | FMC Technologies stockholders do not need to take any action, although we urge you to read this entire document carefully. The approval of the FMC Technologies stockholders is not required or sought to effect the spin-off, and FMC Technologies stockholders have no appraisal rights in connection with the spin-off. FMC Technologies is not seeking a proxy from any stockholders, and you are requested not to send us a proxy. |
FMC Technologies stockholders will not be required to pay anything for our shares distributed in the spin-off or to surrender any shares of FMC Technologies common stock. FMC Technologies stockholders should not send in their FMC Technologies share certificates. FMC Technologies stockholders will automatically receive their shares of our common stock when the spin-off is effected.
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Q: | Are there risks associated with owning our common stock? |
A: | Yes. Our business is subject to both general and specific risks relating to our operations. In addition, our spin-off from FMC Technologies presents risks relating to our becoming a separately-traded public company as well as risks relating to the nature of the spin-off transaction itself. See Risk Factors beginning on page 9. |
Q: | What are the U.S. federal income tax consequences of the spin-off to FMC Technologies stockholders? |
A: | Based on the private letter ruling that FMC Technologies expects to receive from the Internal Revenue Service (IRS), FMC Technologies stockholders will not recognize a gain or loss on the receipt of shares of our common stock in the spin-off. FMC Technologies stockholders will apportion their tax basis in FMC Technologies common stock between such FMC Technologies common stock and our common stock received in the spin-off in proportion to the relative fair market values of such stock at the time of the spin-off. An FMC Technologies stockholders holding period for our common stock received in the spin-off will include the period for which that stockholders FMC Technologies common stock was held. See The Spin-OffMaterial U.S. Federal Income Tax Consequences of the Spin-Off beginning on page 28. You should consult your own tax advisor as to the particular consequences of the spin-off to you. |
Q: | What if I want to sell my FMC Technologies common stock or my JBT Corporation common stock? |
A: | You should consult with your own financial advisors, such as your stockbroker, bank or tax advisor. We do not make any recommendations on the purchase, retention or sale of shares of FMC Technologies common stock or our common stock to be distributed. |
If you do decide to sell any shares, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your FMC Technologies common stock or your JBT Corporation common stock after it is distributed, or both.
Q: | Where will I be able to trade shares of our common stock? |
A: | There is not currently a public market for our common stock. We intend to apply to have our common stock authorized for listing on the NYSE under the symbol JBT. We anticipate that trading in shares of our common stock will begin on a when-issued basis on or shortly before the record date and before the distribution date, and regular way trading will begin on the first trading day following the distribution date. If trading does begin on a when-issued basis, you may purchase or sell our common stock after that time, but your transaction will not settle until after the distribution date. On the first trading day following the distribution date, when-issued trading with respect to our common stock will end and regular way trading will begin. We cannot predict the trading prices for our common stock before or after the distribution date. |
Q: | Do you intend to pay dividends on your common stock? |
A: | We anticipate that we will pay cash dividends on our common stock following the spin-off. We will start with a quarterly dividend of $ [0.08] per share. The declaration and amount of future dividends, if any, will be determined by our Board of Directors and will depend on our financial condition, earnings, capital requirements, financial covenants, regulatory constraints, industry practice and other factors our Board of Directors deems relevant. Because FMC Technologies does not currently pay a dividend and because we and FMC Technologies will be separate entities after the spin-off, our decision to pay (or not pay) dividends in the future will not impact FMC Technologies decision of whether to pay (or not pay) dividends in the future. See Dividend Policy on page 32 for additional information on our dividend policy following the spin-off. |
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Q: | Where can FMC Technologies stockholders get more information? |
A: | Before the distribution, if you have any questions relating to the distribution, you should contact: |
FMC Technologies, Inc.
1803 Gears Road
Houston, Texas 77067
Attention: Corporate Secretary
(281) 591-4000
After the distribution, if you have any questions relating to our common stock, you should contact:
John Bean Technologies Corporation
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Corporate Secretary
(312) 861-5900
Q: | Who will be the distribution agent for the spin-off? |
A: | National City Bank will be the distribution agent for the spin-off. The distribution agent can be contacted at: |
National City Bank
Corporate Trust Operations
P.O. Box 92301
Cleveland, OH 44193-0900
(800) 622-6757
shareholder.inquiries@nationalcity.com
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We provide customized solutions that are engineered for the viable and growing food processing and air transportation industries. We design, manufacture, test and service technologically sophisticated systems and products for customers through our JBT FoodTech and JBT AeroTech segments.
We have a long history of leadership in the industries we serve. Food industry machinery was the foundation of the original Bean Spray Pump Company founded by John Bean in the 1880s. The Bean Spray Pump technology was also at the foundation of our first airport product when a John Bean Spray Pump was adapted to become an aircraft deicer in the 1960s. The Bean Spray Pump Company is the foundation on which FMC Corporation, FMC Technologies and now JBT Corporation were built.
JBT FoodTech markets its solutions and services to multi-national and regional industrial food processing companies. The product offerings of JBT FoodTech businesses include:
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freezer solutions for the freezing and chilling of meat, seafood, poultry, ready-to-eat meals, fruit, vegetable and bakery products; |
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protein processing solutions that portion, coat and cook poultry, meat, seafood, vegetable and bakery products; |
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shelf stable sterilization solutions for fruits, vegetables, soups, sauces, dairy and pet food products as well as ready-to-eat meals in a wide variety of modern packages; and |
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fruit processing solutions that extract, concentrate and aseptically process citrus, tomato and other fruits. |
JBT AeroTech markets its solutions and services to domestic and international airport authorities, passenger airlines, air freight and ground handling companies and the United States military. The product offerings of our JBT AeroTech businesses include:
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ground support equipment for cargo loading, aircraft deicing and aircraft towing; |
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gate equipment for passenger boarding, on the ground aircraft power and cooling; |
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airport services for maintenance of airport equipment, systems and facilities; and |
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military equipment for cargo loading, aircraft towing and on the ground aircraft cooling. |
In 2007, JBT Corporation generated $978.0 million of revenue and $88.4 million in total segment operating profit, resulting in compound annual growth rates since 2005 of 9.0% and 17.3%, respectively.
Our Strengths
We believe the following competitive strengths position us well for continued operating success, growth and profitability:
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We are a leader in attractive markets. We provide customized solutions that are engineered for the viable and growing food processing and air transportation industries. Because of the large and diverse nature of the food processing and air transportation industries, we have been selective in the specific applications into which we leverage our leading technologies. We are a leading solutions provider in the markets that we serve. We have a large installed base of systems and equipment and we believe we have #1 or #2 market positions in our major product lines based on sales. We invest in maintaining and extending our technology leadership positions and addressing the technological challenges of evolving industry trends. We are focused on continuing to improve our existing products and services and developing new products and services to increase our customers efficiencies and reduce their total cost of ownership. |
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We have a strong track record of profitable growth . Over the last three years, the compound annual growth rates for our total revenue and segment operating profit have been 9.0% and 17.3%, respectively. The strong earnings allow us to continue to invest in technological innovations to increase profitability, make acquisitions and support our dividend policy. |
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We have a blue chip customer base . We provide customized food processing solutions to a diverse base of customers, comprised of top multinational and regional food processors. We also provide ground support equipment, gate equipment and airport maintenance services to many of the leading domestic and international air passenger and cargo carriers, ground handlers, and airports and to the U.S. Department of Defense. |
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We have a large installed base that provides a growing, recurring revenue stream . We have delivered over 40,000 pieces of food processing equipment as well as over 30,000 pieces of airport equipment. Our large installed base provides a growing, recurring revenue stream as well as the opportunity to strengthen and enhance customer relationships, increase our customer knowledge and generate new ideas for product development. |
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We have built a global geographic footprint with extensive capabilities . We have built a strong global presence with manufacturing, sourcing, sales and service organizations located on six continents to support our equipment that has been delivered to customers in more than 100 countries. As demand increases in emerging regions such as Latin America, the Middle East, Eastern Europe and Asia, we are positioned to provide local customers or expanding multinational companies with our products, expertise and customer service. |
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We are an attractive platform for growth through acquisition . We believe that the food processing and air transportation industries provide opportunities to make value-accretive acquisitions of companies and technologies. We believe that our global capabilities and leading industry positions make acquisitions of complementary companies and technologies ideal for integration into our global businesses. |
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We have a more focused corporate structure that provides for greater value creation opportunities . We anticipate multiple benefits from our management and corporate resources being focused solely on our JBT FoodTech and JBT AeroTech businesses. Our new corporate structure will enable us to transition from a generator of cash for a larger corporate parent to an independent, stand-alone company focused on growth opportunities within the food processing and air transportation industries. |
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We have an efficient capital structure that allows for effective returns of capital to shareholders . Our new capital structure will allow us to manage the business on an economic value added basis, which will provide us the appropriate performance measurement tools to maintain or improve our return on capital. It will also enable us to utilize free cash flow to support a dividend policy and reduce debt while keeping management focused on operating results and cash flow generation. Our capital structure will also provide us with the flexibility to make selective value-accretive acquisitions within the industries we serve. |
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Our strong management team is highly experienced and appropriately incentivized . We have an experienced and diverse senior management team. On average, the members of our senior management team have careers exceeding 20 years with FMC Technologies and FMC Corporation, including an average of over four years living and working abroad. In addition, our senior management team members comprise nine different nationalities and speak nine different languages. We intend to use net contribution, a measurement of excess returns on capital, to measure the productive use of capital and changes in EBITDA to measure growth. A major portion of our new bonus and long-term incentive plans are based solely on JBT Corporations results and provide appropriate focus to maximize shareholder value. |
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Our Strategy
As part of our core mission of being a leading supplier of customized solutions to the food processing and air transportation industries, we will focus on four critical strategies:
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Extend Technology Leadership. By maintaining and extending our technological leadership positions, we will remain well positioned to capture the growth created by the trends in the food processing and air transportation industries. To extend our technological leadership position, we will continue to invest in ongoing research and development. We will focus on enhancing our customers efficiencies, reducing their total cost of ownership, and solving technological challenges posed by evolving industry trends. |
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Leverage Our Installed Base. We intend to continue to leverage our large installed base of food processing and airport equipment to generate new aftermarket business and to increase our offering of aftermarket products, parts and services. Our large installed base provides a growing, recurring revenue stream as well as the opportunity to strengthen and enhance our customer relationships, increase our customer knowledge and generate new ideas for product development. |
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Capture International Growth Opportunities. We have built a strong global presence with manufacturing, sales and service organizations located on six continents. As demand increases in emerging regions such as Latin America, the Middle East, Eastern Europe and Asia, we are positioned to provide local or expanding multinational customers with our products, expertise and customer service. Additionally, our new manufacturing facility in China and our established sourcing teams in India and China provide us with a strong base to supply products to and from Asia. |
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Growth Through Acquisitions. In addition to benefiting from the expected growth in the markets that we serve, we also intend to pursue external growth through select, value-accretive acquisitions of companies and technologies. We believe that the food processing and air transportation equipment industries provide opportunities for growth through acquisition. We believe that our global capabilities and leading industry positions will permit us to efficiently integrate complementary companies and technologies into our global business. |
Our Industries
JBT Corporation, through its consolidated business segments, serves two primary industries: food processing and air transportation.
Euromonitor International reports that the world market for packaged food was $1.455 trillion in 2005 and is projected to grow at a compound annual rate of 2.65% through 2010. Euromonitor forecasts that the fastest growing regional packaged food markets through 2010 will be Eastern Europe, with compound annual growth of 5.7%, followed by Africa and the Middle East (4.8%), Latin America (4.1%) and Asia Pacific (2.5%). While the overall growth rate of processed foods drives increased demand for JBT FoodTech equipment, products and services, our sales are also influenced by several industry trends. These trends include consolidation within the food industry, growth in new food products and packaging, growth in quick serve foods and growth in developing markets.
The Boeing Company projects that for the period 2006-2026 the air transportation industry will experience compound annual growth of 4.5% for the number of passengers traveling, 5.0% for airline traffic, 6.1% for air cargo traffic and 3.5% for airplane fleet size. While the overall growth rate of aircraft fleets and passenger and cargo traffic drives increased demand for JBT AeroTech equipment and services, our sales are also influenced by several other industry trends that impact our key markets. These include industry consolidation and restructuring, developing markets growth, new aircraft technology challenges and increased health, safety and environmental concerns.
For additional details on the food processing and air transportation industries, see BusinessJBT FoodTechIndustry Overview and BusinessJBT AeroTech-Industry Overview beginning on pages 57 and 63, respectively.
3
Summary of the Spin-Off
The following is a summary of the terms of the spin-off. Please see The Spin-Off beginning on page 26 for a more detailed description of the matters described below.
Distributing company |
FMC Technologies, Inc., a Delaware corporation. |
Distributed company |
John Bean Technologies Corporation (JBT Corporation), which is comprised of the current FoodTech and Airport Systems business segments of FMC Technologies. JBT Corporations principal executive offices are located at 200 East Randolph Drive, Chicago, Illinois 60601. |
Distribution ratio |
Each holder of FMC Technologies common stock will receive a dividend of .216 of a share of JBT Corporation common stock for every share of FMC Technologies common stock held on the record date. |
Securities to be distributed |
Approximately [27,601,614] shares of JBT Corporation common stock and accompanying preferred share purchase rights, which will constitute all of the outstanding shares of JBT Corporation common stock immediately after the spin-off. |
Record date |
The record date is 5:00 p.m., New York City time, on [ ], 2008. In order to be entitled to receive shares of JBT Corporation common stock in the spin-off, holders of shares of FMC Technologies common stock must be stockholders as of 5:00 p.m., New York City time, on the record date. |
Distribution date |
The distribution date will be on or about [ ], 2008. |
Description of our credit facility |
We anticipate entering into one or more credit facilities, including a term loan and a revolving credit facility in an aggregate amount of approximately $300 million, in order to fund a cash dividend to FMC Technologies, to satisfy our working capital needs and to fund other corporate purposes. We expect that our credit facilities will be utilized to replace certain FMC Technologies letters of credit and surety bonds currently in place with respect to JBT Corporation obligations. |
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We expect that the terms of the new credit facilities will contain certain customary financial covenants and events of default which generally give the banks the right to accelerate payments of outstanding debt. |
Please see Description of Indebtedness beginning on page 126 for a more detailed description of the expected terms of our credit agreement. |
Dividend policy |
We anticipate that we will pay cash dividends on our common stock following the spin-off. The initial quarterly dividend will be $ [0.08] per share. The declaration and amount of future dividends, if any, will be determined by our Board of Directors and will depend on our financial condition, earnings, capital requirements, financial covenants, regulatory constraints, industry practice and other factors our Board of Directors deems relevant. |
Payment of intercompany indebtedness |
All intercompany debt between FMC Technologies and JBT Corporation will be settled prior to the completion of the spin-off and there will be no continuing intercompany debt thereafter. |
Anti-takeover provisions |
Provisions of the Delaware General Corporation Law and certain provisions of our certificate of incorporation and by-laws, including our staggered Board of Directors composed of three classes, may have the effect of discouraging, delaying or preventing a change of control of JBT Corporation not approved by our Board of Directors. Such provisions may also have the effect of discouraging third parties from making proposals involving an acquisition or change of control of JBT Corporation, although such proposals, if made, might be considered desirable by a majority of our stockholders. Such provisions could further have the effect of making it more difficult for third parties to cause the replacement of our Board of Directors. |
In connection with the spin-off, we will adopt a stockholder rights plan which also could have the effect of discouraging, delaying or preventing a change of control of JBT Corporation not approved by our Board of Directors. Certain provisions of the tax sharing agreement to be entered into between FMC Technologies and JBT Corporation that are intended to preserve the tax-free nature of the spin-off may also have the effect of discouraging third parties from making proposals involving an acquisition or change of control of JBT Corporation. See Our Relationship with FMC Technologies After the Spin-OffTax Sharing Agreement and Description of Our Capital Stock beginning on pages 116 and 120, respectively. |
5
Corporate Information and Structure
Pursuant to the spin-off, we will be separated from FMC Technologies and become a separate publicly-traded company. The spin-off and our resulting separation from FMC Technologies involves the following steps:
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Before our separation from FMC Technologies, we will enter into a Separation and Distribution Agreement (the Separation Agreement) and several ancillary agreements with FMC Technologies to effect the separation and provide a framework for our relationship with FMC Technologies after the spin-off. These agreements will provide for the allocation between us and FMC Technologies of the assets, liabilities and obligations currently owned by FMC Technologies and attributable to periods prior to, at and after our separation from FMC Technologies. Other ancillary agreements will provide for certain transition services to be performed by each of FMC Technologies and us for the other to facilitate our transition into a separate company, the administration of insurance claims under pre-existing policies and the management of certain litigation matters from discontinued products and businesses. For more information on these agreements, see Our Relationship with FMC Technologies After the Spin-Off beginning on page 113. |
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In addition, before the separation, our Board of Directors and FMC Technologies, as our sole stockholder, will adopt certain benefit plans and approve various actions related to the spin-off as described in this information statement. We will assume FMC Technologies obligations under its current defined benefit pension plan applicable to our current employees, terminated vested and retired employees. |
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The Securities and Exchange Commission (the SEC) will declare effective under the Securities Exchange Act of 1934, as amended (the Exchange Act), the registration statement of which this information statement is a part, and FMC Technologies will mail this information statement to its stockholders. |
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On or prior to the distribution date, FMC Technologies will have received a ruling from the IRS to the effect that the spin-off will qualify as a tax-free transaction under Section 355 of the Internal Revenue Code (the Code). On or prior to the distribution date, FMC Technologies will receive an opinion by Kirkland & Ellis LLP as to the satisfaction of certain required qualifying conditions for the application of Section 355 of the Code to the spin-off. Also on or prior to the distribution date, certain assets related to our business will be transferred from FMC Technologies to us or our relevant subsidiaries via a series of distributions among various FMC Technologies subsidiaries. |
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Following the separation, we will operate as a separate publicly-traded company, and we expect that our common stock will begin trading on the NYSE on a regular way basis under the symbol JBT on the first trading day following the distribution date. |
For a further explanation of the spin-off, see The Spin-Off beginning on page 26.
Summary Financial Data
The following tables set forth our summary financial data. The summary historical income statement and statement of cash flows for each of the three years in the period ended December 31, 2005, 2006 and 2007 and the summary historical balance sheet data as of December 31, 2006 and 2007 are derived from our audited combined financial statements included elsewhere in this information statement, which have been prepared in accordance with U.S. generally accepted accounting principles.
The summary historical income statement and statement of cash flows for the three-month period ended March 31, 2008 and the summary balance sheet data as of March 31, 2008 are derived from our unaudited combined financial statements included elsewhere in this information statement, which have been prepared in accordance with U.S. generally accepted accounting principles.
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The following tables also present our summary unaudited pro forma combined financial information, which has been derived from our unaudited pro forma combined financial statements included elsewhere in this information statement. Our unaudited pro forma combined financial statements have been prepared to reflect adjustments to our historical financial information to give effect to the following transactions, as if those transactions had been completed at earlier dates:
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creation of the capital structure of JBT Corporation based upon the expected separation from FMC Technologies; |
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a reduction in deferred tax assets relating to certain foreign tax credit carryforwards that will be retained by FMC Technologies; |
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the transfer of certain employee benefit plan assets and liabilities related to our business from FMC Technologies to us; and |
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the effect of the financing to pay a dividend to FMC Technologies. |
The unaudited pro forma combined financial data presented for the year ended December 31, 2007 are derived from our audited combined financial statements for the year ended December 31, 2007. The unaudited pro forma combined data presented as of and for the three months ended March 31, 2008 are derived from our unaudited combined financial statements as of and for the three months ended March 31, 2008. The unaudited pro forma financial data presented reflects the transactions as if they occurred on January 1, 2007, for the Summary Income Statement and on December 31, 2007, for the Summary Balance Sheet. A more complete explanation can be found in our unaudited pro forma combined financial statements included elsewhere in this information statement.
You should read the summary unaudited pro forma combined financial information in conjunction with our audited combined financial statements and the notes to the audited combined financial statements. You should also read the sections Selected Combined Financial Data, Unaudited Pro Forma Combined Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations. The summary unaudited pro forma combined financial information is qualified by reference to these sections, as well as the audited combined financial statements and the notes to the audited combined financial statements that are included elsewhere in this information statement.
The combined financial information and unaudited pro forma combined financial information are not necessarily indicative of results to be expected from any future period and do not reflect what our financial position and results of operation would have been had we operated as a separate company during the periods presented.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 AND THREE MONTHS ENDED
MARCH 31, 2008
Year Ended December 31, |
Three Months Ended
March 31, |
||||||||||||||||||||||
2005 | 2006 | 2007 |
2007
Pro Forma |
2008 |
2008
Pro Forma |
||||||||||||||||||
Audited | Unaudited | Unaudited | |||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||
Summary Income Statement Data: |
|||||||||||||||||||||||
Revenue |
$ | 823.3 | $ | 844.3 | $ | 978.0 | $ | 978.0 | $ | 260.2 | $ | 260.2 | |||||||||||
Costs and expenses: |
|||||||||||||||||||||||
Cost of sales |
624.8 | 631.1 | 740.8 | 740.8 | 198.3 | 198.3 | |||||||||||||||||
Selling, general and administrative expense |
138.9 | 146.7 | 153.8 | 153.8 | 39.2 | 39.2 | |||||||||||||||||
Research and development expense |
18.0 | 16.2 | 18.7 | 18.7 | 5.5 | 5.5 | |||||||||||||||||
Total costs and expenses |
781.7 | 794.0 | 913.3 | 913.3 | 243.0 | 243.0 | |||||||||||||||||
Other income (expense), net |
0.7 | 0.1 | (3.6 | ) | (3.6 | ) | 2.1 | 2.1 | |||||||||||||||
Net interest income (expense) |
0.1 | 0.4 | 0.5 | (14.0 | ) | 0.1 | (2.5 | ) | |||||||||||||||
Income before income taxes |
42.4 | 50.8 | 61.6 | 47.1 | 19.4 | 16.8 | |||||||||||||||||
Provision for income taxes |
16.0 | 16.0 | 21.5 | 16.1 | 7.4 | 6.4 | |||||||||||||||||
Income from continuing operations |
26.4 | 34.8 | 40.1 | 31.0 | 12.0 | 10.4 | |||||||||||||||||
Income from discontinued operations, net of income taxes |
(1.9 | ) | (0.2 | ) | (3.7 | ) | (3.7 | ) | 0.3 | 0.3 | |||||||||||||
Net income |
$ | 24.5 | $ | 34.6 | $ | 36.4 | $ | 27.3 | $ | 12.3 | $ | 10.7 | |||||||||||
Year Ended December 31, |
Three Months Ended
March 31, |
|||||||||||||||
2006 | 2007 | 2008 |
2008
Pro Forma |
|||||||||||||
Audited | Unaudited | |||||||||||||||
(Dollars in millions) | ||||||||||||||||
Summary Balance Sheet Data: |
||||||||||||||||
Cash and cash equivalents |
$ | 10.3 | $ | 9.5 | $ | 11.7 | $ | 8.3 | ||||||||
Short-term debt and current portion of long-term debt |
(0.2 | ) | (1.1 | ) | (1.1 | ) | (1.1 | ) | ||||||||
Long-term debt, less current |
| | | (200.0 | ) | |||||||||||
Net (debt) cash |
$ | 10.1 | $ | 8.4 | $ | 10.6 | $ | (192.8 | ) | |||||||
Year Ended December 31, |
Three Months Ended
March 31, 2008 |
|||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||
Audited | Unaudited | |||||||||||||||
(Dollars in millions) | ||||||||||||||||
Summary of Cash Flow Data: |
||||||||||||||||
Cash provided by operating activities of continuing operations |
$ | 54.0 | $ | 96.3 | $ | 39.0 | $ | 11.5 | ||||||||
Cash required by investing activities of continuing operations |
(14.6 | ) | (19.6 | ) | (19.9 | ) | (3.8 | ) | ||||||||
Cash required by financing activities of continuing operations |
(49.7 | ) | (68.9 | ) | (23.2 | ) | (6.6 | ) | ||||||||
Cash provided (required) by discontinued operations |
5.5 | (0.7 | ) | 2.5 | 0.7 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents |
(0.5 | ) | 0.5 | 0.8 | 0.4 | |||||||||||
Increase (decrease) in cash and cash equivalents |
$ | (5.3 | ) | $ | 7.6 | $ | (0.8 | ) | $ | 2.2 | ||||||
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You should carefully consider the risks described below, together with all of the other information included in this information statement, in evaluating our company and our common stock. If any of the risks described below actually occurs, our business, financial condition, results of operations, cash flows and stock price could be materially adversely affected.
Risk Factors Relating to Our Business
Our financial results are subject to fluctuations caused by many factors that could result in our failing to achieve anticipated financial results.
Our quarterly and annual financial results have varied in the past and are likely to continue to vary in the future due to a number of factors, many of which are beyond our control. In particular, the capital goods industries in which we compete can have significant variations in the number, contractual terms and size of orders. The timing of our receipt of orders and our shipment of the products or provision of services can significantly impact the sales and income of a period. These and any one or more of the factors listed below, among other things, could cause us not to achieve our revenue or profitability expectations. The resulting failure to meet market expectations could cause a drop in our stock price. These factors include the risks discussed elsewhere in this section and the following:
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Changes in demand for our products and services, including changes in growth rates in the food processing and air transportation industries; |
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Any downturn in our customers businesses, in the domestic economy or in international economies where our customers do substantial business; |
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Changes in commodity prices resulting in increased manufacturing costs, such as petroleum-based products, metals or other raw materials we use in significant quantities; |
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Changes in pricing policies resulting from competitive pressures, such as aggressive price discounting by our competitors and other market factors; |
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Our ability to develop and introduce on a timely basis new or enhanced versions of our products and services; |
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Unexpected needs for capital expenditures or other unanticipated expenses; |
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Changes in the mix of revenue attributable to domestic and international sales; |
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Changes in the mix of products and services that we sell; |
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Seasonal fluctuations in buying patterns; and |
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Future acquisitions and divestitures of technologies, products and businesses. |
Unanticipated delays or acceleration in our sales cycles make accurate estimation of our revenue difficult and could result in significant fluctuation in quarterly operating results.
The length of our sales cycle varies depending on a number of factors over which we may have little or no control, including the size and complexity of a potential transaction, the level of competition that we encounter in our selling activities and our current and potential customers internal budgeting and approval process. As a result of a generally long sales cycle, we may expend significant effort over a long period of time in an attempt to obtain an order, but ultimately not obtain the order, or the order ultimately received may be smaller than anticipated. Our revenue from different customers varies from quarter to quarter, and a customer with a large order in one quarter may generate significantly lower revenue in subsequent quarters. Due to resulting fluctuations, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance.
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Disruptions in the political, regulatory, economic and social conditions of the foreign countries in which we conduct business or fluctuations in currency exchange rates could negatively affect our business, financial condition and results of operations.
We operate manufacturing facilities in nine countries other than the United States, and our international operations accounted for approximately half of our 2007 revenue. Multiple factors relating to our international operations and to particular countries in which we operate could have an adverse effect on our financial condition or results of operations. These factors include:
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Nationalization and expropriation; |
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Potentially burdensome taxation; |
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Increased growth in our international business operations and revenue relative to our domestic operations may result in increasing tax liabilities resulting from repatriation of income generated outside of the United States; |
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Economic downturns, inflationary and recessionary markets, including capital and equity markets; |
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Civil unrest, political instability, terrorist attacks and wars; |
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Seizure of assets; |
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Trade restrictions, trade protection measures or price controls; |
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Foreign ownership restrictions; |
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Import or export licensing requirements; |
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Restrictions on operations, trade practices, trade partners and investment decisions resulting from domestic and foreign laws and regulations; |
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Changes in governmental laws and regulations; |
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Inability to repatriate income or capital; and |
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Reductions in the availability of qualified personnel. |
Because a significant portion of our revenue is denominated in foreign currencies, changes in exchange rates will result in increases or decreases in our costs and earnings and may also affect the book value of our assets located outside the United States and the amount of our stockholders equity. We prepare our consolidated financial statements in U.S. dollars, but these results may fluctuate due to the fact that a significant portion of our earnings and expenditures are denominated in other currencies. Although we may seek to minimize our currency exposure by engaging in hedging transactions where we deem it appropriate, we cannot assure you that our efforts will be successful. To the extent we sell our systems and services in foreign markets, currency fluctuations may result in our systems and services becoming too expensive for foreign customers.
The increase in energy or raw material prices may reduce the profitability of our customers, which ultimately could negatively affect our business, financial condition, results of operations and cash flows.
In recent years, energy prices have continued an upward trend to historically high levels. These increases have a negative trickle down effect on many areas involved in running a business, straining profitability through increased operating costs. Our customers require large amounts of energy to run their businesses, particularly in the air transportation industry. Energy prices can affect the profitability of passenger and cargo air carriers through increased jet and ground support equipment fuel prices. Energy prices also affect food processors through increased energy and utility costs to run the plant, chemical and petroleum based raw materials used in production and fuel costs to run logistics and service fleet vehicles.
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Food processors are also dependent upon the cost and supply of raw materials such as feed grains, livestock, produce and dairy products. Recent rises in the cost and limitations in availability of these commodities can negatively affect the profitability of their operations.
A reduction in profitability due to increased energy or raw material prices within our customer base may reduce their future investments in food processing equipment or airport equipment. This reduction in investment may have a material adverse effect on our business, financial condition, results of operations and cash flows.
Changes in food consumption patterns may negatively affect our business, financial condition, results of operations and cash flows.
Diet trends can create demand for protein food products but negatively impact high-carbohydrate foods, or create demand for easy to prepare, transportable meals but negatively impact traditional canned products. Because various food types and packaging can quickly go in and out of style as a function of health, dietary or convenience trends, food processors can be challenged in forecasting the needed capacity and related equipment and services for their food plants. Consumer demand for food products can also be negatively impacted by increases in processed food prices. Shifting consumer demand for processed foods may have a material adverse effect on our business, financial condition, results of operations and cash flows.
An outbreak of animal borne diseases (H5N1, BSE or other virus strains affecting poultry or livestock) may negatively affect protein processors.
An outbreak or pandemic stemming from H5N1 (avian flu) or BSE (mad cow disease) or any other animal related disease strains could reduce the availability of poultry or beef that is processed for the restaurant, food service, wholesale or retail consumer. Should a pandemic break out, eradication of entire regional animal populations could be mandated.
Any limitation on raw material could discourage producers from making additional capital investments in processing equipment, aftermarket products, parts and services. Such a decrease in demand for our products could have a material adverse effect on our business, financial condition, results of operations and cash flows.
An outbreak of food borne illness or other food safety or quality concerns may negatively affect our business, financial condition, results of operations and cash flows.
Should an E. coli or other food borne illness cause a recall of meat or produce, the companies supplying those fresh, further processed or canned forms of these products could be severely financially affected. This type of recall, whether voluntary or mandatory, could have broad ranging and long lasting negative affects on growers, packers, retailers, wholesalers and/or restaurants. If a consumer were to become critically ill due to the outbreak, the food providers reputation and brand could be permanently tarnished. Any affect on the financial viability of our customer base of fresh or processed food providers could seriously affect and reduce our immediate and recurring revenue base.
Our business, financial condition, results of operations and cash flows could be materially adversely affected if consumers were to lose confidence in the safety or quality of certain food products or ingredients. Adverse publicity about these types of concerns, whether or not valid, may discourage consumers from buying processed food products or cause production and delivery disruptions. Any disruption within the food supply chain could have a negative effect on the demand for our food processing machinery and on our financial results.
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Freezes, hurricanes, droughts or other natural disasters may negatively affect our business, financial condition, results of operations and cash flows.
Should a natural disaster negatively affect the production of growers or farms, the food processing industry may not have the fresh foods necessary to meet consumer demand. The crops of entire groves or fields can be severely impacted by a drought, freeze or hurricane. Should a drought or freeze continue for an extended duration or high category hurricane directly impact a tree crop area, the trees themselves could be permanently damaged. If orchards had to be replanted, the trees may not produce viable product for several years. Since our revenue generation is dependent on a farmers ability to provide high quality crops to some of our customers, our business, financial condition, results of operations and cash flows could be materially adversely impacted.
Citrus tree diseases may negatively affect our business, financial condition, results of operations and cash flows.
The success of our citrus business is directly related to the viability and health of citrus crops. The citrus industries in Florida, Brazil and other countries are facing increased pressure on their harvests and citrus bearing acreage due to citrus canker and greening diseases. These citrus tree diseases are often incurable once a tree has been infested and the end result can be the destruction of the tree.
We realize operating lease revenue based partially upon capacity or throughput that a citrus processor or produce packinghouse produces. Reduced amounts of available fruit for the processed or fresh markets could materially adversely affect our business, financial condition, results of operations and cash flows.
Our failure to comply with the laws and regulations governing our U.S. government contracts or the loss of production funding of any of our U.S. government contracts could harm our business.
The federal government is the largest contractor in the United States. Our JBT AeroTech business entered into contracts with the U.S. government, including a long-term contract relating to the sale of our Halvorsen Loader, which is a military air cargo loader, to the U.S. Air Force. As a result we are subject to various laws and regulations that apply to companies doing business with the U.S. government. The laws governing U.S. government contracts differ in several respects from the laws governing private contracts. They are heavily regulated to curb misappropriation of funds and ensure uniform policies and practices across agencies. Their terms are carefully drafted by teams of government attorneys. Their ongoing funding is tied to National Defense Budgets and Procurement Programs that are annually negotiated and approved or disapproved by the U.S. Department of Defense, Executive Branch and the Congress. For example, if there were any shifts in spending priorities or if funding for the U.S. Air Force cargo loader program were reduced or cancelled, the resulting loss of revenue may have a material adverse impact on our JBT AeroTech business. Many U.S. government contracts contain pricing terms and conditions that are not applicable to private contracts. Moreover, U.S. defense contracts, in particular, are unilaterally terminable at the option of the U.S. government with compensation for work completed and costs incurred.
Contracts with the U.S. government are also subject to special laws and regulations, the noncompliance with which may result in various sanctions. Contractors, sometimes without their knowledge, are subject to investigations by the U.S. government initiated in various ways. If, for any reason, we were now or at any time in the future found to be non-compliant to any laws or regulations governing U.S. government contracts, our earnings could be negatively impacted. In addition, any delays of deliverables due to our non-performance would also have a negative impact on these contracts.
Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition, results of operations and cash flows.
Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition, results of operations and cash flows. Any future terrorist
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attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions affecting our customers or the economy as a whole may materially adversely affect our operations or those of our customers. As a result, there could be delays or losses in transportation and deliveries to our customers, decreased sales of our products and extension of time for payment of accounts receivable from our customers. Strategic targets such as those relating to transportation and food processing may be at greater risk of future terrorist attacks than other targets in the United States. It is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Due to the type of contracts we enter into, the cumulative loss of several major contracts may negatively affect our business, financial condition, results of operations and cash flows.
We often enter into large, project-oriented contracts or long-term equipment leases and service agreements. These agreements may be terminated or breached, or our customers may fail to renew these agreements. If we were to lose several key agreements over a relatively short period of time and if we were to fail to develop alternative business opportunities, we could experience a materially adverse impact on our business, financial condition, results of operations and cash flows.
We may lose money on fixed-price contracts.
As is customary for several of the business areas in which we operate, we agree, in some cases, to provide products and services under fixed-price contracts. Under these contracts, we are typically responsible for cost overruns. Our actual costs and any gross profit realized on these fixed-price contracts may vary from the estimated amounts on which these contracts were originally based. There is inherent risk in the estimation process, including significant unforeseen technical and logistical challenges or longer than expected lead times. A fixed-price contract may prohibit our ability to mitigate the impact of unanticipated increases in raw material prices (including the price of steel) through increased pricing. Depending on the size of a project, variations from estimated contract performance could have a materially adverse impact on our business, financial condition, results of operations and cash flows.
Customer sourcing initiatives may negatively affect new equipment and aftermarket businesses.
Integration of the supply chain to provide a sustainable competitive advantage has become an objective for many multi-national companies. With continued price pressure from consumers, wholesalers and retailers, manufacturers are focusing their efforts on ways to reduce costs, improve sourcing processes and enhance profitability.
Although these inherently are good practices, it can depersonalize the sales process and result in a shift in focus to short term cost savings as opposed to fully understanding all of the cost components that are associated with capital goods purchases over the lifetime of the investment. If customers implement sourcing initiatives focused solely on immediate cost savings and not on total cost of ownership, our new equipment and aftermarket sales could be negatively affected.
The emergence of low-cost suppliers in Asia may negatively affect our business, financial condition, results of operations and cash flows.
Asian equipment manufacturers originally provided low cost and undifferentiated machinery to markets focused on less complex and less expensive solutions. Some of these equipment suppliers are shifting their focus upstream to an emerging domestic middle market and preparing themselves for worldwide competition. Although these competitors find it difficult to compete in the global arena through innovation or by establishing a strong brand presence, their determination cannot be underestimated and at some point in the future, may pose a threat to our global market positions.
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The solutions we sell are very complex, and we need to rapidly and successfully develop and introduce new solutions in a global, competitive, demanding and changing environment.
To succeed in the globally competitive food processing and air transportation industries, we must continually develop our product and service offerings. This requires a high level of innovation. In addition, bringing new solutions to the market entails a costly and lengthy process and requires us to accurately anticipate customer needs and technology trends. We must continue to respond to demands and develop leading technologies in the food processing and air transportation industries, or our business, financial condition, results of operations and cash flows may be materially adversely affected.
There can be no assurance that our innovations will be profitable, and if we cannot successfully market and sell both existing and newly developed solutions, our business and operating results could be impacted. Significant investments in unsuccessful research and development efforts could materially adversely affect our business, financial condition and results of operations. If we were to lose our significant technology advantage, our market share and growth could be materially adversely affected. In addition, if we are unable to deliver products, features and functionality as projected, we may be unable to meet our commitments to customers, which could have a materially adverse effect on our reputation and business.
Our business, financial condition, results of operations and cash flows could be materially adversely affected by competing technology. Some of our competitors are large multinational companies that may have greater financial resources than us, and they may be able to devote greater resources to research and development of new systems, services and technologies than we are able to do. Moreover, some of our competitors operate in narrow business areas, allowing them to concentrate their research and development efforts directly on products and services for those areas.
When we develop new products with higher capacity and more advanced technology, the increased difficulty and complexity associated with producing these products increases the likelihood of reliability, quality or operability problems.
Despite rigorous testing prior to their release and superior quality processes, newly developed or enhanced products and solutions may have some start up issues which may be found after the products are introduced and shipped. This risk is enhanced when products are first introduced, as well as when we develop products with more advanced technology, since the increased difficulty and complexity associated with producing these products increases the likelihood of reliability, quality or operability problems. The correction and detection of issues may cause delays, lost revenue and incremental costs. While we attempt to remedy errors that we believe would be considered critical by our customers prior to shipment, we may not be able to detect or remedy all such errors.
Our customers who rely on our solutions for business-critical applications are more sensitive to product errors, which could expose us to product liability, performance and warranty claims, as well as harm to our reputation. These and other risks associated with new product and service offerings may have a materially adverse impact on our business, financial condition, results of operations and cash flows.
Product introductions and certain enhancements of existing products by us in future periods may also reduce demand for our existing products or could delay purchases by customers awaiting arrival of our new products. As new or enhanced products are introduced, we must successfully manage the transition from older products.
In the ordinary course of business, we continually evaluate opportunities for new product and service offerings, new markets and new geographic sectors, and development of such opportunities could entail certain business risks which could affect our financial condition.
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If we are unable to develop, preserve and protect our intellectual property assets, our business, financial condition, results of operations and cash flows may be negatively affected.
As a technology company, our intellectual property portfolio is crucial to our continuing ability to be a leading solutions and services provider to the food processing and air transportation industries. We strive to protect and enhance our proprietary intellectual property rights through patent, copyright, trademark and trade secret laws, as well as through technological safeguards. To the extent we are not successful, our business, financial condition, results of operations and cash flows could be materially adversely impacted. We may be unable to prevent third parties from using our technology without our authorization or independently developing technology that is similar to ours, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States. With respect to our pending patent applications, we may not be successful in securing patents for these claims, and our competitors may already have applied for patents that, once issued, will prevail over our patent rights or otherwise limit our ability to sell our products.
While we take steps to provide for confidentiality obligations of employees and third parties with whom we do business (including customers, suppliers and strategic partners), there is a risk that such parties will breach such obligations and jeopardize our intellectual property rights. Although we have agreements in place to mitigate this risk, there can be no assurance that such protections will be sufficient.
We are actively engaged in efforts to protect the value of our intellectual property and to prevent others from infringing our intellectual property rights. However, due to the complex and technical nature of such efforts and the potentially high stakes involved, such enforcement activity can be expensive and time consuming, and there can be no assurance that we will be successful in these efforts.
Claims by others that we infringe their intellectual property rights could harm our business, financial condition, results of operations and cash flows.
We have seen a trend towards aggressive enforcement of intellectual property rights as the functionality of products in our industry increasingly overlaps and the volume of issued patents continues to grow. As a result, there is a risk that we could be subject to infringement claims which, regardless of their validity, could:
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Be expensive, time consuming and divert management attention away from normal business operations; |
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Require us to pay monetary damages or enter into non-standard royalty and licensing agreements; |
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Require us to modify our product sales and development plans; or |
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Require us to satisfy indemnification obligations to our customers. |
Regardless of whether these claims have any merit, they can be burdensome to defend or settle and can harm our business and reputation.
Our information systems, computer equipment and information databases are critical to our business operations, and any damage or disruptions could negatively affect our business, financial condition, results of operations and cash flows.
Our operations are dependent on our ability to protect our computer equipment and the information stored in our databases from damage by, among other things, earthquake, fire, natural disaster, power loss, telecommunications failures, unauthorized intrusions and other catastrophic events. A part of our operations is based in an area of California that has experienced power outages and earthquakes, while another part of our operations is based in an area of Florida that has experienced power outages and hurricanes. Despite our best efforts at planning for such contingencies, catastrophic events of this nature may still result in system failures and other interruptions in our operations, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
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In addition, it is periodically necessary to replace, upgrade or modify our internal information systems. If we are unable to do this in a timely and cost-effective manner, especially in light of demands on our information technology resources, our ability to capture and process financial transactions and therefore our business, financial condition, results of operations and cash flows may be materially adversely impacted.
Inadequate internal controls and accounting practices could lead to errors, which could negatively impact our business, financial condition, results of operations and cash flows.
We will have internal controls and management oversight systems in place, however, we may not be able to prevent or detect misstatements in our reported financial statements due to system errors, the potential for human error and unauthorized actions of employees or contractors, inadequacy of controls, temporary lapses in controls due to shortfalls in transition planning and oversight resource contracts and other factors. In addition, due to their inherent limitations, such controls may not prevent or detect misstatements in our reported financial results as required under SEC and NYSE rules, which could increase our operating costs or impair our ability to operate our business. Controls may also become inadequate due to changes in circumstances, and it is necessary to replace, upgrade or modify our internal information systems from time to time. If we are unable to implement these changes in a timely and cost-effective manner, our ability to capture and process financial transactions and support our customers as required may be materially adversely impacted and could harm our business, financial condition, results of operations and cash flows.
In addition, despite transition planning and management oversight, our transition from operating as businesses of FMC Technologies to operating as a standalone company can create certain risks of operational inefficiencies and delays.
We may supplement our internal growth through strategic combinations, and our success depends on our ability to successfully integrate, operate and manage these acquired businesses and assets.
We may supplement our internal growth through strategic combinations, asset purchases and other transactions that complement or expand our existing businesses. Each of these transactions involves a number of risks, including:
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The diversion of our managements attention from our existing businesses to integrating the operations and personnel of the acquired or combined business; |
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Possible material adverse effects on business, financial condition, results of operations and cash flows during the integration process; and |
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Our possible inability to achieve the intended objectives of the transaction. |
We may hire additional employees in connection with these acquisitions. We may not be able to successfully integrate all of the newly hired employees, or profitably integrate, operate, maintain and manage our newly acquired operations in a competitive environment. We may not be able to maintain uniform standards, controls, procedures and policies, and this may lead to operational inefficiencies.
We may seek to finance an acquisition through borrowings or through the issuance of new debt or equity securities. If we make a relatively large acquisition, we could deplete a substantial portion of our financial resources to the possible detriment of our other operations. Any future acquisitions could also dilute the equity interests of our stockholders, require us to write off assets for accounting purposes or create other undesirable accounting results, such as significant expenses for amortization or impairment of goodwill or other intangible assets.
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Loss of our key management and other personnel could impact our business.
We depend on our senior executive officers and other key personnel. The loss of any of these officers or key personnel could materially adversely affect our business, financial condition, results of operations and cash flows. In addition, competition for skilled and non-skilled employees among companies that rely heavily on engineering, technology and manufacturing is intense, and the loss of skilled or non-skilled employees or an inability to attract, retain and motivate additional skilled and non-skilled employees required for the operation and expansion of our business could hinder our ability to conduct research activities successfully, develop new products and services and meet customers shipments.
The industries in which we operate expose us to potential liabilities arising out of the installation or use of our systems that could negatively affect our business, financial condition, results of operations and cash flows.
Our businesses supply equipment and systems for use in food processing as well as equipment, systems and services used in airports all over the world, which creates potential exposure for us to liability for personal injury, wrongful death, product liability, commercial claims, property damage, pollution and other environmental damages. Although we have obtained business and related risk insurance, we cannot assure you that our insurance will be adequate to cover all potential liabilities. Further, we cannot assure you that insurance will generally be available in the future or, if available, that premiums to obtain such insurance will be commercially justifiable. If we incur substantial liability and the damages are not covered by insurance or are in excess of policy limits, or if we were to incur liability at a time when we are not able to obtain liability insurance, our business, financial condition, results of operations and cash flows could be materially adversely affected.
Environmental protection initiatives may negatively impact the profitability of our business.
Global initiatives to protect and steward the environment have moved to center stage. From global warming and climate change to urban sprawl and resource depletion, corporations and consumers are becoming more aware and concerned about the impact of human activity on the environment. Comprehensive global and national greenhouse gas reduction programs have been proposed and are being discussed within legislatures, boardrooms and households. The ultimate costs, implementation and success of such broad reaching programs will be dependent on the precise emissions targets, the timing for the reductions and the means of implementation.
Pressures to reduce the footprint of carbon emissions impact the air transportation and manufacturing sectors. Airports, airlines and air cargo providers are continually looking for new ways to become more energy efficient and reduce pollutants. Manufacturing plants are seeking means to reduce their heat-trapping emissions and minimize their energy and water usage. All of the initiatives come at a cost both to our customers operations as well as to our operating costs and therefore may materially adversely impact our business, financial condition, results of operations and cash flows.
Changes in U.S. immigration policy could negatively affect the profitability of our customers, which ultimately could negatively affect our business, financial condition, results of operations and cash flows.
A number of food growers and food processors employ migrant workers throughout their operations during the seasonal crop peaks. Should a legislative or immigration policy alter or restrict the availability of migrant workers, food growers and processors would be limited in their ability to grow, harvest or process their food products. Any workforce shortage or increased labor costs could adversely impact the profitability of these customers, which could also materially adversely affect our ongoing sales and service revenue and our business, financial condition, results of operations and cash flows.
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Our operations and industries are subject to a variety of U.S. and international laws, which laws can change. We therefore face uncertainties with regard to lawsuits, regulations and other related matters.
In the normal course of business, we are subject to proceedings, lawsuits, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, product liability, tax matters and regulatory compliance. For example, we are subject to changes in foreign laws and regulations that may encourage or require us to hire local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular non-U.S. jurisdiction. In addition, environmental laws and regulations affect the systems and services we design, market and sell, as well as the facilities where we manufacture our systems. We are required to invest financial and managerial resources to comply with environmental laws and regulations and anticipate that we will continue to be required to do so in the future.
There is an increased focus by the United States Securities and Exchange Commission, or the SEC, and Department of Justice on enforcement of the Foreign Corrupt Practices Act (the FCPA). Given the breadth and scope of our international operations, we may not be able to detect or prevent improper or unlawful conduct by our international partners and employees, despite our ethics, governance and compliance standards, which could put us at risk regarding possible violations of laws, including the FCPA.
Considerable management time and resources will be spent to understand and comply with changing laws, regulations and standards relating to corporate governance, public disclosure (including the Sarbanes-Oxley Act of 2002), SEC regulations and the rules of the NYSE where our shares are expected to be listed. Although we do not believe that any recent regulatory and legal initiatives will result in significant changes to our internal practices or our operations, rapid changes in accounting standards, taxation requirements, and federal securities laws and regulations, among others, may substantially increase costs to our organization and could materially adversely impact our business, financial condition, results of operations and cash flows.
We have a significant amount of indebtedness, which makes us more vulnerable to adverse economic and competitive conditions.
Relative to our stockholders equity, we have a significant amount of indebtedness. As of the effective date of the spin-off, we expect to have outstanding long-term indebtedness of $175 million and expect to have stockholders equity of approximately $11.3 million. This amount of debt is substantial and our debt could:
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require us to repatriate a substantial portion of our non-U.S. earnings and cash flow from operations for payments on our indebtedness, thereby increasing our effective tax rate and reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; |
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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
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place us at a competitive disadvantage compared to our less leveraged competitors; or |
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increase our vulnerability to both general and industry-specific adverse economic conditions; and limit, among other things, our ability to borrow additional funds. |
See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources beginning on page 49.
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Risk Factors Relating to the Spin-Off
We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from FMC Technologies.
As a stand-alone, independent public company, we believe that our business will benefit from, among other things, allowing our management to design and implement corporate policies and strategies that are based primarily on the characteristics of our business, to focus our financial resources wholly on our own operations and to implement and maintain a capital structure designed to meet our own specific needs. However, we may not be able to achieve some or all of the benefits expected as a result of the spin-off.
Additionally, by separating from FMC Technologies, there is a risk that our company may be more susceptible to stock market fluctuations and other adverse events than we would have been were we still a part of the current FMC Technologies due to a reduction in market diversification. Prior to the spin-off, we have been able to take advantage of FMC Technologies size and purchasing power in procuring goods, technology and services, including insurance, employee benefit support and audit services. As a separate, stand-alone entity, we may be unable to obtain access to financial and other resources on terms as favorable as those available to us prior to the separation. Furthermore, as a stand-alone company, we will not be able to enjoy certain benefits from FMC Technologies operating diversity, borrowing leverage and available capital for investments.
If the distribution, together with certain related transactions, were to fail to qualify as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code, then our stockholders, we and/or FMC Technologies might be subject to significant tax liability.
FMC Technologies has applied for a private letter ruling from the IRS substantially to the effect that the distribution, together with certain related transactions, will qualify for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code. In addition, FMC Technologies intends to obtain an opinion from Kirkland & Ellis LLP substantially to the effect that the distribution, together with certain related transactions, will so qualify. Although FMC Technologies Board of Directors may waive the conditions of receiving both the ruling and the opinion, FMC Technologies has advised us that it does not intend to complete the distribution if it has not obtained the IRS private letter ruling and an opinion from Kirkland & Ellis LLP substantially to the effect that the distribution, together with certain related transactions, will qualify for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code. Both the IRS private letter ruling and the opinion will be based, in part, on certain representations, assumptions and undertakings, including those relating to the past and future conduct of our business, and neither the IRS private letter ruling nor the opinion would be valid if such representations, assumptions and undertakings were incorrect. Therefore, notwithstanding the IRS private letter ruling and opinion, the IRS could later determine that the distribution should be treated as a taxable transaction if it determines on audit that any of the representations, assumptions or undertakings that were included in the request for the private letter ruling are false or have been violated. For more information regarding the tax opinion and the private letter ruling, see the section entitled The Spin-OffMaterial U.S. Federal Income Tax Consequences of the Spin-Off beginning on page 28.
If the distribution fails to qualify for tax-free treatment, FMC Technologies would be treated as if it had sold the common stock of our company for its fair market value, resulting in a taxable gain to the extent of the excess of such fair market value over its tax basis in the stock. In general, our initial public stockholders would be treated as if they had received a taxable distribution equal to the fair market value of our common stock that was distributed to them. Under the tax sharing agreement between FMC Technologies and us, we would generally be required to indemnify FMC Technologies against any tax owed by FMC Technologies resulting from the distribution to the extent that such tax resulted from (i) an acquisition of all or a portion of our stock or assets, whether by merger or otherwise, (ii) other actions or failures to act by us or (iii) any of our representations or undertakings being incorrect or violated. For a more detailed discussion, see the section entitled Our Relationship with FMC Technologies after the Spin-OffTax Sharing Agreement beginning on page 116. Our
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indemnification obligations to FMC Technologies and its subsidiaries, officers and directors are not limited by any maximum amount. If we are required to indemnify FMC Technologies or such other persons under the circumstances set forth in the Tax Sharing Agreement, we may be subject to substantial liabilities.
We could be liable to FMC Technologies for adverse tax consequences resulting from certain change-in-control transactions and therefore could be prevented from engaging in strategic or capital raising transactions.
FMC Technologies could recognize a taxable gain if the spin-off is determined to be part of a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in either FMC Technologies or JBT Corporation. Under the Code, any acquisitions of FMC Technologies or JBT Corporation within the four-year period beginning two years before the date of the spin-off are presumed to be part of such a plan. Regulations issued by the IRS, however, provide mitigating rules in many circumstances. Nonetheless, a merger, recapitalization or acquisition, or issuance or redemption of our common stock after the spin-off could, in some circumstances, be counted toward the 50% change of ownership threshold. The tax sharing agreement precludes us from engaging in some of these transactions unless we first obtain a tax opinion acceptable to FMC Technologies or an IRS ruling to the effect that such transactions will not result in additional taxes. The tax sharing agreement further requires us to indemnify FMC Technologies for any resulting taxes owed by FMC Technologies regardless of whether we first obtain such opinion or ruling. As a result, we may be unable to engage in strategic or capital raising transactions that stockholders might consider favorable or to structure potential transactions in the manner most favorable to us.
Our operations may depend on the availability of additional financing and, after the spin-off, we will not be able to obtain financing from FMC Technologies. We may not have access to funds under our credit facility.
Following the spin-off, we expect to have sufficient liquidity to support the development of our business. In the future, however, we may require additional financing for liquidity, capital requirements and growth initiatives. After the spin-off, FMC Technologies will not provide funds to us. Accordingly, we will depend on our ability to generate cash flows from operations and to borrow funds and issue securities in the capital markets to maintain and expand our business. We may need to incur debt on terms and at interest rates that may not be as favorable as those historically enjoyed by FMC Technologies. In addition, future events may prevent us from borrowing funds under our new revolving credit facility. Any inability by us to obtain financing in the future on favorable terms could have a negative effect on our results of operations, cash flows and financial condition.
Our ability to operate our businesses may suffer if we do not, quickly and cost-effectively, establish our own financial, administrative and other support functions to successfully operate as a stand-alone entity, and we cannot assure you that the transitional services FMC Technologies has agreed to provide us will be sufficient for our needs.
Historically, our businesses have relied on financial, administrative and other resources of FMC Technologies. After this spin-off, we will need to create our own financial, administrative and other support systems or contract with a third party to replace FMC Technologies resources. We have entered into an agreement with FMC Technologies under which FMC Technologies will provide transitional services to us, including services related to information technology systems, treasury, legal, financial and accounting services. Although FMC Technologies will be contractually obligated to provide us with these services after the distribution, these services may not be sufficient to meet our needs, and we may not be able to replace these services at all or obtain these services at prices and on terms as favorable as we currently have them, after our agreement with FMC Technologies expires. Any failure or significant downtime in our own financial or administrative systems or in FMC Technologies financial or administrative systems during the transitional period could prevent us from paying our employees, billing our customers or performing other administrative services on a timely basis and could materially harm our business or operations.
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Our historical and pro forma financial information may not be indicative of our future results as an independent company.
The historical and pro forma financial information we have included in this information statement may not reflect what our results of operations, financial position and cash flows would have been had we been an independent company during the periods presented or be indicative of what our results of operations, financial position and cash flows may be in the future when we are an independent company. We have made adjustments based upon available information and assumptions that we believe are reasonable to reflect these factors, among others, in our pro forma financial information included in this information statement. However, our assumptions may not prove to be accurate and, accordingly, our pro forma information should not be assumed to be indicative of what our results of operations, cash flows or financial condition actually would have been as a stand-alone public company nor to be a reliable indicator of what our results of operations, cash flows and financial condition actually may be in the future.
For additional information about the past financial performance of our business and the basis of the presentation of the historical combined financial statements, see Selected Combined Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and the historical financial statements and the accompanying notes included elsewhere in this information statement.
The agreements that we have entered into or will enter into with FMC Technologies may involve, or may appear to involve, conflicts of interest.
Because the spin-off involves the separation of what are currently the FoodTech and Airport Systems business segments of FMC Technologies into JBT Corporation, an independent company, we are entering into certain agreements with FMC Technologies to provide a framework for our initial relationship with FMC Technologies following the spin-off. We negotiated these agreements with FMC Technologies while we were still business segments of FMC Technologies. Accordingly, some of the persons who are expected to become our officers and directors are employees, officers or directors of FMC Technologies or its subsidiaries, and, as such, have an obligation to serve the interests of FMC Technologies and its subsidiaries. As a result, they could be viewed as having a conflict of interest.
Our corporate governance documents, our rights plan and Delaware law may delay or discourage takeovers and business combinations that our stockholders might consider in their best interests.
Provisions in our amended and restated certificate of incorporation and by-laws may make it difficult and expensive for a third-party to pursue a tender offer, change-in-control or takeover attempt that is opposed by our management and Board of Directors. These provisions include, among others:
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A Board that is divided into three classes with staggered terms; |
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Limitations on the right of stockholders to remove directors; |
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The right of our Board to issue preferred stock without stockholder approval; |
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Inability of our stockholders to act by written consent; and |
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Rules regarding how stockholders may present proposals or nominate directors at stockholders meetings. |
Public stockholders who might desire to participate in this type of transaction may not have an opportunity to do so. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change-in-control or change our management and Board and, as a result, may adversely affect the marketability and market price of our common stock.
In addition, we expect that our Board will adopt a stockholder rights plan intended to deter hostile or coercive attempts to acquire us. Under the plan, if any person or group acquires, or begins a tender or exchange
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offer that could result in such person acquiring 15% or more of our common stock, without approval of our Board under specified circumstances, our other stockholders will have the right to purchase shares of our common stock, or shares of the acquiring company, at a substantial discount to the public market price. Therefore, the rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board, except pursuant to any offer conditioned on a substantial number of rights being acquired. See Description of Our Capital StockRights Agreement beginning on page 123.
We will also be subject to the provisions of Delaware law described below regarding business combinations with interested stockholders. Section 203 of the Delaware General Corporation Law applies to a broad range of business combinations between a Delaware corporation and an interested stockholder. The Delaware law definition of business combination includes mergers, sales of assets, issuances of voting stock and certain other transactions. An interested stockholder is defined as any person who owns, directly or indirectly, 15% or more of the outstanding voting stock of a corporation.
Section 203 prohibits a corporation from engaging in a business combination with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless:
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The Board approved the business combination before the stockholder became an interested stockholder, or the Board approved the transaction that resulted in the stockholder becoming an interested stockholder; |
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Upon completion of the transaction which resulted in the stockholder becoming an interested stockholder, such stockholder owned at least 85% of the voting stock outstanding when the transaction began other than shares held by directors who are also officers and other than shares held by certain employee stock plans; or |
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The Board approved the business combination after the stockholder became an interested stockholder and the business combination was approved at a meeting by at least two-thirds of the outstanding voting stock not owned by such stockholder. |
Although we believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics and thereby provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial by some stockholders.
Risk Factors Relating to Our Common Stock
There may not be an active trading market for shares of our common stock.
Prior to the spin-off, there has been no public trading market for shares of our common stock. We intend to apply to have our common stock authorized for listing on the NYSE under the symbol JBT. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our common stock or how liquid such a market might become. It is possible that, after the spin-off, an active trading market will not develop or continue, and there can be no assurance as to the price at which our common stock will trade. The initial share price of our common stock may not be indicative of prices that will prevail in any future trading market.
In addition, because of the significant changes that will take place as a result of the spin-off, the trading market for both our common stock and FMC Technologies common stock after the spin-off may be significantly different from that for FMC Technologies common stock prior to the spin-off. The market may view us as a new company after the spin-off, and it is possible that we will not be the subject of significant research analyst coverage. The absence of significant research analyst coverage of our company can adversely affect the market value and liquidity of an equity security.
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We cannot predict the price range or volatility of our common stock after the spin-off, and sales of a substantial number of shares of our common stock may adversely affect the market price of our common stock.
From time to time, the market price and volume of shares traded of companies in the industries in which we operate experience periods of significant volatility. Company-specific issues and developments generally affecting our industries or the economy may cause this volatility. The market price of our common stock may fluctuate in response to a number of events and factors, including:
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General economic, market and political conditions; |
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Quarterly variations in results of operations or results of operations that could be below the expectations of the public market analysts and investors; |
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Changes in financial estimates and recommendations by securities analysts; |
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Operating and market price performance of other companies that investors may deem comparable; |
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Press releases or publicity relating to us or our competitors or relating to trends in our markets; and |
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Sales of common stock or other securities by insiders. |
In addition, broad market and industry fluctuations, as well as investor perception and the depth and liquidity of the market for our common stock may adversely affect the trading price of our common stock, regardless of actual operating performance.
Sales or distributions of a substantial number of shares of our common stock in the public market or otherwise following the spin-off, or the perception that such sales could occur could adversely affect the market price of our common stock. After the spin-off, all of the shares of our common stock, other than the shares held by executive officers and directors, will be eligible for immediate resale in the public market. Investment criteria of certain investment funds and other holders of our common stock may result in the immediate sale of our common stock after the spin-off to the extent such stock no longer meets these criteria. Substantial selling of our common stock, whether as a result of the spin-off or otherwise, could adversely affect the market price of our common stock.
We cannot assure you as to the price at which our common stock will trade after the distribution date. Until our common stock is fully distributed and an orderly market develops in our common stock, the price at which our common stock trades may fluctuate significantly and may be lower or higher than the price that would be expected for a fully distributed issue.
The payment of dividends will be at the discretion of our Board of Directors.
We anticipate that we will pay cash dividends on our common stock following the spin-off. The initial quarterly dividend will be $ [0.08 ] per share. The declaration and amount of future dividends, if any, will be determined by our Board of Directors and will depend on our financial condition, earnings, capital requirements, financial covenants, regulatory constraints, industry practice and other factors our Board deems relevant. See Dividend Policy on page 32 for additional information on our dividend policy following the spin-off.
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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This information statement and other materials filed or to be filed by us and FMC Technologies, as well as information in oral statements or other written statements made or to be made by us and FMC Technologies, contain statements, including in this document under the captions Summary, Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and Business, that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. You can identify these forward-looking statements by the use of forward-looking words such as outlook, believes, expects, potential, continues, may, will, should, seeks, approximately, predicts, intends, plans, estimates, anticipates, foresees or the negative version of those words or other comparable words and phrases. Any forward-looking statements contained in this information statement are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.
We believe that the factors that could cause our actual results to differ materially include but are not limited to the factors we describe in this information statement, including under Risk Factors, The Spin-off and Managements Discussion and Analysis of Financial Condition and Results of Operations. The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements:
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Fluctuations in our financial results; |
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Unanticipated delays or acceleration in our sales cycles; |
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Changes in demand for our products and services; |
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Changes in commodity prices, including those impacting materials used in our business; |
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Disruptions in the political, regulatory, economic and social conditions of the foreign countries in which we conduct business; |
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Increases in energy prices; |
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Changes in food consumption patterns; |
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Impacts of pandemic illnesses, food borne illnesses and diseases to various agricultural products; |
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Weather conditions and natural disasters; |
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Changes in U.S. immigration policy; |
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Acts of terrorism or war; |
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Termination or loss of major customer contracts; |
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Customer sourcing initiatives; |
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Competition and innovation in our industries; |
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Our ability to develop and introduce new or enhanced products and services; |
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Difficulty in developing, preserving and protecting our intellectual property; |
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Competition from low-cost suppliers in Asia; |
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Our ability to protect our information systems; |
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Adequacy of our internal controls; |
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Our ability to successfully integrate, operate and manage acquired businesses and assets; |
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Loss of key management and other personnel; |
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Potential liability arising out of the installation or use of our systems; |
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Our ability to comply with the laws and regulations governing our U.S. government contracts; |
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Our ability to comply with U.S. and international laws governing our operations and industries; |
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The outcome of pending or future litigation; |
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Increases in tax liabilities; |
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Difficulty in implementing our business strategies; |
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Availability and access to financial and other resources; |
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Failure to qualify as a tax-free reorganization; |
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Our ability to obtain financing; and |
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Our ability to establish our own financial, administrative and other support functions. |
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this information statement. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Consequently, actual events and results may vary significantly from those included in or contemplated or implied by our forward-looking statements. The forward-looking statements included in this information statement are made only as of the date of this information statement, and we undertake no obligation to publicly update or review any forward-looking statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise.
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After a thorough strategic review of FMC Technologies global portfolio, FMC Technologies determined that separating the FoodTech and Airport Systems businesses from its other operations would allow them to be in a better position to thrive under its own management focus and long-term growth plans and allow the separate entities to create more long-term value individually than through the combined entity.
The transaction, which is intended to be in the form of a tax-free dividend to FMC Technologies stockholders, is subject to the receipt of a favorable ruling from the IRS. FMC Technologies Board of Directors will establish record and payment dates for the spin-off shortly before the completion of the distribution.
Reasons for the Spin-Off
FMC Technologies Board of Directors believes that the spin-off will separate businesses with fundamentally different characteristics that require management to pursue distinctly different operating and business strategies. The separation is intended to benefit stockholders by allowing us to maximize the performance of our businesses assets through undivided senior management focus on and capital allocation to these businesses.
The Board of Directors of FMC Technologies considered the following potential benefits in making the determination to effect the spin-off.
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Allow management of each separated company to design and implement corporate strategies and policies that are based primarily on the business characteristics of that company, maintain a sharper focus on core business and growth opportunities, and concentrate their financial resources wholly on their own operations. |
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Increase focus on core business priorities to drive shareholder value. FMC Technologies and JBT Corporation will be better able to focus their attention and financial resources on their own distinct businesses, opportunities, markets and challenges so that each can pursue the most appropriate long-term growth opportunities and business strategies. FMC Technologies management believes that a separate focus on these items will allow each company to unlock value not currently being realized. |
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Allow each separated company to recruit and retain employees pursuant to compensation policies which are appropriate for their respective lines of business. As a separate, publicly-traded company with our own executive management team, we may be able to attract greater media attention and press coverage, which could strengthen our ability to promote the JBT Corporation brand. |
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Reduce internal competition for capital. Historically, our access to resources has been limited as FMC Technologies strategy was to build its energy businesses. We will now be able to invest any excess cash flow into the growth initiatives of our businesses, rather than having a part of our cash flow reinvested into FMC Technologies energy businesses. In addition, we will have direct access to the public capital markets to allow us to seek to finance our operations and growth without having to compete with FMC Technologies energy businesses with respect to financing. With their strong market positions, JBT FoodTech and JBT AeroTech will be well positioned to acquire companies and technologies within their markets. As an independent entity, we will be in a position to pursue strategies our Board of Directors and management believe will create long-term stockholder value, including organic and acquisition growth opportunities, provided we continue to have access to capital. |
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Provide both companies heightened strategic flexibility to form strategic business alliances in their target markets, unencumbered by considerations of the potential impact on the other business. |
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Create common equity shares for JBT Corporation, including options and restricted share units, providing the appropriate incentive mechanisms to motivate and reward our management and |
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employees. The common shares of the independent, publicly-traded JBT Corporation will have a value that reflects the efforts and performance of our management and employees. As a result, we will be able to develop better incentive programs to attract and retain key employees through the use of stock-based and performance-based incentive plans that more directly link their compensation with our financial performance. These programs will be designed to more directly reward employees based on our performance. |
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Allow us to effect future acquisitions utilizing our common stock for all or part of the consideration and to issue a security more directly tied to the performance of our business. |
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Increase transparency and clarity into the different businesses of FMC Technologies and JBT Corporation. The investment community, including the respective analysts, stockholders and investors of FMC Technologies and JBT Corporation, will be better able to evaluate the merits and future prospects of each company. This will enhance the likelihood that each company will receive appropriate market recognition of its individual performance and potential. |
Neither we nor FMC Technologies can assure you that, following the spin-off, any of these benefits will be realized to the extent anticipated or at all. For a description of the factors that might impact our ability to achieve these benefits, see Risk Factors.
FMC Technologies Board of Directors also considered a number of other factors in evaluating the spin-off, including:
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The one-time and on-going costs of the spin-off; |
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Our capital structure; |
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The possibility that disruptions in normal business may result; |
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The limitations placed on us as a result of the tax sharing agreement and other agreements that we are entering into with FMC Technologies in connection with the spin-off; and |
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The risk that the combined trading prices of our common stock and FMC Technologies common stock after the distribution may be lower than the trading price of FMC Technologies common stock before the distribution. |
FMC Technologies Board of Directors concluded, however, that the potential long-term benefits of the spin-off outweigh these factors, and that separating us from FMC Technologies in the form of a tax-free distribution is appropriate and advisable.
Manner of Effecting the Spin-Off
The general terms and conditions relating to the spin-off will be set forth in the Separation Agreement between us and FMC Technologies. The spin-off will be effective at 11:59 p.m., New York City time on the distribution date, which is [ ] , 2008. As a result of the spin-off, each FMC Technologies stockholder will receive .216 of a share of our common stock for every share of FMC Technologies common stock they own. In order to be entitled to receive shares of our common stock in the spin-off, FMC Technologies stockholders must be stockholders at 5:00 p.m., New York City time, on the record date, [ ] , 2008. The spin-off of our shares will be made in book-entry form, and physical stock certificates will be issued only upon request. Each share of our common stock that is distributed will be validly issued, fully paid and nonassessable and free of preemptive rights. See Description of Our Capital Stock beginning on page 120.
FMC Technologies stockholders will not be required to pay for shares of our common stock received in the spin-off or to surrender or exchange shares of FMC Technologies common stock in order to receive our common stock or to take any other action in connection with the spin-off. No vote of FMC Technologies stockholders is required or sought in connection with the spin-off, and FMC Technologies stockholders have no appraisal rights in connection with the spin-off.
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IN ORDER TO BE ENTITLED TO RECEIVE SHARES OF OUR COMMON STOCK IN THE SPIN-OFF, YOU MUST BE A HOLDER OF FMC TECHNOLOGIES COMMON STOCK AT 5:00 P.M., NEW YORK CITY TIME, ON THE RECORD DATE.
Results of the Spin-Off
After the spin-off, we will be a separately traded, public company. Immediately following the spin-off, we expect to have approximately 80,000 beneficial holders and approximately 4,788 record holders of shares of our common stock based on the number of beneficial and record holders, respectively, of shares of FMC Technologies common stock on June 30, 2008. The actual number of shares to be distributed will be determined on the record date and will reflect any exercise of FMC Technologies options between the date the Board of Directors of FMC Technologies declares the dividend for the spin-off and the record date for the spin-off.
FMC Technologies and JBT Corporation will be parties to a number of agreements that govern the spin-off and the future relationship between the two companies. For a more detailed description of these agreements, please see Our Relationship with FMC Technologies After the Spin-Off beginning on page 113.
Material U.S. Federal Income Tax Consequences of the Spin-Off
The following is a summary of certain U.S. federal income tax consequences to FMC Technologies, the holders of FMC Technologies common stock, us and the holders of our common stock after the spin-off as of the date hereof. This summary does not discuss all tax considerations that may be relevant to stockholders in light of their particular circumstances, nor does it address the consequences to stockholders subject to special treatment under the U.S. federal income tax laws, such as stockholders subject to the alternative minimum tax, tax-exempt entities, non-resident alien individuals, foreign entities, foreign trusts and estates and beneficiaries thereof, stockholders who acquire shares as compensation for services (including holders of FMC Technologies restricted stock who did not make a Section 83(b) election), banks, insurance companies, other financial institutions, traders in securities that use mark-to-market accounting, and dealers in securities or commodities. In addition, this summary does not address any state, local or foreign tax consequences. This summary is based upon provisions of the Code, and regulations, rulings and judicial decisions, as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those summarized below.
If a partnership holds FMC Technologies or our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding FMC Technologies or our common stock, you should consult your tax advisors.
All stockholders should consult their own tax advisors concerning the specific tax consequences of the spin-off of our common stock to holders of FMC Technologies common stock in light of their particular circumstances. This summary is not intended to be, nor should it be construed to be, legal or tax advice to any particular investor.
FMC Technologies expects to receive a ruling from the IRS to the effect that the spin-off will qualify as a tax-free transaction under Section 355 of the Code and a tax-free reorganization under Section 368(a)(1)(D) of the Code. Although letter rulings are generally binding on the IRS, the continuing validity of a ruling is subject to factual representations and assumptions contained in the letter. Further, as part of the IRSs general ruling policy with respect to distributions under Section 355 of the Code, the private letter ruling is based upon representations of FMC Technologies (rather than a determination by the IRS) that certain conditions that are necessary to qualify for tax-free treatment under Section 355 of the Code have been satisfied. Any inaccuracy in these representations could invalidate the ruling. FMC Technologies and JBT Corporation are not aware of any facts or circumstances that would cause the representations and assumptions on which we expect the ruling to be based to be incorrect.
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In connection with obtaining the ruling, FMC Technologies expects to obtain an opinion from Kirkland & Ellis LLP as to the qualification of the spin-off as tax-free under Section 355 of the Code and a tax-free reorganization under Section 368(a)(1)(D) of the Code. An opinion of independent tax attorneys is not binding on the IRS or the courts. The opinion of Kirkland & Ellis LLP will be based on, among other things, current tax law and assumptions and representations as to factual matters made by FMC Technologies, which if incorrect in certain material respects, would jeopardize the conclusions reached by Kirkland & Ellis LLP in its opinion. FMC Technologies and JBT Corporation are not currently aware of any facts or circumstances that would cause these assumptions and representations to be untrue or incorrect in any material respect or that would jeopardize the conclusions reached by Kirkland & Ellis LLP in its opinion.
On the basis of the expected receipt of the ruling and the opinion FMC Technologies expects to receive in connection therewith, and assuming that FMC Technologies common stock is a capital asset in the hands of a FMC Technologies stockholder on the distribution date:
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holders of FMC Technologies common stock will not recognize any income, gain or loss as a result of the receipt of shares of our common stock in the spin-off; |
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holders of FMC Technologies common stock will apportion the tax basis of their FMC Technologies common stock between such FMC Technologies common stock and our common stock received in the spin-off in proportion to the relative fair market values of such stock at the time of the spin-off; |
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the holding period for our common stock received in the spin-off by holders of FMC Technologies common stock will include the period during which such holders held the FMC Technologies common stock with respect to which the spin-off was made; and |
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neither we nor FMC Technologies will recognize gain or loss as a result of the spin-off. |
Current federal tax regulations also generally provide that if an FMC Technologies stockholder holds different blocks of FMC Technologies common stock (generally shares of FMC Technologies common stock purchased on different dates or at different prices), the aggregate basis for each block of FMC Technologies common stock purchased or acquired on the same date and at the same price will be allocated, to the greatest extent possible, between the shares of our common stock (including any fractional share) received in the spin off in respect of such block of FMC Technologies common stock and such block of FMC Technologies common stock, in proportion to their respective fair market values, and the holding period of the shares of our common stock (including any fractional share) received in the spin off in respect of such block of FMC Technologies common stock will include the holding period of such block of FMC Technologies common stock, provided that such block of FMC Technologies common stock was held as a capital asset on the distribution date. If an FMC Technologies stockholder is not able to identify which particular shares of our common stock (including any fractional share) are received in the spin off with respect to a particular block of FMC Technologies common stock, for purposes of applying the rules described above, the stockholder may designate which shares of our common stock (including any fractional share) are received in the spin off in respect of a particular block of FMC Technologies common stock, provided that the number of shares so designated is consistent with the ratio of the total number of shares of our common stock distributed to the FMC Technologies stockholder in the spin-off to the total number of shares of FMC Technologies common stock on which the FMC Technologies stockholder received that distribution.
If you receive cash in lieu of a fractional share of our common stock, you will be treated as though you first received a distribution of the fractional share in the spin-off and then sold it for the amount of such cash. You will generally recognize capital gain or loss, provided that the fractional share is considered to be held as a capital asset, measured by the difference between the cash you receive for such fractional share and your tax basis in that fractional share, as determined above. Such capital gain or loss will be long-term capital gain or loss if your holding period (as determined above) for such fractional share is more than one year on the distribution date.
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If the distribution were not to qualify as a tax-free spin-off, each FMC Technologies stockholder receiving shares of our common stock in the spin-off would be treated as if such stockholder had received a distribution in an amount equal to the fair market value of our common stock received, which would result in (1) a taxable dividend to the extent of such stockholders pro rata share of FMC Technologies current and accumulated earnings and profits, (2) a reduction in such stockholders basis in FMC Technologies common stock to the extent the amount received exceeds such stockholders share of earnings and profits and (3) a taxable gain to the extent the amount received exceeds the sum of the amount treated as a dividend and the stockholders basis in the FMC Technologies common stock. Any such gain would generally be a capital gain if the FMC Technologies common stock is held as a capital asset on the distribution date. In addition, FMC Technologies would recognize a taxable gain to the extent the fair market value of our common stock exceeded its tax basis in such common stock.
Even if the spin-off otherwise qualifies for tax-free treatment under Section 355 of the Code, FMC Technologies could recognize taxable gain if the spin-off is determined to be part of a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in either FMC Technologies or JBT Corporation. Under the Code, any acquisitions of FMC Technologies or JBT Corporation within the four-year period beginning two years before the date of the spin-off are presumed to be part of such a plan. Regulations issued by the IRS, however, provide mitigating rules in many circumstances. Nonetheless, a merger, recapitalization or acquisition, or issuance or redemption of our common stock after the spin-off could, in some circumstances, be counted toward the 50% change of ownership threshold. The tax sharing agreement precludes us from engaging in some of these transactions unless we first obtain a tax opinion acceptable to FMC Technologies or an IRS ruling to the effect that such transactions will not result in additional taxes. The tax sharing agreement further requires us to indemnify FMC Technologies for any resulting taxes regardless of whether we first obtain such opinion or ruling. As a result, we may be unable to engage in strategic or capital raising transactions that stockholders might consider favorable, or to structure potential transactions in the manner most favorable to us. See Our Relationship with FMC Technologies After the Spin-OffTax Sharing Agreement beginning on page 116.
There are other restrictions imposed on us under current U.S. federal tax law for spin-offs with which we will need to comply in order to preserve the favorable tax treatment of the distribution, such as continuing to own and manage our food and airport businesses and limitations on sale or redemptions of our common stock or other property following the distribution.
If you are a significant distributee with respect to the spin-off, you are required to attach a statement to your federal income tax return for the year in which the spin-off occurs setting forth our name and IRS employer identification number, FMC Technologies name and IRS employer identification number, the date of the spin-off, and the fair market value of the shares of our common stock that you receive in the spin-off. Upon request, FMC Technologies will provide the information necessary to comply with this reporting requirement to each stockholder of record as of 5:00 p.m., New York City time, on the record date. You are a significant distributee with respect to the spin-off if you own at least 5% of the outstanding shares of FMC Technologies common stock immediately before the spin-off. You should consult your own tax advisor concerning the application of this reporting requirement in light of your particular circumstances.
Listing and Trading of Our Common Stock
There is currently no public market for our common stock. We intend to apply to have our common stock authorized for listing on the NYSE under the symbol JBT. We anticipate that trading of our common stock will commence on a when-issued basis on or shortly before the record date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. On the first trading day following the distribution date, when-issued trading with respect to our common stock will end and regular way trading will begin. Regular way trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of the transaction.
We cannot predict what the trading prices for our common stock will be before or after the distribution date. We also cannot predict any change that may occur in the trading price of FMC Technologies common stock as a
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result of the spin-off. Until our common stock is fully distributed and an orderly market develops in our common stock, the price at which it trades may fluctuate significantly and may be lower or higher than the price that would be expected for a fully distributed issue. See Risk FactorsRisks Relating to Our Common Stock.
The shares of our common stock distributed to FMC Technologies stockholders will be freely transferable except for shares received by persons who may be deemed to be our affiliates under the Securities Act of 1933, as amended. Persons that may be considered affiliates of us after the spin-off generally include individuals or entities that control, are controlled by or are under common control with us. This may include some or all of our officers and directors as well as our principal stockholders. Persons that are our affiliates will be permitted to sell their shares only pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an exemption from the registration requirements of the Securities Act, such as the exemptions afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.
Spin-off Conditions and Termination
We expect that the spin-off will be effective on the distribution date, [ ], 2008, provided that, among other things:
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the SEC has declared effective our registration statement on Form 10, of which this information statement is a part, under the Securities Exchange Act of 1934, as amended, and no stop order relating to the registration statement is in effect; |
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we have entered into the new credit facility described under Description of Indebtedness; |
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the private letter ruling has been received from the IRS substantially to the effect that no income, gain or loss will be recognized by FMC Technologies or its stockholders as a result of the spin-off; |
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our Board of Directors and the Board of Directors for FMC Technologies have received a satisfactory solvency opinion with regard to our company from an investment banking or valuation firm; and |
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no action, proceeding or investigation shall have been instituted or threatened before any court or administrative body to restrain, enjoin or otherwise prevent the consummation of the spin-off, and no restraining order or injunction issued by any court of competent jurisdiction shall be in effect restraining the consummation of the spin-off. |
The fulfillment of the foregoing conditions will not create any obligation on FMC Technologies part to effect the spin-off, and the Board of Directors of FMC Technologies has reserved the right to amend, modify or abandon the spin-off and the related transactions at any time prior to the distribution date. The Board of Directors of FMC Technologies may also waive any of these conditions.
In addition, FMC Technologies has the right not to complete the spin-off and related transactions if, at any time, FMC Technologies Board of Directors determines, in its sole discretion, that the distribution is not in the best interests of FMC Technologies and its stockholders or that business conditions are such that it is not advisable to spin-off our business.
Reason for Furnishing this Information Statement
This information statement is being furnished solely to provide information to FMC Technologies stockholders who will receive shares of our common stock in the spin-off. It is not and is not to be construed as an inducement or encouragement to buy or sell any securities. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither FMC Technologies nor JBT Corporation undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations.
31
We anticipate that we will pay cash dividends on our common stock following the spin-off. The initial quarterly dividend will be $ [0.08] per share. The declaration and amount of future dividends, if any, will be determined by our Board of Directors and will depend on our financial condition, earnings, capital requirements, financial covenants, regulatory constraints, industry practice and other factors our Board deems relevant. Because FMC Technologies does not currently pay a dividend and because we and FMC Technologies will be separate entities after the spin-off, our decision to pay (or not pay) dividends in the future will not impact FMC Technologies decision of whether to pay (or not pay) dividends in the future.
32
The following table sets forth our capitalization (i) on an actual basis as of March 31, 2008 and (ii) on pro forma basis as of March 31, 2008 as adjusted to give effect to the separation and distribution as if they had occurred on March 31, 2008.
You should read this table in conjunction with Selected Combined Financial Information, Unaudited Pro Forma Combined Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations and the combined financial statements and related notes that are included elsewhere in this information statement.
As of March 31,
2008 |
|||||||
Actual |
Pro
Forma |
||||||
(Unaudited)
(Dollars in
|
|||||||
Debt Outstanding |
| 200.0 | |||||
Owners Equity |
|||||||
Owners net investment |
226.0 | 17.6 | |||||
Accumulated other comprehensive income (loss) |
0.5 | (6.3 | ) | ||||
Total Owners Equity |
226.5 | 11.3 | |||||
Total Liabilities and Owners Equity |
$ | 597.3 | $ | 598.8 | |||
33
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined financial information for the year ended December 31, 2007 has been derived from our audited historical combined financial statements as of and for the year ended December 31, 2007. The unaudited pro forma combined financial information as of and for the three months ended March 31, 2008 has been derived from our unaudited combined financial statements as of and for the three months ended March 31, 2008. This unaudited pro forma combined financial information should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our audited combined financial statements and notes related to those combined financial statements included elsewhere in this information statement.
The unaudited pro forma combined statement of income for the year ended December 31, 2007 and for the three months ended March 31, 2008 have been prepared as if the distribution had occurred as of January 1, 2007. The unaudited pro forma combined balance sheet as of March 31, 2008 has been prepared as if the distribution occurred on March 31, 2008. Adjustments include the following:
|
creation of the capital structure of JBT Corporation based upon the expected separation from FMC Technologies; |
|
a reduction in deferred tax assets relating to certain foreign tax credit carryforwards that will be retained by FMC Technologies; |
|
the transfer of certain employee benefit plan assets and liabilities related to our business from FMC Technologies to us; and |
|
the effect of the financing to pay a dividend to FMC Technologies. |
The pro forma adjustments are based on the best information available and assumptions that management believes are reasonable given the information available; however, such adjustments are subject to change based upon the final terms of the Separation Agreement. The unaudited pro forma combined financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what our results of operations or financial position would have been had the transactions contemplated by the Separation Agreement and related transactions occurred on the dates indicated.
The unaudited pro forma combined financial information has been prepared using the historical results of operations and bases of the assets and liabilities of FMC Technologies businesses, which give effect to allocations of corporate overhead and other expenses from FMC Technologies. FMC Technologies allocated to us, among other things, $11.1 million in 2005, $12.0 million in 2006 and $11.3 million in 2007 of expenses incurred for providing us with the following services: legal, tax, general accounting, communications, corporate development, benefits and human resources, information systems, payroll services, web hosting services and other public company undertakings. By no later than December 31, 2008, we expect to have assumed responsibility for these services and their related expenses. We currently believe the estimate for the costs of these services could be approximately $12.0 million to $13.0 million in 2009, our first full year as a separate publicly-traded company. However, the actual total costs of these services associated with our transition to, and operating as, a separate publicly-traded company could be different than our estimates. See the Notes to Unaudited Pro Forma Combined Financial Statements.
34
Unaudited Pro Forma Combined Statement of Income
Three Months Ended March 31, 2008 | |||||||||||
Historical | Adjustments | Pro Forma | |||||||||
(In millions, except per share data) | |||||||||||
Revenue |
$ | 260.2 | $ | | $ | 260.2 | |||||
Costs of sales |
198.3 | | 198.3 | ||||||||
Selling general and administrative expense |
39.2 | | 39.2 | ||||||||
Research and development expense |
5.5 | | 5.5 | ||||||||
Total costs and expenses |
243.0 | | 243.0 | ||||||||
Other income, net |
2.1 | | 2.1 | ||||||||
Income before interest income, interest expense and income taxes |
19.3 | | 19.3 | ||||||||
Net interest income (expense) |
0.1 | (2.6 | )(1) | (2.5 | ) | ||||||
Income from continuing operations before income taxes |
19.4 | (2.6 | ) | 16.8 | |||||||
Provision (benefit) for income taxes |
7.4 | (1.0 | )(1) | 6.4 | |||||||
Income from continuing operations |
$ | 12.0 | $ | (1.6 | ) | $ | 10.4 | ||||
Income from continuing operations per common share: |
|||||||||||
Basic |
$ | 0.38 | |||||||||
Diluted |
$ | 0.37 | |||||||||
Weighted average shares outstanding: |
|||||||||||
Basic (4) |
27.6 | ||||||||||
Diluted (5) |
28.1 |
Unaudited Pro Forma Combined Statement of Income
Year Ended December 31, 2007 | ||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
(In millions, except per share data) | ||||||||||||
Revenue |
$ | 978.0 | | $ | 978.0 | |||||||
Costs of sales |
740.8 | | 740.8 | |||||||||
Selling general and administrative expense |
153.8 | | 153.8 | |||||||||
Research and development expense |
18.7 | | 18.7 | |||||||||
Total costs and expenses |
913.3 | | 913.3 | |||||||||
Other expense, net |
(3.6 | ) | | (3.6 | ) | |||||||
Income before interest income, interest expense and income taxes |
61.1 | | 61.1 | |||||||||
Net interest income (expense) |
0.5 | (14.5 | )(1) | (14.0 | ) | |||||||
Income from continuing operations before income taxes |
61.6 | (14.5 | ) | 47.1 | ||||||||
Provision (benefit) for income taxes |
21.5 | (5.4 | )(1) | 16.1 | ||||||||
Income from continuing operations |
$ | 40.1 | $ | (9.1 | ) | $ | 31.0 | |||||
Income from continuing operations per common share: |
||||||||||||
Basic |
$ | 1.13 | ||||||||||
Diluted |
$ | 1.10 | ||||||||||
Weighted average shares outstanding: |
||||||||||||
Basic (4) |
27.6 | |||||||||||
Diluted (5) |
28.1 |
35
Unaudited Pro Forma Combined Balance Sheet
As of March 31, 2008 | ||||||||||
Historical | Adjustments | Pro Forma | ||||||||
(Dollars in millions) | ||||||||||
Current assets |
||||||||||
Cash and cash equivalents |
$ | 11.7 | $ | (3.4 | )(1) | $ | 8.3 | |||
Trade receivables, net of allowances |
176.1 | | 176.1 | |||||||
Inventories |
168.3 | | 168.3 | |||||||
Prepaid expenses |
6.1 | | 6.1 | |||||||
Other current assets |
26.8 | | 26.8 | |||||||
Assets of discontinued operations |
3.1 | | 3.1 | |||||||
Total current assets |
392.1 | (3.4 | ) | 388.7 | ||||||
Investments |
7.1 | | 7.1 | |||||||
Property, plant and equipment, net |
128.1 | | 128.1 | |||||||
Goodwill |
24.3 | | 24.3 | |||||||
Intangible assets, net |
21.1 | | 21.1 | |||||||
Other assets |
9.0 | 8.2 | (2) | 17.2 | ||||||
Deferred income taxes |
15.6 | 4.0 | (2) | 12.3 | ||||||
(7.3 | )(3) | |||||||||
Total assets |
$ | 597.3 | $ | 1.5 | $ | 598.8 | ||||
Liabilities and Owners Equity
As of March 31, 2008 | |||||||||||
Historical | Adjustments | Pro Forma | |||||||||
(Dollars in millions) | |||||||||||
Current liabilities |
|||||||||||
Accounts payable, trade and other |
$ | 103.0 | | $ | 103.0 | ||||||
Advance payments and progress billings |
113.1 | | 113.1 | ||||||||
Other current liabilities |
95.6 | | 95.6 | ||||||||
Liabilities of discontinued operations |
2.9 | | 2.9 | ||||||||
Total current liabilities |
314.6 | | 314.6 | ||||||||
Long-term debt, less current portion |
| $ | 200.0 | (1) | 200.0 | ||||||
Other liabilities |
56.2 | 16.7 | (2) | 72.9 | |||||||
Owners equity |
|||||||||||
Owners net investment |
226.0 | (203.4 | )(1) | 17.6 | |||||||
2.3 | (2) | ||||||||||
(7.3 | )(3) | ||||||||||
Accumulated other comprehensive income (loss) |
0.5 | (6.8 | )(2) | (6.3 | ) | ||||||
Total owners equity |
226.5 | (215.2 | ) | 11.3 | |||||||
Total liabilities and owners equity |
$ | 597.3 | $ | 1.5 | $ | 598.8 | |||||
36
Notes to Unaudited Pro Forma Combined Financial Statements
(1) Adjustments reflect the dividend of $203.4 million, estimated as of March 31, 2008, paid to FMC Technologies, which amount will be funded through the issuance of unsecured debt. Pursuant to the terms of the Separation Agreement, the dividend will be adjusted by the value of our after-tax operating cash flow for the period from and including January 1, 2008 to and including the distribution date. If the spin-off were to occur on July 31, 2008, we estimate the dividend would be approximately $175.0 million, after adjustments. While the credit facilities have not been finalized, we estimated interest expense using an effective annual interest rate of 7.25% during 2007 and 5.28% during 2008, or one month LIBOR plus 200 basis points. Income tax adjustments assume a rate of 37%.
(2) FMC Technologies has qualified and non-qualified U.S. defined benefit and other postretirement benefit plans whose assets and liabilities, and related tax effects, assumed at 37%, will be distributed to us upon spin-off.
(3) Adjustment reflects $7.3 million reduction in deferred tax assets relating to certain foreign tax credit carryforwards that will be retained by FMC Technologies.
(4) The number of shares used to compute basic earnings per share is based on the number of shares of our common stock assumed to be outstanding on the distribution date, based on a distribution ratio of .216 shares of our common stock for each share of FMC Technologies, Inc. common stock.
(5) The number of shares used to compute diluted earnings per share adds potential dilutive securities to the shares used in computing basic earnings per share. We expect to convert certain stock-based compensation awards for FMC Technologies common stock into awards for JBT Corporation common stock.
37
SELECTED COMBINED FINANCIAL DATA
The selected historical financial and other data have been derived from FMC Technologies combined financial statements using the historical results of operations and bases of the assets and liabilities of FMC Technologies businesses and give effect to allocations of expenses from FMC Technologies. The historical combined statement of income data set forth below does not reflect changes that will occur in the operations and funding of our company as a result of our spin-off from FMC Technologies. The historical combined balance sheet data set forth below reflects the assets and liabilities that existed as of the dates and the periods presented.
The selected combined financial data should be read in conjunction with, and are qualified by reference to, Unaudited Pro Forma Combined Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and the historical audited financial statements and the accompanying notes thereto included elsewhere in this information statement. The combined statements of operations and cash flow data for each of the three years in the period ended December 31, 2007 and the combined balance sheet data as of December 31, 2006 and 2007 are derived from the audited combined financial statements included elsewhere in this information statement, and should be read in conjunction with those combined financial statements and the accompanying notes. The combined statements of operations set forth below for the years ended December 31, 2003 and December 31, 2004 and the combined balance sheet data as of December 31, 2003, December 31, 2004 and December 31, 2005 are derived from our unaudited financial statements. The combined statements of operations and cash flow data for the three months ended March 31, 2008 and March 31, 2007 and the combined balance sheet data as of March 31, 2008 and March 31, 2007 are derived from the unaudited combined financial statements included elsewhere in this information statement, and should be read in conjunction with those financial statements and the accompanying notes. In managements opinion, these unaudited combined financial statements have been prepared on substantially the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial data for the periods presented. In 2006 and 2007, FMC Technologies reclassified the results of operations of two JBT FoodTech businesses to income (loss) from discontinued operations.
38
The financial information presented below may not reflect what our results of operation, cash flows and financial position would have been had we operated as a separate, stand-alone entity during the periods presented or what our results of operations, financial position and cash flows will be in the future.
Years Ended December 31, |
Three Months Ended
March 31, |
|||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||||||||
Unaudited | Audited | Unaudited | ||||||||||||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||||||||||
Income Statement Data: |
||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||
FoodTech |
$ | 468.1 | $ | 473.7 | $ | 497.4 | $ | 496.2 | $ | 593.2 | $ | 123.0 | $ | 148.7 | ||||||||||||||
AeroTech |
221.5 | 272.1 | 326.7 | 348.7 | 386.0 | 71.9 | 111.7 | |||||||||||||||||||||
Intercompany eliminations |
(1.6 | ) | (0.6 | ) | (0.8 | ) | (0.6 | ) | (1.2 | ) | (0.1 | ) | (0.2 | ) | ||||||||||||||
Total revenue |
$ | 688.0 | $ | 745.2 | $ | 823.3 | $ | 844.3 | $ | 978.0 | $ | 194.8 | $ | 260.2 | ||||||||||||||
Cost of sales |
$ | 504.1 | $ | 565.2 | $ | 624.8 | $ | 631.1 | $ | 740.8 | $ | 146.5 | $ | 198.3 | ||||||||||||||
Selling, general and administrative expense |
121.2 | 126.7 | 138.9 | 146.7 | 153.8 | 36.3 | 39.2 | |||||||||||||||||||||
Research and development expense |
18.3 | 17.8 | 18.0 | 16.2 | 18.7 | 4.5 | 5.5 | |||||||||||||||||||||
Total costs and expenses |
643.6 | 709.7 | 781.7 | 794.0 | 913.3 | 187.3 | 243.0 | |||||||||||||||||||||
Other income (expense), net |
0.1 | 1.4 | 0.7 | 0.1 | (3.6 | ) | (0.7 | ) | 2.1 | |||||||||||||||||||
Income from continuing operations before net interest and income taxes |
44.5 | 36.9 | 42.3 | 50.4 | 61.1 | 6.8 | 19.3 | |||||||||||||||||||||
Net interest income (expense) |
(0.1 | ) | 0.1 | 0.1 | 0.4 | 0.5 | 0.1 | 0.1 | ||||||||||||||||||||
Income from continuing operations before income taxes |
44.4 | 37.0 | 42.4 | 50.8 | 61.6 | 6.9 | 19.4 | |||||||||||||||||||||
Provision for income taxes |
15.7 | 16.9 | 16.0 | 16.0 | 21.5 | 2.9 | 7.4 | |||||||||||||||||||||
Income from continuing operations |
28.7 | 20.1 | 26.4 | 34.8 | 40.1 | 4.0 | 12.0 | |||||||||||||||||||||
Income (loss) from discontinued operations, net of income taxes |
(3.3 | ) | (3.8 | ) | (1.9 | ) | (0.2 | ) | (3.7 | ) | (0.8 | ) | 0.3 | |||||||||||||||
Net income |
$ | 25.4 | $ | 16.3 | $ | 24.5 | $ | 34.6 | $ | 36.4 | $ | 3.2 | $ | 12.3 | ||||||||||||||
Balance sheet data (at end of period): |
||||||||||||||||||||||||||||
Total assets |
$ | 500.1 | $ | 493.9 | $ | 493.5 | $ | 516.6 | $ | 573.9 | $ | 523.0 | $ | 597.3 | ||||||||||||||
Long-term debt, less current portion |
0.4 | 0.3 | 0.2 | | | | | |||||||||||||||||||||
Owners net investment |
$ | 232.9 | $ | 242.1 | $ | 223.9 | $ | 197.6 | $ | 218.3 | $ | 193.6 | $ | 226.0 |
Years Ended December 31, |
Three Months Ended
March 31, |
||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | 2008 | |||||||||||||||
Unaudited | Audited | Unaudited | |||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
Other financial information: |
|||||||||||||||||||||
Capital expenditures |
$ | 24.3 | $ | 20.7 | $ | 21.6 | $ | 22.7 | $ | 23.0 | $ | 4.0 | $ | 4.1 | |||||||
Cash flows provided by operating activities of continuing operations |
$ | 44.3 | $ | 35.7 | $ | 54.0 | $ | 96.3 | $ | 39.0 | $ | 9.4 | $ | 11.5 | |||||||
Order backlog (unaudited) (1) |
$ | 227.4 | $ | 259.3 | $ | 227.8 | $ | 322.1 | $ | 398.4 | $ | 366.9 | $ | 371.9 |
(1) | Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders at the reporting date. |
39
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
Our representatives may from time to time make written or oral statements that are forward-looking and provide information that is not historical in nature, including statements that are or will be contained in this report, the notes to our combined financial statements, our other filings with the Securities and Exchange Commission, our press releases and conference call presentations and our other communications to our stockholders. These statements involve known and unknown risks, uncertainties and other factors that may be outside of our control and may cause actual results to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, those described under Risk Factors beginning on page 9 of this information statement.
In some cases, forward-looking statements can be identified by such words or phrases as will likely result, is confident that, expects, should, could, may, will continue to, believes, anticipates, predicts, forecasts, estimates, projects, potential, intends or similar expressions that relate to prospective events or developments, including the negative of those words and phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and our outlook based on currently available information. We wish to caution you not to place undue reliance on any such forward-looking statements, which speak only as of the date made and involve judgments.
Executive Overview
We currently operate as the FoodTech and Airport Systems segments of FMC Technologies, and FMC Technologies has determined to spin-off our segments by forming JBT Corporation and distributing all of our common stock as a dividend to the FMC Technologies shareholders. In connection with the spin-off, we will enter into the Separation Agreement with FMC Technologies, which will set forth the key provisions relating to the separation of our businesses and identification of the assets transferred, liabilities assumed and contracts to be assigned to us. Our assets and operations consist of the operations that are reported as FMC Technologies FoodTech and Airport Systems business segments in its financial statements and SEC reports.
We provide customized solutions that are engineered for the viable and growing food processing and air transportation industries. We design, manufacture, test and service technologically sophisticated systems and products for customers through our JBT FoodTech and JBT AeroTech segments. We have established a large installed base of food processing equipment as well as airport equipment and have built a strong global presence with manufacturing, sourcing, sales and service organizations located on six continents to support our equipment that has been delivered to more than 100 countries.
We have developed close working relationships with our customers. We believe that by working closely with our customers we enhance our competitive advantage, strengthen our market positions and improve our results. We serve customers from around the world. During 2007, approximately half of our total sales were to locations outside of the United States. We evaluate international markets and pursue opportunities that fit our technological capabilities and strategies.
The food processing and air transportation industries in which we operate are susceptible to significant changes in the strength of the global or regional economies and the economic health of companies who make capital commitments for our products and services. We focus on economic and industry-specific drivers and key risk factors affecting each of our businesses as we formulate our strategic plans and make decisions related to allocating capital and human resources. These factors include risks associated with the global economic outlook, product obsolescence, and the competitive environment.
40
As part of our core mission of being a leading supplier of customized solutions to the food processing and air transportation industries, we address these business related risks through our focus on the four critical strategies of extending our technology leadership; leveraging our installed base; capturing international growth opportunities; and growing through acquisitions.
As we evaluate our operating results, we consider performance indicators like segment revenue, operating
COMBINED RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
Three Months Ended March 31, | Change | |||||||||
2008 | 2007 | 2008 vs. 2007 | ||||||||
(Dollars in millions) | ||||||||||
Revenue |
$ | 260.2 | $ | 194.8 | $ | 65.4 | ||||
Costs and expenses: |
||||||||||
Cost of sales |
198.3 | 146.5 | 51.8 | |||||||
Selling, general and administrative expense |
39.2 | 36.3 | 2.9 | |||||||
Research and development expense |
5.5 | 4.5 | 1.0 | |||||||
Total costs and expenses |
243.0 | 187.3 | 55.7 | |||||||
Other income (expense), net |
2.1 | (0.7 | ) | 2.8 | ||||||
Net interest income |
0.1 | 0.1 | | |||||||
Income before income taxes |
19.4 | 6.9 | 12.5 | |||||||
Provision for income taxes |
7.4 | 2.9 | 4.5 | |||||||
Income from continuing operations |
12.0 | 4.0 | 8.0 | |||||||
Income (loss) from discontinued operations, net of income taxes |
0.3 | (0.8 | ) | 1.1 | ||||||
Net income |
$ | 12.3 | $ | 3.2 | $ | 9.1 | ||||
Our total revenue for the first quarter of 2008 increased 34% from the first quarter of 2007. High demand in the later months of 2007 culminated in an order backlog of almost $400 million at December 31, 2007, which was primarily comprised of JBT AeroTech equipment orders. Execution of this backlog was the primary driver of increased revenue. Additionally, higher demand for freezing and cooking equipment, particularly by poultry producers in Latin America, contributed $17.3 million in increased revenue in the first quarter of 2008 compared to the first quarter of 2007. Higher demand in Brazil reflects investment by poultry producers as Brazil has become a leading exporter of raw poultry following the avian flu epidemics in other parts of the world.
Cost of sales were greater in the first quarter of 2008 compared to the same period in 2007, however gross profit (sales less cost of sales) increased by $13.6 million in 2008 compared to 2007. This was primarily a result of a trend toward higher demand for comprehensive food processing solutions with multiple components. Gross profit margins declined from 24.8% in 2007 to 23.8% in 2008 as a result of more outsourced components, which increased our material costs.
Selling, general and administrative expenses were higher in the first quarter of 2008 compared to the same period in 2007, but were lower as a percentage of sales reflecting leverage of higher revenue. Foreign currency translation contributed $1.7 million of the total increase in expense.
Other income (expense), net reflected foreign currency related gains. With more than 50% of our revenue and expenses generated outside of the U.S., we mitigate the impact of currency fluctuations on our operating results by entering into derivative instruments. Our procedures are designed to mitigate, but not entirely eliminate, the foreign currency fluctuations.
41
Income tax expense for the three months ended March 31, 2008 resulted in an effective income tax
rate of 38%, compared to an effective rate of 42% for the three months ended March 31, 2007. The decrease in effective tax rate was primarily attributable to changes in the distribution of global earnings across the jurisdictions in which we
COMBINED RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
Year Ended December 31, | Change | |||||||||||||||||||
2007 | 2006 | 2005 | 2007 vs. 2006 | 2006 vs. 2005 | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Revenue |
$ | 978.0 | $ | 844.3 | $ | 823.3 | $ | 133.7 | $ | 21.0 | ||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales |
740.8 | 631.1 | 624.8 | 109.7 | 6.3 | |||||||||||||||
Selling, general and administrative expense |
153.8 | 146.7 | 138.9 | 7.1 | 7.8 | |||||||||||||||
Research and development expense |
18.7 | 16.2 | 18.0 | 2.5 | (1.8 | ) | ||||||||||||||
Total costs and expenses |
913.3 | 794.0 | 781.7 | 119.3 | 12.3 | |||||||||||||||
Other income (expense), net |
(3.6 | ) | 0.1 | 0.7 | (3.7 | ) | (0.6 | ) | ||||||||||||
Net interest income |
0.5 | 0.4 | 0.1 | 0.1 | 0.3 | |||||||||||||||
Income before income taxes |
61.6 | 50.8 | 42.4 | 10.8 | 8.4 | |||||||||||||||
Provision for income taxes |
21.5 | 16.0 | 16.0 | 5.5 | | |||||||||||||||
Income from continuing operations |
40.1 | 34.8 | 26.4 | 5.3 | 8.4 | |||||||||||||||
Income (loss) from discontinued operations, net of income taxes |
(3.7 | ) | (0.2 | ) | (1.9 | ) | (3.5 | ) | 1.7 | |||||||||||
Net income |
$ | 36.4 | $ | 34.6 | $ | 24.5 | $ | 1.8 | $ | 10.1 | ||||||||||
2007 Compared with 2006
Revenue increased by $133.7 million (more than 15%) in the twelve months ended December 31, 2007 compared to 2006. Increased sales of equipment and services provided to producers of shelf stable food products drove revenue higher by approximately $20.0 million. This higher demand was for new efficient solutions for customers increased use of unique product packaging. Increased demand for freezing solutions from bakery markets and other ready-to-eat meal food processors contributed approximately $17.0 million in higher revenue. This higher demand was a function of increased demand for frozen ready-to-eat meals, particularly in Europe. New long-term contracts were executed for a variety of JBT AeroTech equipment and services to commercial airlines, airport authorities and the U.S. government. Air traffic trended upward compared to 2006, creating higher demand for loaders and other ground support equipment used by airports and airlines, driving approximately $33.0 million in higher revenue. Approximately $36.0 million of the increase in sales resulted from translating foreign currency revenue into U.S. dollars at a different rate in 2007 compared to 2006.
Cost of sales were greater in 2007 compared to 2006, however gross profit (sales less cost of sales) increased by $24.0 million in 2007 compared to 2006. This was primarily a result of higher demand for comprehensive food processing solutions with multiple components. However, increased outsourced components negatively impacted gross profit margins which declined from 25.3% in 2006 to 24.3% in 2007.
Selling, general and administrative expenses grew by 5%, which largely reflected the impact of foreign currency translation. As a percentage of sales, selling, general and administrative expenses declined from 17.4% of sales in 2006 to 15.7% of sales in 2007, reflecting leverage from higher sales volume and the absence of system implementation costs incurred in 2006.
42
Other income (expense), net, reflected foreign currency related gains and losses. With more than 50% of our revenue and expenses generated outside of the U.S., we mitigate the impact of currency fluctuations on our operating results by entering into derivative instruments. Our procedures are designed to mitigate, but not entirely eliminate, the foreign currency fluctuations. The loss was driven primarily by the weakening of the U.S. dollar against European currencies.
Income tax expense for the year ended December 31, 2007 resulted in an effective income tax rate of 35%, compared to an effective rate of 31% for 2006. The increase in effective tax rate is attributable to changes in the distribution of global earnings across the jurisdictions in which we operate and also reflects both incremental tax benefit in 2006 related to the reversal of a valuation allowance and incremental tax expense recorded in 2007 related to the repatriation of foreign earnings.
2006 Compared with 2005
Revenue increased by $21.0 million (3%) in the twelve months ended December 31, 2006 compared to 2005. This increase can, in part, be attributed to the introduction of new airport services to three large U.S. airports. These contracts generated approximately $7.0 million in incremental revenue. Higher demand for airport and airline equipment resulting from higher levels of air traffic (both passenger and cargo) contributed approximately $20.0 million in incremental revenue.
Cost of sales increased in 2006 compared to 2005, but declined as a percentage of sales. This gross margin improvement was primarily a result of lower costs in executing orders for freezing equipment and services. While freezing equipment sales volume did not increase significantly over 2005, we managed more efficient production of orders, which allowed for improvement in margin.
Selling, general and administrative expenses increased by approximately 6% during 2006 and also increased as a percentage of sales from 16.9% in 2005 to 17.4% in 2006. In 2006, we incurred higher costs from system implementations as well as relocation and other initiatives from expanding businesses internationally.
Other income (expense), net, in 2006 includes $1.0 million in foreign currency related losses and $1.1 million in gains on sales of fixed assets. In 2005, we incurred $2.4 million in foreign currency related losses and $3.1 million in gains on sales of fixed assets. In both years we disposed of idle property. With more than 50% of our revenue and expenses generated outside of the U.S, we mitigate the impact of currency fluctuations on our operating results by entering into derivative instruments. Our procedures are designed to mitigate, but not entirely eliminate, the foreign currency fluctuations.
Income tax expense for the year ended December 31, 2006 resulted in an effective income tax rate of 31%, compared to an effective rate of 38% for 2005. The decrease in effective tax rate primarily reflects the net effect of incremental tax expense in 2005 related to a valuation allowance recorded against net operating losses in certain foreign jurisdictions, and an incremental tax benefit in 2006 related to the reversal of a portion of a valuation allowance. The decrease in rate also reflects incremental tax expense recorded in 2005 related to the repatriation of foreign earnings.
Discontinued Operations
We have reported two businesses within discontinued operations, one of which was sold in 2007 for a gain, net of tax, of $3.1 million. Offsetting this gain were operating losses of $7.3 million, including restructuring expenses and asset valuation provisions of $4.5 million from a second discontinued business which ceased operations in first quarter 2008.
43
Operating Results of Business Segments
Segment operating profit is defined as total segment revenue less segment operating expenses. The following items have been excluded in computing segment operating profit: corporate staff expense, interest income and expense, income taxes and other expense, net. Other expense, net, primarily includes stock-based compensation, LIFO inventory provisions, and foreign currency exchange gains and losses.
The following table summarizes our operating results for the three months ended March 31, 2008 and 2007:
Three Months Ended March 31, |
Favorable
(Unfavorable) |
|||||||||||
2008 | 2007 | 2008 vs. 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Revenue |
||||||||||||
JBT FoodTech |
$ | 148.7 | $ | 123.0 | $ | 25.7 | ||||||
JBT AeroTech |
111.7 | 71.9 | 39.8 | |||||||||
Intercompany eliminations |
(0.2 | ) | (0.1 | ) | (0.1 | ) | ||||||
Total revenue |
$ | 260.2 | $ | 194.8 | $ | 65.4 | ||||||
Net income |
||||||||||||
Segment operating profit |
||||||||||||
JBT FoodTech |
$ | 13.3 | $ | 9.2 | $ | 4.1 | ||||||
JBT AeroTech |
9.1 | 2.1 | 7.0 | |||||||||
Total segment operating profit |
22.4 | 11.3 | 11.1 | |||||||||
Corporate items: |
||||||||||||
Corporate expense |
(2.8 | ) | (2.6 | ) | (0.2 | ) | ||||||
Other expense, net |
(0.3 | ) | (1.9 | ) | 1.6 | |||||||
Interest income |
0.1 | 0.1 | | |||||||||
Total corporate items |
(3.0 | ) | (4.4 | ) | 1.4 | |||||||
Income before income taxes |
19.4 | 6.9 | 12.5 | |||||||||
Provision for income taxes |
7.4 | 2.9 | (4.5 | ) | ||||||||
Income from continuing operations |
12.0 | 4.0 | 8.0 | |||||||||
Income (loss) from discontinued operations, net of income taxes |
0.3 | (0.8 | ) | 1.1 | ||||||||
Net income |
$ | 12.3 | $ | 3.2 | $ | 9.1 | ||||||
We report our results of operations in U.S. dollars; however, our earnings are generated in a number of currencies worldwide. We generate a significant amount of revenue, and incur a significant amount of costs in the Euro, Brazilian real, and Swedish krona, for example. The earnings of subsidiaries functioning in their local currencies are translated into U.S. dollars based upon the average exchange rate for the period, in order to provide worldwide combined results. While the U.S. dollar reported results reflect the actual economics of the period reported upon, the variances from prior periods include the impact of translating earnings at different rates.
A summary of the translation impact on our combined results follows:
Three Months Ended
March 31, 2008 |
Year Ended
December 31, 2007 |
|||||
(Dollars in millions) | ||||||
Revenue growth: |
||||||
Amount reported |
$ | 65.4 | $ | 133.7 | ||
Amount due to translation |
$ | 10.3 | $ | 35.4 | ||
Segment operating profit growth: |
||||||
Amount reported |
$ | 11.1 | $ | 15.0 | ||
Amount due to translation |
$ | 0.2 | $ | 4.1 |
44
Translation primarily affected our JBT FoodTech results. There was no material effect of translation on our comparative results of 2006 to 2005.
JBT FoodTech
Three Months Ended March 31, 2008 Compared with Three Months Ended March 31, 2007
JBT FoodTechs revenue increased by $25.7 million in the three months ended March 31, 2008 compared to the same period in 2007. Demand in Latin America from poultry processors was the main driver of revenue increase, contributing $11.6 million in incremental revenue. In addition, foreign currency translation caused $8.6 million in incremental revenue. The remaining revenue increase reflects increased deliveries of food processing equipment from year end backlog existing at the beginning of 2008 as compared to 2007, as orders remained relatively flat quarter over quarter. Higher revenue in European markets offset declines in North American markets.
JBT FoodTechs operating profit increased by $4.1 million in the three months ended March 31, 2008 compared to the same period in 2007. Higher sales volume contributed $7.3 million in higher profits which were partially offset by higher production costs, related to the decline in the value of U.S. dollar, and higher selling, general and administrative costs.
JBT AeroTech
Three Months Ended March 31, 2008 Compared with Three Months Ended March 31, 2007
JBT AeroTechs revenue increased by $39.8 million in the three months ended March 31, 2008 compared to the same period in 2007. Higher levels of air traffic in 2007 drove higher demand for our products, which resulted in strong backlog at the end of 2007 compared to year-end 2006. Many of these orders were converted into sales in the first quarter 2008 which resulted in higher revenue for airline ground support equipment ($24.5 million) and passenger boarding bridges ($9.5 million).
JBT AeroTechs operating profit improved by $7.0 million in the three months ended March 31, 2008 compared to the same period in 2007, primarily as a result of the higher volumes. Gross profit margins were relatively stable compared to the prior year. Although other expenses were above prior year levels, they did not grow at the same rate as revenue as we were able to leverage the higher volume, which resulted in increased operating profit margins quarter over quarter.
Corporate Items
Three Months Ended March 31, 2008 Compared with Three Months Ended March 31, 2007
Corporate items declined from $4.4 million in net expense during the first quarter of 2007 to $3.0 million in net expense during the first quarter of 2008. The decline in expense includes an increase in foreign currency related gains.
Outlook for 2008
We expect segment operating earnings in 2008 will surpass the record high results earned in 2007. This is in part based on our record high order backlog as we entered the current year and our strong first quarter operating results. Overall growth in annual operating earnings of approximately 6-10% is anticipated, notwithstanding challenging economic conditions associated with effects of continued high energy costs and uncertainty in worldwide credit markets.
Overall, corporate expense items are expected to remain about even with the prior year level. However, the incurrence of interest expense associated with approximately $175 million in debt for the cash dividend to FMC Technologies is expected to reduce income before income taxes from the 2007 level. We estimate our current year overall effective tax rate to approximate 35% of income before income taxes.
45
The following table summarizes our operating results for the years ended December 31, 2007, 2006 and 2005:
Year Ended December 31, | Favorable (Unfavorable) | |||||||||||||||||||
2007 | 2006 | 2005 |
2007
vs. 2006 |
2006
vs. 2005 |
||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Revenue |
||||||||||||||||||||
JBT FoodTech |
$ | 593.2 | $ | 496.2 | $ | 497.4 | $ | 97.0 | $ | (1.2 | ) | |||||||||
JBT AeroTech |
386.0 | 348.7 | 326.7 | 37.3 | 22.0 | |||||||||||||||
Intercompany eliminations |
(1.2 | ) | (0.6 | ) | (0.8 | ) | (0.6 | ) | 0.2 | |||||||||||
Total revenue |
$ | 978.0 | $ | 844.3 | $ | 823.3 | $ | 133.7 | $ | 21.0 | ||||||||||
Net income |
||||||||||||||||||||
Segment operating profit |
||||||||||||||||||||
JBT FoodTech |
$ | 56.0 | $ | 46.3 | $ | 39.8 | $ | 9.7 | $ | 6.5 | ||||||||||
JBT AeroTech |
32.4 | 27.1 | 24.5 | 5.3 | 2.6 | |||||||||||||||
Total segment operating profit |
$ | 88.4 | $ | 73.4 | $ | 64.3 | $ | 15.0 | $ | 9.1 | ||||||||||
Corporate items: |
||||||||||||||||||||
Corporate expense |
$ | (11.3 | ) | $ | (12.0 | ) | $ | (11.1 | ) | $ | 0.7 | $ | (0.9 | ) | ||||||
Other expense, net |
(16.0 | ) | (11.0 | ) | (10.9 | ) | (5.0 | ) | (0.1 | ) | ||||||||||
Interest income |
0.5 | 0.4 | 0.1 | 0.1 | 0.3 | |||||||||||||||
Total corporate items |
$ | (26.8 | ) | $ | (22.6 | ) | $ | (21.9 | ) | $ | (4.2 | ) | $ | (0.7 | ) | |||||
Income before income taxes |
$ | 61.6 | $ | 50.8 | $ | 42.4 | $ | 10.8 | $ | 8.4 | ||||||||||
Provision for income taxes |
21.5 | 16.0 | 16.0 | (5.5 | ) | | ||||||||||||||
Income from continuing operations |
$ | 40.1 | $ | 34.8 | $ | 26.4 | $ | 5.3 | $ | 8.4 | ||||||||||
Loss from discontinued operations, net of income taxes |
(3.7 | ) | (0.2 | ) | (1.9 | ) | (3.5 | ) | 1.7 | |||||||||||
Net income |
$ | 36.4 | $ | 34.6 | $ | 24.5 | $ | 1.8 | $ | 10.1 | ||||||||||
JBT FoodTech
2007 Compared with 2006
JBT FoodTechs revenue increased by $97.0 million in the twelve months ended December 31, 2007 compared to 2006. Demand for comprehensive food processing solutions increased, as customers showed preference in working with a single supplier offering multiple equipment for an integrated processing line. There was growing demand from customers in the bakery, ready meal and poultry segments, leading to a $27.3 million increase in revenue for freezing and protein processing equipment. Increased demand for food processing equipment driven by new products, coupled with increasing acceptance of fruit-based beverages, compared to a much lower market demand worldwide in 2006, drove $32.5 million in incremental revenue. In addition, foreign currency translation resulted in $29.6 million in incremental revenue.
JBT FoodTechs operating profit in the twelve months ended December 31, 2007 increased by $9.7 million compared to 2006. Higher sales volume contributed $26.8 million in higher profits, which was partially offset by $13.3 million from margin declines resulting from a change in sales mix. As more customers demanded broader product offerings from a single supplier, 2007 volume consisted of a higher proportion of outsourced equipment, which yielded a lower margin than internally manufactured products. In addition, growth in the bakery segment had a high content of lower margin manufactured equipment. Selling, general and administrative costs increased $4.8 million in 2007 compared to 2006, most of which represents foreign currency translation.
46
2006 Compared with 2005
JBT FoodTechs revenue in the twelve months ended December 31, 2006 was essentially flat compared to 2005. In 2006, demand for protein processing equipment declined following a significant slowdown in the North American poultry market. Investments in new capacity internationally, primarily in Latin America, partially offset this unfavorability. Timing of large fruit processing projects and delayed investments by customers due to anticipated new product introduction also contributed to the lower equipment volume. However, volume remained flat primarily due to growing aftermarket volume.
JBT FoodTechs operating profit increased by $6.5 million in the twelve months ended December 31, 2006 compared to 2005. The increase in operating profit resulted from delivering a more favorable mix of products and a higher proportion of aftermarket revenue. In addition, we realized a gain of $1.0 million on a sale of property in 2006.
JBT AeroTech
2007 Compared with 2006
JBT AeroTechs revenue increased by $37.3 million in the twelve months ended December 31, 2007 compared to 2006. Air traffic trended upward, creating higher demand for airline ground support equipment and increasing revenue by $23.3 million. In addition, the continuing trend by airport authorities and airlines to outsource maintenance services contributed to a $9.5 million increase in revenue.
JBT AeroTechs operating profit increased by $5.3 million for the twelve months ended December 31, 2007 compared to 2006. The profit improvement was a result of higher revenue, partly offset by higher warranty and other product expenses related to the volume increase. Selling and general administrative expenses increased from 2006, although at a lower rate than the revenue increase, due to our ability to leverage the higher volumes. Increased expenses were due to higher commissions on increased sales volumes and higher costs for sales and administrative staff to support future growth. We also invested more funds in research and development activities, primarily for improvements to ground support equipment.
2006 Compared with 2005
JBT AeroTechs revenue increased by $22.0 million for the twelve months ended December 31, 2006 compared to 2005. Approximately $11.0 million of the revenue improvement was driven by higher demand for passenger boarding bridges, primarily from domestic and international airport authorities. The increased demand for boarding bridges was driven in large part by improved economic conditions in the airline industry in 2006. The revenue increase in 2006 was also driven by a $7.0 million growth in demand for airport services at various domestic airports. This improvement was largely attributable to the airlines and airport authorities continued move toward outsourcing non-core activities to experienced maintenance service providers.
JBT AeroTechs operating profit increased by $2.6 million for the twelve months ended December 31, 2006 compared to 2005. Higher revenue and favorable margins, primarily for ground support equipment, contributed $11.5 million of additional earnings. Partly offsetting this improvement were higher warranty and other costs related to new product introductions and increased selling, general and administrative costs required to support current and future growth efforts. The absence of a $2.7 million gain recorded in 2005 on a land sale also partially offset the net increase in profits.
Corporate Items
2007 Compared with 2006
Corporate items increased by $4.2 million for the twelve months ended December 31, 2007 compared to 2006 primarily due to an increase of $2.6 million in foreign currency exchange related losses. With more than 50% of our revenue and expenses generated outside of the U.S, we mitigate the impact of currency fluctuations
47
on our operating results by entering into derivative instruments. Our procedures are designed to mitigate, but not entirely eliminate, the foreign currency fluctuations. Partially offsetting these expenses were lower incentive compensation expenses for corporate staff in 2007 compared to 2006.
2006 Compared with 2005
Corporate items increased by $0.7 million for the twelve months ended December 31, 2006
Inbound Orders and Order Backlog
Inbound orders represent the estimated sales value of confirmed customer orders received during the reporting period.
Inbound Orders | ||||||||||||
Three Months Ended
March 31, |
Year Ended
December 31, |
|||||||||||
2008 | 2007 | 2007 | 2006 | |||||||||
(Dollars in millions) | ||||||||||||
JBT FoodTech |
$ | 148.9 | $ | 145.6 | $ | 596.8 | $ | 537.0 | ||||
JBT AeroTech |
84.8 | 94.0 | 457.5 | 401.6 | ||||||||
Total inbound orders |
$ | 233.7 | $ | 239.6 | $ | 1,054.3 | $ | 938.6 | ||||
Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders at the reporting date.
Order Backlog | |||||||||
March 31,
2008 |
December 31,
2007 |
December 31,
2006 |
|||||||
(Dollars in millions) | |||||||||
JBT FoodTech |
$ | 167.6 | $ | 167.4 | $ | 163.8 | |||
JBT AeroTech |
204.3 | 231.0 | 158.3 | ||||||
Total order backlog |
$ | 371.9 | $ | 398.4 | $ | 322.1 | |||
JBT FoodTechs order backlog at December 31, 2007 increased by $3.6 million compared to December 31, 2006, reflecting 11% growth in inbound orders and 20% growth in sales. We expect to convert the entire JBT FoodTech backlog at December 31, 2007 into revenue during 2008.
JBT AeroTechs order backlog at December 31, 2007 increased by $72.7 million compared with December 31, 2006. An increase in demand for loaders, especially internationally, drove the increase in backlog. In addition, new government contracts for trailers and ancillary aircraft equipment reside in 2007 backlog. We expect to convert approximately 90% of the JBT AeroTech backlog at December 31, 2007 into revenue during 2008.
JBT AeroTechs order backlog at March 31, 2008 has decreased by $26.7 million compared with December 31, 2007 backlog. Almost 50% of the year-end backlog was converted to sales in the first quarter of 2008 and new orders in the quarter did not fully replace the converted backlog. Compared to prior year, orders for ground support equipment were down, partially offset by an order for additional Halvorsen cargo loaders from the U.S. Government. We expect to convert approximately 90% of the JBT AeroTech backlog at March 31, 2008 into revenue during 2008.
48
Liquidity and Capital Resources
JBT Corporations financial resources have historically been provided by FMC Technologies. FMC Technologies manages cash and cash equivalents on a centralized basis. As such, cash receipts associated with most of our businesses have historically been transferred to FMC Technologies on a daily basis, and FMC Technologies has funded our cash disbursements. These net cash transfers are reflected in parent company equity in our financial statements. Certain of our businesses maintain separate cash accounts and borrow from uncommitted credit lines. While the borrowings on these facilities typically are immaterial, we utilize these credit lines to provide an efficient daily source of liquidity.
Upon the spin-off, we will pay FMC Technologies a $200 million dividend, as adjusted based on the provisions of the Separation Agreement. If the spin-off were to occur on July 31, 2008, we estimate that this dividend would be approximately $175 million, after adjustments. To fund the dividend, we intend to negotiate and sign new bank credit facilities prior to the separation, with available borrowing capacity of approximately $300 million.
We believe our cash flows from operations and our credit facilities will be sufficient to service our indebtedness and to satisfy our future working capital, research and development activities, capital expenditures, pension contributions and other financing requirements for the foreseeable future. Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business and risk factors described elsewhere in this information statement. If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities, we may be required to seek additional financing alternatives.
Cash flows for the three months ended March 31, 2008 and 2007 and each of the years in the three-year period ended December 31, 2007, were as follows:
Year ended
December 31, |
Three months
ended March 31, |
|||||||||||||||||||
2007 | 2006 | 2005 | 2008 | 2007 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Cash provided by operating activities of continuing operations |
$ | 39.0 | $ | 96.3 | $ | 54.0 | $ | 11.5 | $ | 9.4 | ||||||||||
Cash required by investing activities of continuing operations |
(19.9 | ) | (19.6 | ) | (14.6 | ) | (3.8 | ) | (3.6 | ) | ||||||||||
Cash required by financing activities of continuing operations |
(23.2 | ) | (68.9 | ) | (49.7 | ) | (6.6 | ) | (8.9 | ) | ||||||||||
Cash provided (required) by discontinued operations |
2.5 | (0.7 | ) | 5.5 | 0.7 | (2.2 | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
0.8 | 0.5 | (0.5 | ) | 0.4 | 0.1 | ||||||||||||||
Increase (decrease) in cash and cash equivalents |
$ | (0.8 | ) | $ | 7.6 | $ | (5.3 | ) | $ | 2.2 | $ | (5.2 | ) | |||||||
Operating Cash Flows
We generated $11.5 million in cash flows from operating activities of continuing operations during the three months ended March 31, 2008. The increase of $2.1 million over the same period in the prior year is primarily attributable to improved profitability as income from continuing operations increased by $8.0 million. Increased investment in working capital partially offset this increase.
Operating activities of continuing operations provided $39.0 million in cash for the twelve months ended December 31, 2007, representing a $57.3 million decrease compared to 2006. The decrease was primarily attributable to cash outflows for working capital. Spending for inventory, particularly in our JBT AeroTech businesses, grew during 2007 by $20.5 million as a result of production to support the larger order backlog. In addition, our working capital investment increased as accounts receivable balances rose relative to 2006. This increase was attributable to higher sales during the fourth quarter of 2007 in our JBT AeroTech businesses, as well as payment delays by certain of our JBT AeroTech customers.
49
Operating activities of continuing operations provided $96.3 million in cash for the twelve months ended December 31, 2006, which represented a $42.3 million increase compared to 2005. The increase was largely attributable to improvements in the management of working capital. More timely cash receipts for accounts receivable collections, primarily in our JBT FoodTech businesses resulting from sustained collection efforts, contributed to the $26.8 million of net cash inflow. We also received more advance payments on long-term projects in 2006. These receipts vary from period to period depending on payment terms and the timing of delivery on significant contracts.
Investing Cash Flows
Our annual capital spending consistently ranges from $20.0 million to $25.0 million. Much of our spending supports the maintenance and upgrading of our installed base of equipment and facilities. We expect to continue spending at this level in the upcoming year, and our first quarter 2008 capital expenditures are consistent with this expectation. Cash has been generated from the disposal of assets, primarily from sales of property and plant equipment, in each of the last three fiscal years. In 2005, we sold excess land at our Orlando facility for $3.8 million, which drove higher proceeds from disposals than in 2006 or 2007. We do not expect proceeds from disposals of assets to be a significant source of cash for us in future years.
Financing Cash Flows
FMC Technologies historically managed our financial resources, including borrowings. As such, our financing activities to date have been limited to capital transactions with FMC Technologies. Historically, cash from operations were swept to FMC Technologies, and because our operations were cash flow positive, we had cash outflows for distributions to FMC Technologies for the past three fiscal years.
Discontinued Operations Cash Flows
Cash flows provided by discontinued operations in 2007 primarily reflect the proceeds on the sale of Food Handling during the third quarter. Proceeds of $8.0 million were partially offset by cash requirements for operating activities in Food Handling and Harvester. Discontinued operations utilized $0.7 million in 2006, compared to $5.5 million generated in 2005, which included $3.9 million in cash receipts from collections of accounts receivable and advance payments.
Outlook for 2008
We plan to meet our cash requirements in 2008 with cash generated from operations and borrowings under our credit facilities.
Upon the spin-off, we anticipate entering into one or more credit facilities, including a term loan and revolving credit facility in the aggregate amount of approximately $300 million to fund a cash dividend to FMC Technologies, to satisfy our working capital needs, to support letters of credit and to fund other general corporate requirements, including the financing of acquisitions. Our credit facilities will be utilized at the effective date of the spin-off to replace certain FMC Technologies letters of credit and surety bonds currently in place with respect to our obligations.
We expect that the terms of the new credit facilities will contain certain customary events of default, which generally give the banks the right to accelerate payments of outstanding debt, including failure to maintain required covenant ratios, failure to make a payment of principal, interest or fees within a grace period and default, beyond any applicable grace period, on any of our aggregate indebtedness exceeding a certain amount.
The bank credit facilities will contain certain customary financial covenants limiting our indebtedness (maximum leverage ratios) and requiring minimum EBITDA coverage of interest expense (minimum interest coverage ratios) as well as limitations on additional debt, dividends and asset sales.
50
We anticipate that we will pay cash dividends on our common stock following the spin-off. The initial
quarterly dividend will be $
[0.08]
per share. The declaration and amount of future dividends, if any, will be determined by our Board of Directors and will depend on our financial condition, earnings, capital requirements, financial
Contractual Obligations and Off-Balance Sheet Arrangements
The following is a summary of our contractual obligations at December 31, 2007:
Payments due by period | |||||||||||||||
Contractual Obligations |
Total
payments |
Less than
1 year |
1 - 3
years |
3 - 5
years |
After 5
years |
||||||||||
(Dollars in millions) | |||||||||||||||
Long-term debt (a) |
$ | | $ | | $ | | $ | | $ | | |||||
Short-term debt |
1.1 | 1.1 | | | | ||||||||||
Operating leases |
16.6 | 3.7 | 5.2 | 4.0 | 3.7 | ||||||||||
Unconditional purchase obligations (b) |
38.2 | 36.3 | 1.7 | 0.2 | | ||||||||||
Pension and other postretirement benefits (c) |
1.5 | 1.5 | | | | ||||||||||
Total contractual obligations |
$ | 57.4 | $ | 42.6 | $ | 6.9 | $ | 4.2 | $ | 3.7 | |||||
(a) | As of December 31, 2007, we did not have any long-term debt directly attributable to our operating units. At the spin-off date, we will incur some long-term debt to finance our dividend payment to FMC Technologies. |
(b) | In the normal course of business, we enter into agreements with our suppliers to purchase raw materials or services. These agreements include a requirement that our supplier provide products or services to our specifications and require us to make a firm purchase commitment to our supplier. As substantially all of these commitments are associated with purchases made to fulfill our customers orders, the costs associated with these agreements will ultimately be reflected in cost of sales on our combined statements of income. |
(c) | We expect to contribute approximately $1.5 million to our foreign pension plans in 2008. In addition, after the spin-off and establishment of separate JBT Corporation pension and other post-retirement benefit plans in the U.S., we may be required or elect to contribute to those plans. Required contributions for future years depend on factors that cannot be determined at this time. |
The following is a summary of other off-balance sheet arrangements at December 31, 2007:
Amount of commitment expiration by period | |||||||||||||||
Other off-balance sheet arrangements |
Total
amount |
Less than
1 year |
1 - 3
years |
3 - 5
years |
After 5
years |
||||||||||
(Dollars in millions) | |||||||||||||||
Letters of credit and bank guarantees |
$ | 23.7 | $ | 20.6 | $ | 2.1 | $ | 0.2 | $ | 0.8 | |||||
Surety bonds |
171.4 | 120.6 | 38.4 | 12.4 | | ||||||||||
Total other off-balance sheet arrangements |
$ | 195.1 | $ | 141.2 | $ | 40.5 | $ | 12.6 | $ | 0.8 | |||||
To provide required security regarding our performance on certain contracts, we provide letters of credit, surety bonds and bank guarantees, for which we are contingently liable. In order to obtain these financial instruments, we pay fees to various financial institutions in amounts competitively determined in the marketplace. Our ability to generate revenue from certain contracts is dependent upon our ability to obtain these off-balance sheet financial instruments.
Our off-balance sheet financial instruments may be renewed, revised or released based on changes in the underlying commitment. Historically, our commercial commitments have not been drawn upon to a material extent; consequently, management believes it is not likely that there will be claims against these commitments that would result in a negative impact on our key financial ratios or our ability to obtain financing.
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Qualitative and Quantitative Disclosures about Market Risk
We are subject to financial market risks, including fluctuations in foreign currency exchange rates and interest rates. In order to manage and mitigate our exposure to these risks, we may use derivative financial instruments in accordance with established policies and procedures. We do not use derivative financial instruments where the objective is to generate profits solely from trading activities. At December 31, 2007 and 2006, our derivative holdings consisted of foreign currency forward contracts, and foreign currency instruments embedded in purchase and sale contracts.
These forward-looking disclosures address potential impacts from market risks only as they affect our financial instruments. They do not include other potential effects which could impact our business as a result of changes in foreign currency exchange rates, interest rates, commodity prices or equity prices.
Foreign Currency Exchange Rate Risk
When we sell or purchase products or services, transactions are frequently denominated in currencies other than an operations functional currency. When foreign currency exposures exist, we may enter into foreign exchange forward instruments with third parties. Our hedging policy reduces, but does not entirely eliminate, the impact of foreign currency exchange rate movements. We expect any gains or losses in the hedging portfolio to be substantially offset by a corresponding gain or loss in the underlying exposure being hedged.
We hedge our net recognized foreign currency assets and liabilities to reduce the risk that our earnings and cash flows will be adversely affected by fluctuations in foreign currency exchange rates. We also hedge firmly committed anticipated transactions in the normal course of business. The majority of these hedging instruments mature during 2008.
We use a sensitivity analysis to measure the impact on derivative instrument fair values of an immediate 10% adverse movement in the foreign currency exchange rates. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar and all other variables are held constant. We expect that changes in the fair value of derivative instruments will offset the changes in fair value of the underlying assets and liabilities on the balance sheet. To the extent that our derivative instruments are hedging anticipated transactions, a 10% decrease in the value of the hedged currency would result in a decrease of approximately $11.8 million in the net fair value of derivative financial instruments reflected on our balance sheet at December 31, 2007. Changes in the derivative fair value will not have an immediate impact on our results of operations unless these contracts are deemed to be ineffective.
Interest Rate Risk
Our debt instruments subject us to market risk associated with movements in interest rates. We had $1.1 million in variable rate debt outstanding at December 31, 2007, upon which interest expense is subject to movement in the LIBOR. A 10% adverse movement in the interest rate, or 50 basis points, would result in an immaterial change in interest expense.
Critical Accounting Estimates
We prepare our combined financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions about matters that are inherently uncertain. On an ongoing basis, our management re-evaluates these estimates, judgments and assumptions for reasonableness because of the critical impact that these factors have on the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods presented. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed
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this disclosure. We believe that the following are the critical accounting estimates used in preparing our financial statements. Management believes that of its significant accounting policies (see Note 1 to the Combined Financial Statements), those that may involve a higher degree of uncertainty, judgment, and complexity are revenue recognition, inventory valuation, accounting for income taxes, and accounting for retirement benefits.
Revenue Recognition
We derive a portion of our revenue from multiple element arrangements. This requires that we determine whether the deliverables in these arrangements should be treated as separate units of accounting for revenue recognition purposes and, if so, how the contract price should be allocated to each element. We analyze our contracts to determine the appropriate accounting. We recognize revenue on separate deliverables under an arrangement when (a) the undelivered product or service is not essential to the functionality of the delivered product or service or (b) there is evidence of fair value of each undelivered product or service. Otherwise, revenue on delivered elements is deferred until undelivered elements are delivered. Our ability to continue to recognize revenue for separate deliverables may depend on the nature of changes to our products and services, if any, which may result in different conclusions regarding fair value or importance of undelivered elements to delivered items functionality. The allocation of contract revenue to the various elements does not change the total revenue recognized from a transaction, but impacts the timing of revenue recognition.
Inventory Valuation
Inventory is recorded at the lower of cost or net realizable value. In order to determine net realizable value, we evaluate each component of inventory on a regular basis to determine whether it is excess or obsolete. We record the decline in the carrying value of estimated excess or obsolete inventory as a reduction of inventory and as an expense included in cost of sales in the period in which it is identified. Our estimate of excess and obsolete inventory is a critical accounting estimate because it is highly susceptible to change from period to period. In addition, it requires management to make judgments about the future demand for inventory.
In order to quantify excess or obsolete inventory, we begin by preparing a candidate listing of the components of inventory that have not demonstrated usage within the most recent two-year period. This list is then reviewed with sales, production and materials management personnel to determine whether this list of potential excess or obsolete inventory items is accurate. Management considers as part of this evaluation whether there has been a change in the market for finished goods, whether there will be future demand for on-hand inventory items and whether there are components of inventory that incorporate obsolete technology. Then management assigns a reserve requirement, which is determined based on its assessment of cost recoverability, to the items on the candidate listing. As a result, our estimate of excess or obsolete inventory is sensitive to changes in assumptions about future demand for the inventory. Since the determination of the reserve requirement is based on management judgment rather than a formulaic approach, we are unable to quantify the effect that a change in demand assumptions would have on managements assessment of the excess and obsolete inventory reserve.
Accounting for Income Taxes
In determining our current income tax provision, we assess temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in our combined balance sheets. When we maintain deferred tax assets, we must assess the likelihood that these assets will be recovered through adjustments to future taxable income. To the extent we believe recovery is not likely, we establish a valuation allowance. We record an allowance reducing the asset to a value we believe will be recoverable based on our expectation of future taxable income. We believe the accounting estimate related to the valuation allowance is a critical accounting estimate because it is highly susceptible to change from period to period as it requires management to make assumptions about our future income over the lives of the deferred tax assets, and the impact of increasing or decreasing the valuation allowance is potentially material to our results of operations.
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Forecasting future income requires us to use a significant amount of judgment. In estimating future income, we use our internal operating budgets and long-range planning projections. We develop our budgets and long-range projections based on recent results, trends, economic and industry forecasts influencing our segments performance, our backlog, planned timing of new product launches, and customer sales commitments. Significant changes in the expected realizability of the deferred tax asset would require that we adjust the valuation allowance applied against the gross value of our total deferred tax assets, resulting in a change to net income.
As of December 31, 2007, we estimated that it is not likely that we will generate future taxable income in certain foreign jurisdictions in which we have cumulative net operating losses and, therefore, we have provided a valuation allowance against the related deferred tax assets. We have estimated that it is likely that we will generate future taxable income in the U.S. and have therefore not provided a valuation allowance against the U.S. deferred tax assets. The need for a valuation allowance is sensitive to changes in our estimate of future taxable income. If our estimate of future taxable income was 15% lower than the estimate used, we would still generate sufficient taxable income to utilize such domestic deferred tax assets.
The deferred tax assets reported in these carve-out financial statements reflect the tax structure and strategies implemented by FMC Technologies, which was designed to optimize FMC Technologies overall tax positions and not just the businesses being spun off. It is not expected that the foreign tax credit carryforwards presented in our results on a carve-out basis under U.S. GAAP will actually be fully distributed by FMC Technologies to JBT Corporation. Please see the Unaudited Pro Forma Financial Information elsewhere in this report for further details.
Post Spin-off Accounting for Retirement Benefits
After the spin-off, we will be allocated the obligation and corresponding plan assets for domestic pension and other post-retirement benefit plans associated with our current employees as well as other terminated vested and retired participants. We will be required to make a variety of estimates, including discount rates used to value certain liabilities, expected return on plan assets set aside to fund these costs, rate of compensation increase, employee turnover rates, retirement rates and mortality rates. Different assumptions used by management could result in recognizing varying expense amounts over different periods of time.
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John Bean Technologies Corporation Overview
We provide customized solutions that are engineered for the viable and growing food processing and air transportation industries. We design, manufacture, test and service technologically sophisticated systems and products for customers through our JBT FoodTech and JBT AeroTech segments.
JBT FoodTech markets its solutions and services to multi-national and regional industrial food processing companies. The product offerings of JBT FoodTechs businesses include:
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freezer solutions for the freezing and chilling of meat, seafood, poultry, ready-to-eat meals, fruit, vegetable and bakery products; |
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protein processing solutions that portion, coat and cook poultry, meat, seafood, vegetable and bakery products; |
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shelf stable sterilization solutions for fruits, vegetables, soups, sauces, dairy and pet food products as well as ready-to-eat meals in a wide variety of modern packages; and |
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fruit processing solutions that extract, concentrate and aseptically process citrus, tomato and other fruits. |
In 2007, JBT FoodTech generated $593.2 million of revenue and $56.0 million of segment operating profit, resulting in compound annual growth rates since 2005 of 9.2% and 18.6%, respectively.
JBT AeroTech markets its solutions and services to domestic and international airport authorities, passenger airlines, air freight and ground handling companies and the United States military. The product offerings of JBT AeroTechs businesses include:
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ground support equipment for cargo loading, aircraft deicing and aircraft towing; |
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gate equipment for passenger boarding and on the ground aircraft power and cooling; |
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airport services for maintenance of airport equipment, systems and facilities; and |
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military equipment for cargo loading, aircraft towing and on the ground aircraft cooling. |
In 2007, JBT AeroTech generated $386.0 million of revenue and $32.4 million of segment operating profit, resulting in compound annual growth rates since 2005 of 8.7% and 15.0%, respectively.
History
We trace our roots back to the 1880s when an orchard owner and inventor named John Bean set out to solve a severe scale infestation affecting orchards in Californias Santa Clara Valley. He developed a continuous high- pressure spray pump to more efficiently apply insecticide on the trees. From this invention, the Bean Spray Pump Company was formed.
As the Bean Spray Pump Company grew, it expanded its product lines and market presence throughout the United States. In 1929, following two major acquisitions of food processing machinery suppliers, the company became the largest manufacturer of equipment for processing fresh and canned produce in the world and changed its name to Food Machinery Corporation. In the following years, Food Machinery Corporation evolved into a globally diversified manufacturing company. To reflect this evolution, the company changed its name to FMC Corporation in 1961. By the mid 1990s, FMC Corporation had grown its revenue to nearly $5 billion and was serving the chemical, defense, energy, food processing and air transportation industries.
In 1997, FMC Corporation started narrowing its strategic focus which led to the sale of its defense business to the Carlyle Group. In 2000, FMC Corporation announced its intent to separate into two independent
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companies. FMC Corporation became a chemical company and FMC Technologies, through an initial public offering in 2001, focused on providing mission-critical systems and services to the energy, food processing and air transportation industries.
JBT FoodTech Evolution
Over the years, the food processing machinery businesses have continued to thrive, introducing technologies in freezing, high speed filling, closing and sterilization of packaged foods, as well as fruit and juice processing. As the food processing industry developed internationally, JBT FoodTech established capabilities globally to market and sell its array of food processing technologies.
More recently, we have focused our growth efforts on internal development, augmented by strategic acquisitions to strengthen our industry
Key JBT FoodTech Acquisitions
Year |
Acquisition |
Description |
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1994 | LogTec | Modeling and automated process control technologies used in shelf stable sterilized food applications and other cooking applications (U.S.) | ||
1995 | FranRica | Tomato and fruit aseptic processing equipment supplier (U.S.) | ||
1996 | Frigoscandia | Supplier of industrial food freezers (Sweden) | ||
1996 | Stein | Supplier of poultry processing equipment (U.S.) | ||
2000 | Northfield | Supplier of freezing systems (U.S.) | ||
2001 | Agri-Tech | Coating technologies for apples (U.S.) | ||
2002 | Lamek | Freezer belt supplier (Sweden) | ||
2005 | Sasol Coatings | Produce coatings product line (South Africa) |
From our beginnings in 1884 and throughout our history, we continue to be a leader in the global food processing industry.
JBT AeroTech Evolution
In the late 1950s, the John Bean Spray Pump Division sold spray pumps to airlines to wash their planes. In 1961, at the request of a major airline, we modified a unit to spray heated liquid for aircraft deicing, marking the beginning of our JBT AeroTech business. In 1969, we introduced our first self-propelled cargo loader to handle the new containerized cargo loading requirements of wide-bodied jet aircraft.
We continued to grow with the aviation industry and developed a full line of air cargo loaders and aircraft deicers. Over the following years, we continued our growth through internal development and acquisition initiatives, several of which are highlighted below.
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In the 1980s, as the international air transportation market grew, we acquired a Spanish based ground support equipment manufacturer adding a European airline equipment facility that positioned us to better serve international growth. |
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In 1994, we acquired Jetway ® , a leading global supplier of passenger boarding bridges and ancillary gate equipment. The Jetway ® acquisition also added a line of aircraft tow tractors to our expanding product offerings in ground support equipment. |
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In 1998, we acquired the patents and exclusive technical rights of the towbarless (TBL) aircraft tractor from the original inventor of this TBL product. This product line improves the speed, efficiency and safety of aircraft pushback and tow operations. |
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In the late 1990s, through a joint development effort, we redesigned an existing commercial loader design to meet the U.S. Air Force specifications and won the supply contract for the Halvorsen loader program. |
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In 2001, in response to outsourcing initiatives of airlines and airport authorities, we created our airport services product line to offer dedicated services and facility systems maintenance. This product line has grown rapidly and now provides outsourced maintenance service at 28 airports, including eight of the 20 busiest United States airports. |
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In 2003, we acquired an exclusive license to develop, produce and market the underlying technology of the RampSnake ® baggage loading and unloading system for narrow-body aircraft. This product line improves the efficiency and safety of loading non-containerized baggage onto commercial airplanes. |
Today, JBT AeroTech has grown to be a leading supplier of ground-based airport equipment and services to the air transportation industry.
JBT FoodTech
Overview
JBT FoodTech is a leading supplier of customized industrial food processing solutions and services used in the food processing industry. We design, manufacture and service technologically sophisticated food processing systems for the preparation of ready-to-eat meals, shelf stable sterilized packaged foods, meat, seafood and poultry products, juice and dairy products, fruit and vegetables and bakery products. During the year ended December 31, 2007, JBT FoodTech generated $593.2 million of revenue and $56.0 million of segment operating profit, resulting in compound annual growth rates since 2005 of 9.2% and 18.6%, respectively.
We believe our success is derived from our continued technological innovation. We broadly categorize our technology solutions offerings into freezing and chilling, protein processing, shelf stable sterilized food processing and fruit processing. The following chart provides an overview of our solutions revenue based on these technologies (excluding aftermarket products, parts and service revenue).
2007 JBT FoodTech Solutions Revenue
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We apply these differentiated and proprietary technologies to meet our customers processing needs. We continually strive to improve our existing solutions and develop new solutions by working closely with our customers. For example:
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Our new patented GYRoCOMPACT ® Tight Curve Freezer provides customers with increased throughput and lower maintenance costs in the same footprint as our previous design; |
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Our new patented GYRoCOMPACT ® II Oven increases yields of cooked product while increasing throughput; |
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Our patented DSI Accura optical portioner, through the use of three-dimensional imagery, provides customers with increased throughput and increases the yield of raw product compared with manual processing; |
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We recently introduced a newly designed citrus juice extractor which increases product yield and quality compared with our past models; |
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Our Aseptic Monoblock provides an all-in-one integrated, skid-mounted solution to customers around the world to aseptically sterilize, cool and fill fruit products; |
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Our recently introduced patented SuperAgi automated batch retort decreases the processing cycle time while providing customers with greater sterilization process flexibility over our past models; and |
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With our introduction of TwinTec , we integrated the filling and seaming operation into a single, small footprint machine. |
Our historically strong position in the markets we serve has provided us with a large installed base of systems and equipment. Throughout our history, we have delivered over 40,000 pieces of food processing equipment which includes more than 7,000 industrial freezers, 2,400 industrial juice extractors, 3,000 sterilizers and 8,000 coating systems. We estimate that the installed base of our equipment collectively processes approximately 75% of the global production of citrus juices, freezes approximately 50% of commercially frozen foods on a global basis and sterilize approximately 50% of the worlds canned foods. This installed base provides strong, recurring aftermarket products, parts and service revenue, which accounted for approximately 25% of our JBT FoodTech total revenue in 2007. Our installed base also provides us with strong, long-term customer relationships from which we derive information for new product development to meet the evolving needs of our food processing customers.
We have operations located globally to serve our existing JBT FoodTech equipment base located in more than 100 countries. Our principal production facilities are located in the United States (California, Minnesota, Ohio and Florida), Belgium, Brazil, South Africa, China, Italy and Sweden. In addition to sales and services offices based in more than 25 countries, we also support our customers in their development of new food products and processes as well as the refinement and experimentation of their current applications through six technical centers located in the United States (California, Ohio and Florida), Brazil, Sweden and Belgium. Our global presence allows us to provide direct customized support to customers virtually anywhere they process foods.
Industry Overview
Euromonitor International reports that the world market for packaged food was $1.455 trillion in 2005 and projected to grow at a compound annual rate of 2.65% through 2010. Continued industry growth is being driven by increased global consumer demand for healthy and easy-to-prepare packaged food and by rising affluence and growing consumer confidence in Eastern Europe, Latin America and parts of Asia-Pacific. The largest regional packaged food markets, Western Europe, North America and Asia-Pacific, are expected to account for 77% of the total packaged food market by 2010. Euromonitor forecasts that the fastest growing regional packaged food markets through 2010 will be Eastern Europe, with compound annual growth of 5.7%, followed by Africa and the Middle East (4.8%), Latin America (4.1%) and Asia-Pacific (2.5%).
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While the overall growth rate of processed foods drives increased demand for food processing equipment products and services, our sales are also influenced by several industry trends that impact our key industry positions. These trends include consolidation within the food industry, the demand for new food products and packaging, growth in quick serve foods and growth in the developing world.
Industry Consolidation. The food industry is undergoing continuing consolidation. Major food retailers, such as Wal-Mart Stores, Inc. (the largest food retailer in the United States), are increasing their purchasing power and placing cost pressures on their vendors. To maintain profitability, food processors are pursuing opportunities to become more efficient and to lower costs. As a result, they are consolidating and are seeking technologically sophisticated integrated systems and services, such as those that we provide, to maximize the efficiency of their operations while maintaining high standards of food safety.
Growth in Demand for New Food Products and Packaging. Euromonitor International reports that smaller households, longer working hours and less structured mealtimes have resulted in growing consumer demand for convenient, easy-to-use, portable foods and packaging that require a minimum of time and effort to prepare. Euromonitor also states that higher levels of disposable income and faster paced, urban-based living have underpinned development of healthy and convenient packaged food products offering functional benefits and better-for-you attributes, such as bio drinkable yogurts and single-serve ready meals. Often, these new food products and packaging require innovative technology solutions for processing, increasing the demand for our freezer, shelf stable sterilization or fruit processing solutions.
Growth in Demand for Quick Serve Foods. Over the last decade, consumer demand in the segments of the convenience food industry that we serve has increased, and we expect this trend to continue. For example, Euromonitor International projects that through 2010, worldwide retail sales of frozen processed poultry will increase at a compound annual rate of 4.9% and frozen processed seafood will grow at a compound annual rate of 5.6%. From 2003 through 2007, McDonalds Corporation reported 10.8% compound annual total revenue growth in Europe, Asia Pacific, Middle East and Africa while during the same period, YUM! Brands, Inc. reported a combined 13.4% compound annual sales growth in its International and China regions (including company-owned and franchised restaurants). This retail sales growth in frozen foods and international expansion of quick serve restaurants has helped drive demand for our freezer and protein processing solutions.
Growth in Developing Markets. The developing markets of Asia, the Middle East, Latin America and Eastern Europe have experienced rapid increases in per capita income. This increase in disposable income is driving demand for more prepared and processed foods. Additionally, regional food processors and multi-national processors are establishing a local presence in Asia and Latin America to meet this growing local demand and to export food products to the Western world. These growth trends in the developing world increase the demand for our highly efficient industrial food processing equipment and systems.
Solutions, Products and Services
We offer a broad portfolio of systems, equipment and services to our customers which are often sold as part of a fully integrated processing line solution. Our systems are typically customized to meet the specific customer application needs. Thus, actual production capacity ranges vary and are dependent on the food and product packaging type being processed.
Freezing and Chilling. We developed the first commercial food processing freezers in the 1960s, and we remain the worlds leading supplier of freezing and chilling solutions to the food processing industry. We design, assemble, test and install industry-leading technologies that include individual quick freezing (IQF), self-stacking spiral, linear/impingement and contact freezers and chillers. Our freezers are designed to meet the most stringent demands for quality, economy, hygiene and user-friendliness. We offer a full range of capacities and accessories to optimize our customers variable production needs. Our industrial freezers can be found in plants that are
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processing food products ranging from meat, seafood and poultry to bakery products and ready-to-eat meals, fruits, vegetables and dairy products. Below is an overview of our freezing and chilling technology offerings.
Product Offering |
Product Description |
Food Applications |
Capacity Ranges |
Delivered
Base |
||||
FloFREEZE ® Individual Quick Freeze (IQF) |
Individually freezes sensitive, sticky and uneven shaped products | Fruits, Vegetables, Seafood, Pasta, Rice | Over 13 tons/hour | 1,100+ | ||||
GYRoCOMPACT ® Self-Stacking Spiral Freezer, Chiller, Proofer | Compact, self-contained design for quick, uniform freezing | Poultry, Meat, Seafood, Bakery, Dairy, Vegetables, Ready Meals | Over 7 tons/hour | 3,300+ | ||||
ADVANTEC Linear Freezers and Chillers | Quick freezing of thin, flat food | Meat, Seafood | Over 5 tons/hour (over 20,000 1 / 4 lb burgers per hour) | 270+ |
Protein Processing. We are a leading supplier of equipment and services that enable us to provide integrated protein processing lines for a variety of convenient food products. Our broad systems offerings include continuous water-jet portioners, coating and seasoning applicators, frying systems and oven and cooking systems. Our fully integrated processing lines often span from the raw products initial point of entry onto the processing line through final packaging. Although our solutions are primarily used in the processing of poultry (including nuggets, strips and wings), we also provide systems that portion, coat or cook other food products ranging from breads and pizzas to meat patties, seafood and ready-to-eat meals. All of these applications we collectively refer to as protein processing. We believe that our installed base of cooking systems processes more meat, seafood and poultry products in North America than that of any other food processing equipment supplier. Below is an overview of our protein processing technology offerings.
Product Offering |
Product Description |
Food Applications |
Capacity Ranges |
Delivered
Base |
||||
Accura Portioners |
Computer-positioned high-pressure waterjets cut complex shapes |
Poultry, Meat, Seafood, Pizza |
Up to 3/4 ton/hour | 200+ | ||||
Coating Applicators |
Application of batter, tempura or breading prior to cooking |
Poultry, Meat, Seafood, Vegetables |
Over 7 tons/hour (over 150,000 1 / 2 oz. chicken nuggets per hour) | 8,000+ | ||||
THERMoFIN Frying Systems | Patented technology that heats oil quickly and precisely for even and cost effective frying |
Poultry, Meat, Seafood |
Over 7 tons/hour (over 150,000 1 / 2 oz. nuggets/hour) | 330+ | ||||
GYRoCOMPACT ® Spiral Ovens | Multi-zone spiral oven with programmable air control for consistent and uniform cooking |
Poultry, Meat, Seafood |
Over 9 tons/hour (over 40,000 4 oz. chicken breasts per hour) | 90+ | ||||
JSO JetStream ® Linear Ovens |
High intensity convection oven for fast cooking with optimal flavor sealing and browning | Meat, Poultry | Over 4.5 tons/hour (over 20,000 1 / 4 lb. burgers per hour) | 490+ |
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Shelf Stable Sterilized Food Processing. We are a leading global supplier of fully integrated industrial sterilization systems that manufacture shelf stable foods in a wide variety of flexible and rigid packages. These integrated solutions include fillers, closers, sterilizers, material handling systems and controls that process foods including fruits and vegetables, soups and sauces, dairy products, a broad range of ready-to-eat meals and pet foods. We offer the largest selection of sterilization products in the industry, including continuous rotary and hydrostatic sterilizers primarily used for processing metal cans and automated batch retorts which can process a variety of flexible and rigid packages such as plastic pouches, cartons, glass and cans. We also provide specialized material handling systems to automate the handling and tracking of processed and unprocessed containers. In addition, we offer leading modeling software as well as thermal processing controls that help our customers optimize and track their cooking processes and introduce on-line corrections in the case of any process deviations. Below is an overview of our shelf stable solutions technology offerings.
Product Offering |
Product Description |
Food Applications |
Capacity Ranges |
Delivered
Base |
||||
Fillers | Filling of wide-neck, rigid and pre-formed containers with food products | Ready Meals, Soups, Sauces, Baby food, Fruits, Vegetables, Seafood, Meat, Poultry, Milk, Ready to Drink Coffee and Tea, Pet Food | Over 1,200 containers per minute | 1,900+ | ||||
Closers | Closing and seaming of can after being filled | Up to 2,000 containers per minute | 3,400+ | |||||
Continuous Rotary and Hydrostatic Sterilizers | Commercial sterilization of food in cans | Ready Meals, Canned Milk, Soups, Sauces, Fruits, Vegetables, Seafood, Meat, Poultry, Pet Food | Over 1,800 containers per minute (550 cans of soup/minute or 2,000 cans of cat food per minute) | 8,000+ | ||||
Automated Batch Retorts | Commercial Sterilization of foods in flexible or rigid pre-formed packaging | Ready Meals, Soups, Sauces, Baby Food, Fruits, Vegetables, Seafood, Meat, Poultry | Over 1,500 containers per minute (600 microwave pasta bowls per minute) |
220+
systems 470+ vessels |
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LOG-TEC Control Systems and Modeling Software |
Automated control and documentation of sterilization process. Modeling software to optimize cooking processes | Ready Meals, Canned Milk, Soups, Sauces, Baby Food, Fruits, Vegetables, Seafood, Meat, Poultry, Pet Food | Matches the sterilization system capacity | 1,900+ |
Fruit Processing. We are the leading supplier of industrial citrus processing equipment. Our citrus processing solutions typically include citrus extractors, finishers, pulp systems, evaporators and by-product recovery systems as well as aseptic systems (including sterilizers, fillers, flow lines and controls) integrated with bulk aseptic storage systems for not-from-concentrate orange juice. In addition to our high capacity industrial extractors, we also offer point of use Freshn Squeeze ® produce juicers. These patented juicers are used around the world in hotels, restaurants, coffee shops, convenience stores and juice bars.
We are among the leading suppliers of tomato and fruit processing equipment and aseptic sterilization and bulk filling systems. Our tomato and fruit processing lines are comprised of extraction, finishing, heating and mixing equipment, enzyme inactivators, evaporators, flash coolers, sterilizers and aseptic fillers that are mainly sold as an integrated processing line. We can also provide equipment for a specific need within a line. Our
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tomato processing lines are installed with leading processors throughout the worlds key tomato growing regions and produce a range of finished tomato products including tomato concentrates, peeled tomato products, diced tomatoes, salsa, pizza sauce, ketchup, pureed and crushed tomatoes. Our aseptic processing lines are used in the bulk processing of a wide range of deciduous and tropical fruits into juices, particulates, purees and concentrates. These fruit products are used as ingredients for dairy products (yogurts, smoothies, flavored milk, ice cream), bakery and fruit-based beverages.
We also provide technology solutions and products to extend the life, improve the appearance and preserve the taste of fresh fruits and vegetables. Once treated, fresh fruits or vegetables are individually labeled by our fast and efficient produce labeling systems. Below is an overview of our fruit processing technology offerings.
Product Offering |
Product Description |
Food Applications |
Capacity Ranges |
Delivered
Base |
||||
Extractors, Pulpers, Finishers | Extract juice and/or pulp from fruit for large-scale processing and point-of-sale applications | Citrus, Tomatoes, Berries, Deciduous and Tropical Fruits | Industrial extractor: over 900 gallons per hour of juice | 7,800+ | ||||
Hot & Cold Breaks, Evaporators | Enzymatic inactivation, concentration and aseptic cooling to preserve fruit product color and taste | Citrus, Tomatoes, Berries, Deciduous and Tropical Fruits | Over 70 tons/hour | 350+ | ||||
Aseptic Sterilizers and Fillers | Aseptic commercial sterilization, cooling and bulk filling of fruit puree, concentrate or paste into 3 gallon to 300 gallon containers | Citrus, Tomatoes, Deciduous and Tropical Fruits |
Aseptic sterilizer: over 60 tons/hour Aseptic fertilizer: over 19 tons/hour |
100+ | ||||
Fresh Produce Technologies | Preservation of fresh produce life, appearance and taste. | Fruits, Vegetables | Coating application rates variable to match line speed |
1,300+
labeler heads |
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High speed application of Price Look Up labels | Apply 900+ labels/minute |
Aftermarket Products, Parts and Services. We provide aftermarket products, parts and services for all of our integrated food processing systems and equipment. We provide retrofits to accommodate changing operational requirements, and we supply our own brand of food grade lubricants designed specifically for our equipment. We also provide continuous, proactive service to our customers including preventative maintenance agreements, consulting services such as water treatment and corrosion monitoring control and on-site personnel. In addition to helping our customers reduce their operating costs and improve operating efficiencies, integrated customer service focus also helps us maintain strong commercial relationships and provides us with ongoing access to information about our customers requirements and strategies to foster continuing product development. Our aftermarket products, parts and services coupled with our large installed base of food processing systems and equipment, provides us with a growing, recurring revenue stream.
Strategy
As part of our core mission of being the leading supplier of customized solutions to the food processing industry, we will focus on four critical strategic initiatives:
Extend Technology Leadership. By maintaining and extending our technological leadership positions, we will remain well positioned to capture the growth created by the trends in the food processing industry. We are focused on enhancing processing efficiencies which include increased production speeds and improved final
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product yield and quality. Additionally, we are focused on reducing the total cost of ownership for food processing plants through reducing capital and operational costs and solving the technological challenges posed by evolving food processing and packaging requirements.
Our ongoing technology and market leadership position us to capitalize on:
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natural annual growth in the food processing industry; |
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opportunities that exist to provide broader services and solutions to customers growing via consolidation of food processing companies; |
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new growth opportunities being generated in emerging markets; and |
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increasingly complex food processing requirements to bring new food products, processes and packaging to market quickly, efficiently and safely. |
Leverage Our Installed Base. From 2005 to 2007, our aftermarket revenue increased at a compound annual rate of approximately 7%. We intend to continue to leverage our large delivered base of industrial freezers, protein processing systems, canning and sterilization systems and fruit and juice processing systems to generate new aftermarket business and to grow our offering of aftermarket products, parts and services. Our large installed base provides a growing, recurring revenue stream as well as the opportunity to strengthen and enhance customer relationships, increase our customer knowledge and generate ideas for new product development. We will continue to enhance the capabilities of our on-line spare parts ordering site to help our customers find the information they need and conduct business more efficiently.
Capture International Growth Opportunities. JBT FoodTech has built a strong global presence with manufacturing, sales and service organizations located on six continents. As demand for processed foods increases in emerging regions such as Latin America, the Middle East, Eastern Europe and Asia, we are positioned to provide local food processors or expanding multi-national processors with our products, expertise and local customer service. Additionally, our new manufacturing facility in China and our established sourcing teams in India and China provide us with a strong base to supply products to and from Asia.
Growth Through Acquisitions. In addition to benefiting from organic growth, we also intend to pursue external growth through select, value-accretive acquisitions of companies and technologies. We believe that the food processing equipment industry will provide us with opportunities for acquisitions. We also believe that our global presence and capabilities will permit us to efficiently integrate complementary companies and technologies into our global businesses.
JBT AeroTech
Overview
JBT AeroTech is a leading supplier of customized solutions and services used for applications in the air transportation industry. We design, manufacture and service technologically sophisticated ground support equipment, airport gate equipment and services for airport authorities, airlines, air freight and ground handling companies and the military. During the year ended December 31, 2007, JBT AeroTech generated $386.0 million of revenue and $32.4 million of segment operating profit, resulting in compound annual growth rates since 2005 of 8.7% and 15.0%, respectively.
We believe our strong market positions result from our ability to design our equipment and services that are customized to meet our customer specific needs. We apply these differentiated technologies to meet our customers needs. We continually strive to improve our existing technologies and develop new technologies by working closely with our customers. For example:
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The Commander cargo loaders introduced the Heliroll ® convey system which provides efficient operation for cargo containers loading on wide-bodied commercial aircraft; |
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In 2001, we were awarded the supply contract for a new military cargo loader and are now the U.S. Department of Defenses leading supplier of aircraft cargo loaders and associated logistics; |
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Since its launch in 2001, our airport services product line has grown rapidly and now provides outsourced maintenance services at 28 airports, including eight of the 20 busiest airports in the United States; |
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Our Tempest deicer with the patented AirFirst ® deicing system is effective in a wide severity of snow, frost and icing conditions and reduces glycol consumption. |
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Our RampSnake ® baggage loading system is equipped with tiltable front and rear lifters and an extendable conveyor system to eliminate injuries related to loading and unloading bulk cargo and to expedite the loading and unloading process; |
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We also recently introduced new passenger boarding bridges and ground support equipment to service the unique needs of the new Airbus A380 jetliner, the worlds largest commercial aircraft; |
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To respond to increasingly stringent environmental standards, we are currently offering electrically powered cargo loaders with rechargeable batteries; and |
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We introduced the Intelligent Operations Performance System , known as iOPS , which enables our customers to perform real-time monitoring, performance measurement and coordinate the operation of their passenger boarding bridges and ground support equipment to improve their efficiency and utilization. |
As a market leader for many years, there is a significant installed base of our airport and airline equipment. We have delivered the largest volume of cargo loaders (8,400+), passenger boarding bridges (7,000+) and aircraft deicers (4,300+). We have also sold more than 2,000 mobile passenger steps, 1,800 cargo transporters and 1,200 tow tractors operating at airports around the world. This installed base of our JBT AeroTech products provides a growing, recurring revenue stream from aftermarket parts, products and services that was over 13% of our JBT AeroTech total revenue in 2007, as well as continuous access to customer feedback for new product development and improvement.
JBT AeroTech products have been delivered to more than 100 countries. To support this equipment, we have operations located throughout the world. Our principle production facilities are located in the United States (Florida, Utah and Pennsylvania), Spain, Mexico and the United Kingdom. To augment our sourcing capabilities, we have established regional manufacturing partnerships in Asia, Africa and South America as well as dedicated sourcing resources in India, China and Eastern Europe. We also have sales and services offices located in more than ten countries and collaborative relationships with independent sales representatives, distributors and service providers in more than ten additional countries.
Industry Overview
Overall, The Boeing Company projects that for the period from 2006 to 2026, the air transportation industry will experience compound annual growth of 4.5% for the number of passengers traveling, 5.0% for airline traffic, 6.1% for air cargo traffic and 3.5% for airplane fleet size.
While the overall growth rate of aircraft fleets and passenger and cargo traffic drives increased demand for JBT AeroTech products and services, our sales are also influenced by several other industry trends that impact our key markets. These include industry consolidation and restructuring, developing markets growth, the new aircraft technological challenges, and increased health, safety and environment concerns.
Industry Consolidation and Restructuring. The airline industry is experiencing continued operating cost pressures that have led to consolidations, strategic alliances and restructurings in an effort to reduce costs and improve efficiencies. As a result, airlines are looking to outsource activities that are not directly related to their core business. In particular, significant outsourcing initiatives have occurred in ground support activities, airport
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maintenance and passenger terminal maintenance. We anticipate that this trend will continue. This has created increased opportunities for service providers, like us, to supply a broader set of services to airlines and airports. In addition, we believe that the continued cost pressures facing United States based airlines have decreased the amount of capital spent on ground support equipment. As airlines return to profitability and their aging installed base of equipment reaches the end of its life cycle, we expect demand for ground support equipment to increase.
Developing Markets Growth. According to The Boeing Company, the largest air traffic growth is projected to be in Asia over the next 20 years. Specifically, The Boeing Company projects that nearly 40% of global passenger air travel will be to, from or within the Asia-Pacific region with air cargo experiencing similar trends. Based upon these industry growth rate projections, we believe that Asia will become the largest air transportation market as early as 2012. To accommodate this significant regional growth, we expect that airport authorities, airlines and air freight companies will be required to expand their existing infrastructure which includes terminals, airport gate systems, baggage and cargo handling systems and ground support equipment. This expected growth will increase the demand for our entire JBT AeroTech product and service portfolio.
Technological, Safety and Environment Challenges. As new aircraft designs such as the Boeing 787, 747-8 and the Airbus 380 are introduced, and as existing passenger aircraft are converted to freighters, such as the Boeing 757 and 747, their physical size, location of passenger and cargo loading stations and cargo load configurations generate the need for new airport equipment designs.
The Flight Safety Foundation estimates the annual total economic cost of airport ground accidents to be over $10 billion including damaged aircraft, lost revenue from ticket sales cancelled, flights and repositioned replacement aircraft. We believe our focus on designing and testing of airport equipment with ergonomic drive and control systems, excellent visibility, and redundant systems provide for the utmost in safety and exceed our customers increased safety concerns.
In an effort to reduce fuel costs and engine emissions, ground support equipment purchasers are evaluating differences in fuel efficiency of equipment including alternative fuel vehicles. In addition to our existing fuel efficient, load sensing cargo loaders, we are also a leader in the development of electric ground support equipment, including loaders and tractors.
Also, increasingly stringent air quality standards are causing airlines and airports to explore alternative fuels and power sources to reduce emissions. The industry is also seeking out monitoring technologies that enable reduction in aircraft auxiliary power unit and jet engine fuel consumption while holding at the gate or on the airport ramp. We believe that these opportunities to apply new technologies within the air transportation industry will increase the demand for our highly efficient airport support equipment, systems and services.
Solutions, Products and Services
We offer a broad portfolio of systems, equipment and services to our airport authority, airline, air cargo, ground handling and military customers.
Ground Support Equipment. We are a leading supplier of air cargo loaders to commercial air passenger and freight carriers and ground handlers. Our Commander loaders service wide-body jet aircraft and are available in a wide range of configurations. We believe that we provide the loader of choice to the air transportation industry.
We manufacture and supply the RampSnake ® narrow-body aircraft baggage loader. The RampSnakes design requires only a single baggage handler in the cargo hold and one operator at the baggage cart, minimizing lifting and reducing costs.
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We manufacture and supply the Tempest aircraft deicers with a broad range of options that can be configured to meet customers need to eliminate aircraft icing while on the tarmac. We offer a full array of conventional and towbarless aircraft tow tractors for moving aircraft without consumption of jet fuel. We also offer a line of self-propelled passenger steps. Below is an overview of our ground support equipment technology offerings.
Product Offering |
Product Description |
Aircraft Ranges |
Capacity Ranges |
Delivered
Base |
||||
Cargo Loaders | Loading and unloading of containerized cargo onto main and lower decks of aircraft | Wide variety of passenger and freighter aircraft up to Airbus A380 | Up to 30,000 lbs | 8,400+ | ||||
Cargo Transporters | Transport of containerized cargo to or from aircraft | Aircraft handling full size pallets or containers |
Up to 15,400lbs at 15.5 mph |
1,800+ | ||||
Baggage Loading Systems | Loading of baggage, cargo or mail packages into baggage holds with minimal lifting | Boeing 717 to 757-200 and Airbus A319 to 321 | Up to 880 lbs | 100+ | ||||
Aircraft Deicers | Deicing of aircraft on the ground including removal of snow, ice and frost | Wide variety of aircraft up to Airbus A380 | Up to 2,000 gallons capacity of deicing fluid | 4,300+ | ||||
Aircraft Tow Tractors | Pushing back of aircraft from gate or aircraft towing between gate and hangar | Regional to wide-body aircraft | Draw bar pull of up to 72,000 lbs | 1,200+ | ||||
Passenger Steps | Boarding of passengers when a boarding bridge is not available | Front and rear boarding doors of narrow and wide-body aircraft | Load capacity up to 13,000 lbs. | 2,000+ |
Gate Equipment. We are a leading supplier of gate equipment. Our Jetway ® passenger boarding bridges have been used by airlines and airport authorities to move passengers between the terminal building and the aircraft since 1959.
We also manufacture a variety of sizes and configurations of auxiliary equipment including preconditioned air and 400 Hertz ground power units. Below is an overview of our gate equipment technology offerings.
Product Offering |
Product Description |
Aircraft Ranges |
Capacity Ranges |
Delivered
Base |
||||
Passenger Boarding Bridges | Bridge for moving passengers between the airport terminal building and the aircraft | Regional Jets up to Airbus A380 | Link aircraft with the airport terminal | 7,000+ | ||||
Ground Power | Provide power and light for passenger and crew onboard, while waiting to be pushed back from gate | Regional Jets up to Airbus A380 | Converts 50/60 Hertz utility power to aircraft compatible 400Hertz power | 3,500+ | ||||
Preconditioned Air | Climate convenience for passenger and crew onboard, while waiting to be pushed back from gate | Regional Jets up to Airbus A380 | 20 to 120 refrigerated tons preconditioned air units for ground cooling | 2,000+ |
Airport Services. We are an industry leading provider of equipment, systems and facility maintenance services to airlines and airports throughout North America. Our expertise extends to the operation, maintenance
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and repair of airport gate systems, baggage handling systems, airport facilities and ground support equipment. We also offer technology and operations monitoring services centered around our patent pending iOPS Suite that links maintenance management systems and aircraft avionics data to critical ground-based monitoring, diagnostic and tracking systems on gate equipment, baggage handling systems, facility systems and ground support equipment.
Military Equipment. In 2000, we were awarded the production contract to supply the U.S. Air Force with a new generation of military air cargo loader which is now known as the Halvorsen loader. We continue to supply the U.S. Air Force Mobility Command with these Halvorsen loaders as well as provide parts support, service and retrofit kits and also have begun to supply these units to other branches of the U.S. Department of Defense.
We supply the U.S. Air Force with three sizes of aircraft tow tractors. Additionally, we have been awarded contracts to supply trailer mounted air conditioning units to the U.S. Air Force and also were recently awarded a contract by the United States Navy to develop a preconditioned air prototype for land-based air conditioning units. Below is an overview of our military equipment technology offering.
Product Offering |
Product Description |
Aircraft Ranges |
Capacity Ranges |
Delivered
Base |
||||
Halvorsen Cargo Loaders | Rapidly deployable, high-reach loader that can transport and lift cargo onto military cargo aircraft | Cargo transport aircraft from C-130 up to C-17 | Load and transport up to 25,000 lbs | 400+ | ||||
Aircraft Tow Tractors | Towing of aircraft around the airport ramp | Jet fighters up to cargo transport aircraft | Draw bar pull of up to 72,000 lbs | 200+ | ||||
Trailer Mounted Air Conditioning | Mobile air conditioning units used for on the ground cooling | Jet fighters up to cargo transport aircraft | 30 to 110 ton mobile air conditioning units |
Initial
deliveries expected in 2008 |
Aftermarket Products, Parts and Services. We provide aftermarket products, parts and services for our equipment. We also provide retrofits to accommodate changing operational requirements and continuous, proactive service, including, in some cases, on-site personnel. These systems and other services represent an integrated approach to addressing critical problems faced by our customers and ensure that we remain well positioned to respond to their new requirements and strategic initiatives through our strong customer relations.
In support of our focus and strategy of meeting our customers needs, we have developed a global parts service network to provide the right part in the right place. Our highly experienced global parts representatives help reduce equipment downtime by providing fast, accurate responses to technical questions. We also provide worldwide operations and maintenance training programs to provide maintenance technicians with the tools necessary to deliver the highest possible level of systems reliability.
Strategy
As part of our core mission of being the leading supplier of customized solutions to the air transportation industry, we will focus on five critical strategic initiatives:
Extend Technology Leadership. By maintaining and extending our technological leadership position, we will remain well positioned to capture the growth created by the trends in the air transportation industry. The focus of our investments in product improvement and development will be improving airport ramp and terminal
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efficiencies and reducing the total cost of ownership for airports, passenger and cargo carriers and ground handlers. We will also strive to continually meet the technological challenges posed by evolving aircraft designs, safety and environmental concerns.
Our ongoing technology and market leadership positions us to capitalize on the following:
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global industry growth of the aviation industry; |
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outsourcing of support activities by airports or air carriers; |
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new equipment required for new aircraft designs or environmental regulations; |
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new growth opportunities being generated in developing regions; and |
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growth in ground support equipment purchases as the United States airline industry improves results. |
Leverage Our Installed Base. From 2005 to 2007, our aftermarket revenue increased at a compound annual rate of approximately 15%. We intend to continue to leverage our large installed base of airport equipment, to expand our aftermarket products, parts and services and to provide increased focus on upgrades and services that will improve our customers operational efficiency. Our large and growing installed base not only generates a recurring revenue stream, it also provides us with strong, long-term customer relationships from which we can derive information for new product development to meet the evolving needs of our customers.
We also intend to expand the capabilities of our airport services product line and to selectively expand our presence within the 20 busiest United States airports. We will leverage our experience gained at airports by pursuing additional opportunities in military ground support equipment, cargo handling systems for air cargo carriers and sophisticated port entry systems. We will continue to create differentiated service products and value added operational information systems that provide productivity, efficiency and financial gains to our customers.
Capture International Growth Opportunities. Asia-Pacific has become a high growth region for the aviation industry. In this region, The Boeing Company forecasts from 2006 to 2026 annual growth of passenger traffic of 6.5% traffic and air cargo tonnage of 7.3%. To accommodate this rapid growth, significant investments will continue to be made in airport infrastructure. We are well positioned with dedicated local sales and service staff to meet the increased airport equipment demand in developing countries with our trusted products as well as our product expertise and customer service.
Expand Military Programs. We supply Halvorsen loaders and provide Halvorsen parts support, service and retrofit kits to the U.S. Air Force Mobility Command. We intend to continue to extend our support for this program by offering engineering and logistics support contracts. We further intend to expand the Halvorsen installed base to the U.S. Navy, Army and selected international military services. We will expand the loader design to meet the specification requirements of new loader programs as they are issued. We also plan to continue our expansion of our military ground support equipment offerings of tow tractors, aircraft deicers, preconditioned air, air conditioning and ground power units to the United States and selected international defense departments.
Growth Through Acquisitions. In addition to benefiting from the expected growth in the business areas that we serve, we intend to pursue external growth opportunities through select, value-accretive acquisitions. We believe that the air transportation industry provides opportunities for acquisitions. Our global capabilities and leading industry positions will facilitate our ability to integrate complementary companies and technologies into the JBT AeroTech businesses.
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JBT Corporation
Sales and Marketing
We sell and market our products and services through a predominantly direct sales force, supplemented with independent distributors and sales representatives. Our experienced international sales force is comprised of individuals with strong technical expertise in our products and services and the industries in which they are sold.
We support our sales force with marketing and training programs that are designed to increase awareness of our product offerings and highlight our differentiation while providing a set of sales tools to aid in the sales of our technology solutions. We actively employ a broad range of marketing tactics to inform and educate customers, the media, industry analysts and academics through targeted newsletters, our web site, seminars, trade shows, user groups and conferences.
Research and Development
The objectives of our research and development programs are to create new products and business opportunities in relevant fields, and to improve existing products. Worldwide expenditures for research and development for the three most recent fiscal years were as follows:
2005 | 2006 | 2007 | |||||||
(Dollars in millions) | |||||||||
JBT Corporation Total |
$ | 18.0 | $ | 16.2 | $ | 18.7 |
Intellectual Property
We own a number of United States and foreign patents, trademarks and licenses that are cumulatively important to our business. We own approximately 550 United States and foreign patents and have approximately 350 patent applications pending in the United States and abroad. Further, we license certain intellectual property rights to or from third parties. We also own numerous United States and foreign trademarks and trade names and have approximately 400 registrations and pending applications in the United States and abroad. We do not believe that the loss of any one or group of related patents, trademarks or licenses would have a material adverse effect on our overall business.
Competition
We conduct business worldwide and compete with a variety of local and regional companies, which typically are focused on a specific application, technology or geographical area, and a few large multinational companies.
We compete by leveraging our industry expertise to provide differentiated and proprietary technology, integrated systems, high product quality and reliability and quality aftermarket service. In the food processing industry, we also distinguish ourselves by providing increased yields with improved final product quality.
JBT FoodTechs major competitors include Aero Heat Exchanger Inc., MYCOM, Convenience Food Systems Inc., Heat & Control, Inc., PneumaticScaleAngelus, Allpax Products, Inc., Atlas Pacific Engineering Company, Inc., Marel Food Systems, Brown International Corp. and Rossi & Catelli Spa. JBT AeroTechs major competitors include TLD, Schopf Maschinenbau GmbH, Airmarrel, Global Ground Support LLC, ThyssenKrupp AG, Linc Facility Services and Elite Line Services, Inc.
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Employees
We employ approximately 3,100 people with approximately 1,900 located in the United States. Approximately 240 of our employees in the United States are represented by one collective bargaining agreement that covers these employees through 2008.
Outside the United States, the company enters into employment contracts and agreements in those countries in which such relationships are mandatory or customary. The provisions of these agreements correspond in each case with the required or customary terms in the subject jurisdiction. Approximately 60% of our international employees are covered under national employee unions.
We maintain good employee relations and have successfully concluded all of our recent negotiations without a
Facilities and Properties
We lease executive offices in Chicago, Illinois. We believe that our properties and facilities meet our current operating requirements and are in good operating condition and that each of our significant manufacturing facilities is operating at a level consistent with the industries in which we operate. The significant production facilities for our JBT FoodTech operations are listed below:
LOCATION |
SQUARE
FEET (approximate) |
LEASED OR
|
||
United States: |
||||
Madera, California |
250,000 | Owned | ||
Lakeland, Florida |
225,000 | Owned | ||
Sandusky, Ohio |
140,000 | Owned | ||
Northfield, Minnesota |
50,000 | Owned | ||
International: |
||||
St. Niklaas, Belgium |
289,000 | Owned | ||
Helsingborg, Sweden |
227,000 | Owned/Leased | ||
Araraquara, Brazil |
125,000 | Owned | ||
Parma, Italy |
72,000 | Owned | ||
Cape Town, South Africa |
38,000 | Leased | ||
Ningbo, China |
28,000 | Leased |
The significant production properties for our JBT AeroTech operations are listed below:
LOCATION |
SQUARE
FEET (approximate) |
LEASED OR
|
||
United States: |
||||
Orlando, Florida |
253,000 | Owned | ||
Ogden, Utah |
220,000 | Owned/Leased | ||
Chalfont, Pennsylvania |
67,000 | Leased | ||
International: |
||||
Madrid, Spain |
258,000 | Owned | ||
Juarez, Mexico |
33,000 | Leased | ||
Leicestershire, UK |
15,000 | Leased |
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Legal Proceedings
Pursuant to the Separation Agreement, at the time of our separation from FMC Technologies, we will assume liabilities related to specified legal proceedings arising from our business prior to separation. Although FMC Technologies will remain the named defendant, we will manage the litigation and indemnify FMC Technologies for costs, expenses and judgments arising from this existing litigation. We do not believe that any existing litigation we will assume will have a material effect on our results of operations, financial condition or liquidity.
We are involved in other legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, we do not believe that the resolution of the proceedings that we are involved in, either individually or taken as a whole will have a material adverse effect on our business, results of operations, cash flows or financial condition.
Raw Materials
For all of our business segments, we purchase carbon steel, stainless steel, aluminum and steel castings and forgings both domestically and internationally. We do not use single source suppliers for the majority of our raw material purchases and believe available supplies of raw materials are adequate. Moreover, raw materials essential to our business are generally readily available.
Customers
No single customer accounts for more than 10% of our 2007 combined revenue.
JBT FoodTechs customers range from large multinational food processing companies to smaller regional food processing companies. Our principal customers include companies such as: Ajinomoto, Co. Ltd., Aujan Inudstries Co LLC, Bonduelle Group, Campbell Soup Company, CIA Pesquera Camanchaca S.A., Citrosuco, Citrovita, COFCO Tunhe Tomato Products Co. Ltd., ConAgra Foods, Inc., Conserva Italia, Cutrale, DelMonte Foods Company, Floridas Natural Growers, Gloria Foods Company, Great Giant Pineapple Co., Grupo Bertin, Hero AG, H.J. Heinz Company, Huiyan Group, Inghams Enterprises Pty Limited, Industrias Bachoco, Jamba Juice Company, Jain Irrigation Systems Ltd., JBS-Friboi Group, Keystone Foods LLC., Morning Star Packing Company, National Food Industries LLC, Nestlé, Novartis AG, Nutricima Limited, Perdigão S.A., Pilgrims Pride Corporation, Sadia S.A., SK Foods, Southern Gardens Citrus, Starkist Tuna, Sunkist Growers, Inc., Thai Dairy Industry Co. Ltd., Thai Union Frozen Products Public Company Limited, Tyson Foods, Inc., Unilever PLC and Xinjiang Chalkis Tomato Products Co. Ltd.
JBT AeroTechs customers are domestic and international airlines, air freight and ground handling companies as well as United States domestic airport authorities, airlines, air freight carriers, ground handling companies and the United States military. Our principal customers include companies such as: Air Canada, Air China, Air France KLM, British Airways, China Southern Airlines, Continental Airlines, Dallas Fort Worth International Airport, Delta Air Lines, DHL, FedEx Corp., EgyptAir, Houston Airport Systems, Iberia Airlines, LAN Airlines, Los Angeles International Airport, Massport/Logan International Airport, Menzies Aviation, Miami International Airport, Servisair Singapore Airlines, Southwest Airlines, Swissport International, Thai Airways International, TAM Airlines, United Airlines, UPS and the U.S. Air Force.
Government Contracts
We currently supply the Halvorsen cargo loader, aircraft tow tractors and trailer mounted air conditioning units to the U.S. Department of Defense. The amount of equipment built for these programs is dependent upon annual government appropriations and levels of military spending. In addition, United States defense contracts are unilaterally terminable at the option of the United States government with compensation for work completed and costs incurred. Contracts with the United States government are subject to special laws and regulations, the noncompliance with which may result in various sanctions that could materially affect our ongoing government business.
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Governmental Regulation and Environmental Matters
Our operations are subject to various federal, state, local and foreign laws and regulations governing the prevention of pollution and the protection of environmental quality. If we fail to comply with these environmental laws and regulations, administrative, civil and criminal penalties may be imposed, and we may become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. We may also be subject to civil claims arising out of an accident or other event causing environmental pollution. These laws and regulations may expose us to liability for the conduct of or conditions caused by others or for our own acts even though these actions were in compliance with all applicable laws at the time they were performed.
Under the Comprehensive Environmental Response, Compensation and Liability Act, referred to as CERCLA, and related state laws and regulations, joint and several liability can be imposed without regard to fault or the legality of the original conduct on certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include the owner and operator of a contaminated site where a hazardous substance release occurred and any company that transported, disposed of or arranged for the transport or disposal of hazardous substances that have been released into the environment, and including hazardous substances generated by any closed operations or facilities. In addition, neighboring landowners or other third parties may file claims for personal injury, property damage and recovery of response cost. We may also be subject to the corrective action provisions of the Resource, Conservation and Recovery Act, or RCRA, and analogous state laws that require owners and operators of facilities that treat, store or dispose of hazardous waste to clean up releases of hazardous waste constituents into the environment associated with their operations.
Some of our facilities and operations are also governed by laws and regulations relating to worker health and workplace safety, including the Federal Occupational Safety and Health Act, or OSHA. We believe that appropriate precautions are taken to protect our employees and others from harmful exposure to potentially hazardous materials handled and managed at our facilities, and that we operate in substantial compliance with all OSHA or similar regulations.
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Directors and Executive Officers
Set forth below is information concerning those persons that will serve as executive officers and directors of JBT Corporation immediately following the distribution date.
Name |
Age |
Position(s) |
||
Charles H. Cannon, Jr. |
55 | Chairman of the Board of Directors, Chief Executive Officer and President | ||
Ronald D. Mambu |
58 | Vice President, Chief Financial Officer, Treasurer and Controller | ||
Torbjörn Arvidsson |
56 | Vice President and Division Manager-Food Solutions and Services | ||
Juan C. Podesta |
56 | Vice President and Division Manager-Food Processing Systems | ||
C. Maury Devine |
57 | Director | ||
Alan D. Feldman |
56 | Director | ||
James E. Goodwin |
63 | Director | ||
Polly B. Kawalek |
53 | Director | ||
James M. Ringler |
62 | Director | ||
James R. Thompson |
71 | Director |
Directors and Executive Officers
CHARLES H. CANNON, JR. has served as our Chairman of the Board of Directors, Chief Executive Officer and President since April 25, 2008. Mr. Cannon has served as, and continues to be, Senior Vice President of FMC Technologies, Inc. since March 2004 and as a Vice President of FMC Technologies since February 2001. Since 1998, Mr. Cannon has served as Vice President and Manager-FMC FoodTech and Transportation Systems Group. After the spin-off, Mr. Cannon will no longer serve FMC Technologies in any capacity. Mr. Cannon joined FMC Corporation in 1982 as a Senior Business Planner in the Corporate Development Department. He became Division Manager of FMC Corporations Citrus Machinery Division in 1989, Division Manager of its Food Processing Systems Division in 1992 and Vice President and General Manager of FMC FoodTech in 1994. Mr. Cannon serves on the Boards of Directors of Standex International Corporation and the Food Machinery Europe Association.
RONALD D. MAMBU has served as our Vice President, Chief Financial Officer, Treasurer and Controller since April 25, 2008. Since February 23, 2001, Mr. Mambu has served as, and continues to be, Vice President and Controller of FMC Technologies. After the spin-off, Mr. Mambu will no longer serve FMC Technologies in any capacity. Mr. Mambu was Director of Financial Planning of FMC Corporation from 1994 until his appointment as Controller. Mr. Mambu joined FMC Corporation in 1974 as a financial manager in Philadelphia. Since then, he has served in a variety of roles at FMC Corporation, including Controller of its former Food and Pharmaceutical Products Division from 1977 to 1982, Controller of Machinery Europe Division from 1982 to 1984, Controller of Agricultural Products Group from 1984 to 1987, Director of Financial Control from 1987 to 1993 and Director of Strategic Planning from 1993 to 1994.
TORBJÖRN ARVIDSSON has served as our Vice President and Division Manager-Food Solutions and Services since July 2008. Mr. Arvidsson served as a Division Manager for FMC Technologies Food Solutions and Services since October 2005. After the spin-off, Mr. Arvidsson will no longer serve FMC Technologies in any capacity. Mr. Arvidsson rejoined Frigoscandia Equipment in 1994 as Business Development Manager, a role he continued in after the acquisition of Frigoscandia Equipment by FMC FoodTech in 1996. In 1998, Mr. Arvidsson was appointed General Manager North America, located in Seattle, Washington, a position he held until late 2000 when he was appointed General Manager Europe and relocated back to Helsingborg,
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Sweden. In 2001, Mr. Arvidsson also assumed responsibility for FMC FoodTechs Asia Pacific region. Mr. Arvidsson has been involved in the international food equipment industry his whole career, dating back to 1975 when he first joined Frigoscandia Equipment after graduating from Lund University, Sweden. In 1983 he graduated from IMI, Geneva (Advanced Management MBA). In 1984, Mr. Arvidsson served as General Manager for Square AB within the Alfa-Laval Group until 1987, when he joined Akerlund & Rausing as Division Manager for its overseas companies. In 1990, Mr. Arvidsson rejoined Alfa-Laval as Deputy General Manager for its convenience food division. Alfa-Laval later became Tetra-LaVal after Tetra-Paks acquisition of Alfa-Laval.
JUAN C. PODESTA has served as our Vice President and Division Manager-Food Processing Systems since July 2008. Mr. Podesta served as a Division Manager for FMC Technologies Food Processing Systems since July 2000. After the spin-off, Mr. Podesta will no longer serve FMC Technologies in any capacity. Mr. Podesta joined FMC Corporation in 1989 as Product Manager, Citrus Systems in Lakeland, Florida. Since then, he has served in a variety of sales, marketing, and line management roles within FMC FoodTech, including International Manager for the Citrus Machinery Division from 1989 to 1992, General Manager, Fruit & Vegetable Processing based in Parma, Italy from 1992 to 1994, General Manager, Canning Systems based in St. Niklaas, Belgium from 1995 to 1996, Division Manager, Food Processing Systems & Agricultural Machinery from 1997 to 1999 and President FMC Europe, based in Brussels, Belgium from 2000 to 2002. Mr. Podesta served as Vice Chairman of Food Processing Machinery Europe, in the Board of The Council of the Americas, and in the Board of Equipment Hygiene Engineering Design Group.
C. MAURY DEVINE was elected to serve as one of our directors effective as of the spin-off date. Since 2005, Ms. Devine has served as, and she continues to be, a director of FMC Technologies. Ms. Devine served as President and Managing Director of ExxonMobil Corporations Norwegian affiliate, ExxonMobil Norway, Inc., from 1996 to 2000. Prior to the merger of ExxonMobil, she served as Secretary of Mobil Corporation from 1994 to 1996. From 1990 to 1994, Ms. Devine managed Mobils international government relations. From 2000 to 2003, Ms. Devine was a Fellow at Harvard Universitys Belfer Center for Science and International Affairs. Prior to joining Mobil, Ms. Devine served 15 years in the United States government in positions at the White House, the American Embassy in Paris, France, and the U.S. Department of Justice. Ms. Devine serves on the Board of Directors of Det Norske Veritas (DNV), the Washington Jesuit Academy, and the National Foreign Language Center. She is also a member of the Council on Foreign Relations.
ALAN D. FELDMAN was elected to serve as one of our directors effective as of the spin-off date. Since 2003, Mr. Feldman has served as, and he continues to be, the Chairman, President and Chief Executive Officer of Midas, Inc. Prior to joining Midas, Mr. Feldman held several senior management posts with McDonalds Corporation, becoming President of McDonalds USA in 1998 and Chief Operating Officer and President of McDonalds Americas in 2001. From 1983 through 1994, Mr. Feldman was with PepsiCo, where he served in financial and operations posts at Frito-Lay and Pizza Hut. At Pizza Hut, Mr. Feldman was named senior Vice President of Operations in 1990 and Senior Vice President, Business Strategy and Chief Financial Officer, in 1993. Mr. Feldman also serves on the Board of Directors of Footlocker, Inc.
JAMES E. GOODWIN was elected to serve as one of our directors effective as of the spin-off date. Mr. Goodwin served as Chairman and Chief Executive Officer of UAL Corporation and United Airlines from March 1999 until his retirement on October 31, 2001. Mr. Goodwin served as President and Chief Operating Officer of UAL Corporation and United Airlines from 1998 to 1999. During his career with UAL Corporation and United Airlines, Mr. Goodwin became Senior Vice President-Marketing in 1985, Senior Vice President- Services in 1988, Senior Vice President-Maintenance Operations in 1991, Senior Vice President-International in 1992 and Senior Vice President-North America in 1995. Mr. Goodwin serves on the Boards of Directors of AAR Corporation, Federal Signal Corporation and First Chicago Bank Corporation, as well as the Advisory Board of Hu-Friedy, the Board of Trustees of the Chicago Symphony Orchestra and Lewis University and is a member of The Council of Retired Chief Executives.
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POLLY B. KAWALEK was elected to serve as one of our directors effective as of the spin-off date. Ms. Kawalek retired in 2004 after serving for 25 years in various capacities with Quaker Oats, Inc., which in 2001 became a business unit of PepsiCo. She served as President of PepsiCos Quaker Foods division from 2002 until her retirement. In 2001, Ms. Kawalek served as President of Quaker Oats U.S. Foods division and from 1997 through 2000 she served as President of its Hot Breakfast division. Ms. Kawalek serves as a director of Marlek Biosciences Corp. and Kimball International, Inc.
JAMES M. RINGLER was elected to serve as one of our directors effective as of the spin-off date. Since 2001, Mr. Ringler has served as, and he continues to be, a director of FMC Technologies. Mr. Ringler serves as Chairman of Teradata Corporation. Mr. Ringler served as Vice Chairman of Illinois Tool Works Inc. until his retirement in 2004. Prior to joining Illinois Tool Works, he was Chairman, President and Chief Executive Officer of Premark International Inc., which merged with Illinois Tool Works in November 1999. Mr. Ringler joined Premark in 1990 and served as Executive Vice President and Chief Operating Officer until 1996. From 1986 to 1990, he was President of White Consolidated Industries Major Appliance Group, and from 1982 to 1986 he was President and Chief Operating Officer of The Tappan Company. Prior to joining The Tappan Company in 1976, Mr. Ringler was a consulting manager with Arthur Andersen & Co. He serves on the Board of Directors of the Dow Chemical Company, Corn Products International, Inc. and Autoliv Inc.
JAMES R. THOMPSON was elected to serve as one of our directors effective as of the spin-off date. Since 2001, Governor Thompson has served as, and he continues to be, a director of FMC Technologies. Governor Thompson has served as the Senior Chairman of the Chicago law firm of Winston & Strawn LLP since September 2006 and as the firms Chairman from January 1993 to September 2006. He joined the firm in January 1991 as Chairman of the Executive Committee after serving four terms as Governor of the State of Illinois from 1977 until January 14, 1991. Prior to his terms as Governor, he served as U.S. Attorney for the Northern District of Illinois from 1971 to 1975. Governor Thompson served as the Chief of the Department of Law Enforcement and Public Protection in the Office of the Attorney General of Illinois, as an Associate Professor at Northwestern University School of Law, and as an Assistant States Attorney of Cook County. Governor Thompson was a member of the National Commission on Terrorist Attacks Upon the United States (also known as the 9/11 Commission). He is a former Chairman of the Presidents Intelligence Oversight Board. He is the Chairman of the United HEREIU Public Review Board and serves on the Board of Directors of Navigant Consulting Group, Inc. and Maximus, Inc.
After the spin-off, we expect to fill the positions of Vice President and Division Manager-JBT Aerotech, Vice President, Secretary and General Counsel, and Vice President Human Resources.
Board of Directors
After the spin-off, we expect that JBT Corporations Board of Directors will consist of seven members, six of whom will be independent directors. Our directors will be divided into three classes. Approximately one-third will be Class I directors, with terms expiring at the annual meeting of stockholders to be held in 2009; approximately one-third will be Class II directors with terms expiring at the annual meeting of stockholders to be held in 2010; and approximately one-third will be Class III directors with terms expiring at the annual meeting of stockholders to be held in 2011. Commencing with the annual meeting of stockholders to be held in 2009, directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires, and thereafter will serve for a term of three years. Each director will hold office, in accordance with the Amended and Restated Certificate of Incorporation and By-laws of JBT Corporation, until the next annual meeting of stockholders and until his or her successor is duly elected and qualified.
Effective as of the spin-off date, Messrs. Cannon, Goodwin, Ringler, Thompson and Feldman and Ms. Devine and Ms. Kawalek will serve as directors of JBT Corporation. We expect that all such persons will continue as a director of JBT Corporation and that no additional directors will be appointed on or after the spin-off date to our initial Board of Directors.
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Director Independence
Following the spin-off, JBT Corporations Corporate Governance Guidelines will provide that a majority of JBT Corporation directors must be independent under criteria established by the NYSE. In order for a director to be considered independent, the Board must affirmatively determine that the director has no material relationship with JBT Corporation (either directly or as a partner, stockholder or officer of an organization that has a relationship with JBT Corporation). In each case, the Board considers all relevant facts and circumstances. We expect to designate directors such that six of our directors will be independent, in accordance with our Corporate Governance Guidelines and the rules of the NYSE and other applicable laws.
Committees of the Board of Directors
Our Board of Directors will establish the following three standing committees to assist it with its responsibilities: Audit, Compensation and Nominating and Governance. All members of the Audit, Compensation and Nominating and Governance Committees will meet the criteria for independence as established by the NYSE and under the Sarbanes-Oxley Act of 2002. Each of the Committees is described in greater detail below. The Board will establish written charters for each of the Committees, which will be available on our web site located at www.jbtcorporation.com following the spin-off. Following the spin-off, any changes to the charters will be reflected on our web site.
Audit Committee
We expect to designate members of our Audit Committee on or prior to the spin-off. The principal duties of the Audit Committee under its written charter will include: (i) responsibilities associated with our external and internal audit staffing and planning; (ii) accounting and financial reporting issues associated with our financial statements and filings with the SEC; (iii) financial and accounting organization and internal controls; (iv) auditor independence and approval of non-audit services; and (v) whistle-blower procedures for reporting questionable accounting and audit practices.
The Audit Committee charter will require that the Committee be comprised of at least three directors, all of whom must be independent under the NYSE listing standards and the Sarbanes-Oxley Act of 2002. In addition, each member of the Audit Committee will be financially literate within the meaning of the NYSE listing standards, and at least one member will have sufficient accounting or financial management expertise to qualify as an audit committee financial expert, as determined by the Board in accordance with SEC rules.
Compensation Committee
We expect to designate members of our Compensation Committee on or prior to the spin-off. The principal duties of the Compensation Committee under its charter will include: (i) ensuring that a succession plan for the Chief Executive Officer is in place; (ii) reviewing managements recommendations for executive officers and making recommendations to the Board of Directors; (iii) approving the compensation for the Chief Executive Officer; (iv) reviewing and approving compensation policies and practices for other executive officers including their annual salaries; (v) reviewing and approving major changes in employee benefit plans; (vi) reviewing short and long-term incentive plans and equity grants; (vii) recommending to the full Board changes to the compensation of the independent members of the Board of Directors; and (viii) reviewing the Compensation Discussion and Analysis to be included in our annual report or proxy statement and, if appropriate, issuing its report recommending to the Board of Directors its inclusion of the Compensation Discussion and Analysis in our annual report or proxy statement. The Compensation Committee charter will require that the Committee be comprised of at least three directors, all of whom must be independent under the NYSE listing standards.
The scope of authority delegated to the Compensation Committee by the Board of Directors is to decide whether or not to accept, reject or modify our managements proposals for annual compensation awards to our
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executive officers. The Compensation Committee also has the authority to recommend the amount of compensation to be paid to our non-management directors. See Compensation Discussion and Analysis for a detailed description of the role of the Compensation Committee in reviewing and approving our executive officer and independent director compensation, see Compensation Discussion and Analysis.
Nominating and Governance Committee
We expect to designate members of our Nominating and Governance Committee on or prior to the spin-off. The principal duties of the Nominating and Governance Committee under its written charter will include: (i) identifying and recommending to the Board of Directors qualified nominees for election to the Board of Directors; (ii) making recommendations to the Board of Directors concerning the structure and membership of other Board committees; (iii) making recommendations to the Board of Directors from time to time regarding matters of corporate governance; (iv) reviewing our ethics policy; and (v) reporting annually to the Board of Directors the Committees assessment of the performance of the Board of Directors and its committees. The Nominating and Governance Committee charter will require that the Committee be comprised of at least three directors, all of whom are independent under the NYSE listing standards.
In connection with its role in recommending candidates for the Board, the Nominating and Governance Committee will advise the Board with respect to the combination of skills, experience, perspective and background that its members believe are required for the effective functioning of the Board considering our current business strategies and the regulatory, geographic and market environment. We have not yet established specific, minimum qualifications for director nominees. Our corporate governance principles will provide that directors should be selected based on integrity, successful business experience, stature in their own fields of endeavor and the diversity of perspectives they bring to the Board. Our corporate governance principles will also require that a majority of our non-management directors should be active or retired senior executives, preferably Chief Executive or Chief Operating Officers of publicly-held companies. In addition, the corporate governance principles will provide that our non-management directors should also be chosen based on recognized experience in our lines of business and leadership in areas of government service, academia, finance and international trade. Nominees to be evaluated by the Nominating and Governance Committee for vacancies on the Board will be selected by the Committee from candidates recommended by multiple sources, including business and personal contacts of the members of the Nominating and Governance Committee, recommendations by our senior management and candidates identified by independent search firms, stockholders and other sources, all of whom will be evaluated based on the same criteria.
Stockholders will be provided the opportunity to submit recommendations for future candidates for election to the Board of Directors for consideration by the Nominating and Governance Committee by writing to the Corporate Secretary at JBT Corporation, 200 East Randolph Drive, Chicago, Illinois 60601. A letter making a director candidate recommendation will need to include the candidates name, biographical information and a summary of the candidates qualifications. In addition, the letter should be accompanied by a signed statement from the nominee indicating that the nominee is willing to serve as a member of the Board. To make a recommendation for the 2009 Annual Meeting, please refer to the timing requirements specified in the section of this Information Statement entitled Proposals for the 2009 Annual Meeting of Stockholders. All submissions from stockholders meeting these requirements will be reviewed by the Nominating and Governance Committee.
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Governance Practices
Following the spin-off, we will initially continue to observe corporate governance practices and principal governance documents substantially the same as those adopted by FMC Technologies, which are designed to ensure that we maximize stockholder value in a manner that is consistent with both the legal requirements applicable to us and a business model that requires our employees to conduct business with the highest standards of integrity. Our Board has adopted and will adhere to corporate governance principles which the Board and senior management believe promote this purpose, are sound and represent best practices, and will review these governance practices, the corporate laws of the State of Delaware under which we were incorporated, the rules and listing standards of the NYSE and the regulations of the SEC, as well as best practices recognized by governance authorities to benchmark the standards under which it operates. Our principal governance documents will be as follows:
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Corporate Governance Guidelines; |
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Board of Directors committee charters, including: |
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Audit Committee charter; |
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Compensation Committee charter; |
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Nominating and Governance Committee charter; and |
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Code of Business Conduct and Ethics. |
Our governance documents will be available following the distribution date on our web site at www.jbtcorporation.com.
Our Board of Directors, with assistance from its Nominating and Governance Committee, will regularly assess our governance practices in light of legal requirements and governance best practices.
Executive Director Sessions
Under our Corporate Governance Guidelines, the outside directors will meet in regularly scheduled executive sessions without management. We expect that a lead independent director will be selected by the Board to serve as the presiding director at these meetings.
Communications with the Board of Directors
After the spin-off, stockholders and other interested persons seeking to communicate directly with the Board of Directors, with the lead independent director or the independent directors as a group should submit their written comments c/o Lead Independent Director at our principal executive offices set forth on page 4. The lead independent director will review any such communication at the next regularly scheduled Board meeting unless, in his or her judgment, earlier communication to the Board is warranted.
If a stockholder communication raises concerns about the ethical conduct of management or JBT Corporation, it should be sent directly to our Corporate Secretary at our principal executive offices set forth on page 4. The Corporate Secretary will promptly forward a copy of any such communication to the Chairman of the Audit Committee and, if appropriate our Chairman, and take such actions as they authorize to ensure that the subject matter is addressed by the appropriate committee of the Board, by management and/or by the full Board.
At the direction of the Board, we reserve the right to screen all materials sent to its directors for potential security risks, harassment purposes or routine solicitations.
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Code of Business Conduct and Ethics
Prior to the distribution date, we will adopt a Code of Business Conduct and Ethics which will apply to our directors, Chief Executive Officer, Chief Financial Officer, Controller and other JBT Corporation employees. The Code of Business Conduct and Ethics will be available free of charge through the Governance portion of our web site at www.jbtcorporation.com, or by writing to the attention of Investor Relations at our principal executive offices set forth on page 4.
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Our compensation plan for non-management members of our Board of Directors is included in our Incentive Compensation and Stock Plan (the Incentive Compensation Plan). The Incentive Compensation Plan grants the Board of Directors the authority to modify the terms of the Board of Directors compensation plan pursuant to a resolution of the Board of Directors.
Each non-management director will receive an annual retainer of $50,000, payable in equal quarterly installments. Each director will receive at least 50% of this annual retainer in the form of restricted stock units and will have the ability to elect to receive the remainder in cash, payable in quarterly installments. Each director will also have the option of deferring the cash portion of the annual retainer and receiving it in the form of restricted stock units. These restricted stock units will have a fair market value equal to the deferred amount of the annual retainer on the date of the grant and will vest on the date of the following years Annual Meeting of Stockholders.
We will also make an annual non-retainer equity grant to our non-management directors of restricted stock or restricted stock units of equivalent value. Upon joining the Board in 2008, we will award each of our non-management directors restricted stock units with a value of $60,000. These awards will not vest until the date of our 2009 Annual Meeting of Stockholders. Annual non-retainer equity grants will occur in subsequent years on the date of our Annual Meeting of Stockholders.
We will have ownership requirements for our non-management directors that are based on a multiple of five times the amount of each directors annual retainer and are designed to align the financial interests of our directors with the interests of our shareholders. Non-management directors will have a period of five years to achieve the required level of stock ownership. Our non-management directors will also be required to hold the restricted stock units they elect to receive from the annual retainer and the annual non-retainer equity grants they are awarded until after they complete their service on our Board of Directors. Restricted stock units granted to a director will be settled in common stock upon completion of the directors service on our Board of Directors. These restricted stock units will be forfeited if a director ceases service on our Board of Directors prior to the vesting date of the restricted stock units, except in the event of death or disability. Unvested restricted stock units will be settled and payable in common stock upon the death or disability of a director or in the event of a change-in-control of our company, as such term is defined under our Incentive Compensation Plan.
The Compensation Committee of FMC Technologies Board of Directors retained Hewitt Associates, an independent compensation consultant, to perform an analysis of peer company non-management director compensation practices. Additional information regarding the peer companies surveyed by Hewitt Associates is included in Establishing Competitive Pay Levels in Compensation Discussion and Analysis below. Based on an analysis of this information, FMC Technologies Compensation Committee has established the initial compensation structure for our non-management directors. Our non-management directors will not receive additional cash remuneration for each Board of Directors meeting or Board of Directors committee meeting attended. The chairs of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee will receive an additional annual fee of $10,000. Each non-management director will also receive reimbursement for reasonable incidental expenses incurred in connection with the attendance of meetings of the Board and Board committees. We may elect to pay for travel expenses of spouses of our non-management directors for board of director meetings occurring outside of the United States. We may also pay a federal income tax gross-up related to reimbursed travel expenses paid to our non-management directors. Mr. Cannon, our Chairman and Chief Executive Officer, will not receive additional compensation for his service as a director.
Our non-employee directors will not participate in our employee benefit plans other than our matching program for charitable contributions.
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Compensation of our Named Executive Officers
We have identified Charles H. Cannon, Jr., Ronald D. Mambu, Juan C. Podesta and Torbjörn Arvidsson as our named executive officers. The information provided with respect to Messrs. Cannon, Mambu, Podesta and Arvidsson for the years 2007 and, where applicable, 2006, reflects their compensation earned while employed by FMC Technologies. We have not designated any other current employee of FMC Technologies as an executive officer, and accordingly our executive compensation disclosure will address the historical compensation of only four named executive officers. Our named executive officers for 2008 could change, as we will hire new executive officers in connection with the spin-off and because the determination of our named executive officers for 2008 will be based on our performance and final compensation decisions. While Messrs. Cannon, Mambu, Podesta and Arvidsson will be employed by FMC Technologies prior to the spin-off, their executive roles and compensation structures with JBT Corporation will differ in some respects from their most recent positions with FMC Technologies. We have adopted and will continue to develop our own compensation plans and programs and anticipate that each of our executive officers will be covered by these programs following the spin-off. A more detailed description of our compensation programs can be found below under the heading Compensation Discussion and Analysis.
Compensation Discussion and Analysis
The following provides an overview of the FMC Technologies executive compensation program that applied to Messrs. Cannon, Mambu, Podesta and Arvidsson in 2007, when they served as employees of FMC Technologies. In addition, this section also describes the executive compensation program that we currently anticipate will be implemented by JBT Corporation. In general, we do not anticipate many differences between our executive compensation program and that of FMC Technologies, which we believe has provided appropriate incentives to FMC Technologies executive officers in a manner that is consistent with the interest of FMC Technologies shareholders.
We anticipate that following the spin-off, Messrs. Cannon, Mambu, Podesta and Arvidsson will be four of our named executive officers for the year ended December 31, 2008. Our fifth named executive officer will be designated when our staffing of corporate and division management function is completed. Of the named executive officers, only Mr. Cannon is currently a named executive officer of FMC Technologies, as a senior vice president. Since our anticipated named executive officers roles and responsibilities may differ in many respects from those that they had with FMC Technologies, their historical compensation may not necessarily be indicative of their future compensation as executive officers of JBT Corporation. As an example, although Mr. Cannon was a Senior Vice President of FMC Technologies and was responsible for managing the two business segments which will constitute our company, he did not have the roles of Chief Executive Officer or Chairman of the Board of Directors, which will substantially increase his overall corporate responsibilities from those he had for FMC Technologies. Mr. Mambu served as Corporate Controller for FMC Technologies, reporting to its Chief Financial Officer. As our Chief Financial Officer, Mr. Mambus corporate role and responsibilities will also change significantly as he will have the responsibility for managing the entire corporate financial function for JBT Corporation encompassing treasury and tax functions in addition to financial strategy and reporting. The roles and responsibilities of Mr. Podesta and Mr. Arvidsson will not change significantly from their current responsibilities as division managers for FMC Technologies. Nevertheless, we have elected to present historical compensation information for each of our anticipated named executive officers for periods during which they were employees of FMC Technologies in order to provide a historical basis against which to compare compensation going forward. Because Mr. Cannon was a named executive officer of FMC Technologies, FMC Technologies reported his 2006 and 2007 compensation and we are including this previously reported compensation information. For Messrs. Mambu, Podesta and Arvidsson, we are presenting only the last year of compensation, as permitted by SEC regulations.
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Each of our executive compensation plans and agreements has been reviewed and approved by FMC Technologies Compensation Committee, and certain of our executive compensation plans will have been approved prior to our spin-off by FMC Technologies, as our sole stockholder. Following the spin-off, our executive compensation plans will be administered by the Compensation Committee established by our Board of Directors, which will be formed prior to the distribution date. All of the members of our Compensation Committee will independent directors as defined by the listing requirements of the NYSE.
In anticipation of the spin-off, FMC Technologies Compensation Committee engaged Hewitt Associates, an independent compensation consultant, to provide guidance with respect to the development and implementation of our compensation programs, including those for our executive officers. After the spin-off, these matters will fall within the responsibility of our Compensation Committee. Under its charter, our Compensation Committee will have the authority to engage the services of outside auditors, experts and others to assist the committees fulfillment of these responsibilities.
General Principles
An explanation of the compensation philosophy and practices that impacted the 2007 compensation of the individuals that we expect to be our named executive officers following the spin-off requires an explanation of those philosophies and practices utilized by FMC Technologies and how they impacted their 2007 compensation. Accordingly, the following is a discussion and analysis of FMC Technologies executive compensation practices, together with a description of our anticipated executive compensation policies.
FMC Technologies. The core principles underlying FMC Technologies executive compensation philosophy are:
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Compensation opportunities are competitivepotential compensation for executives is targeted at median levels paid at comparable peer companies with whom FMC Technologies would be likely compete for executive talent in order to attract, motivate and retain skilled managerial talent over the long term; |
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Executive compensation is performance-baseda portion of an executives compensation is directly linked to achievement of specific corporate and individual results that FMC Technologies believes create shareholder value; |
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Long term equity compensation incentives represents a significant portion of executive compensationat risk equity compensation in the form of stock options, time-based restricted stock grants, and performance-based restricted stock grants, along with stock ownership and retention guidelines, align executive and shareholder interests and provide proper motivation for enhancing both short-term and long-term shareholder value; and |
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Compensation rewards internal talent developmenta portion of executive compensation is tied to recruitment and development of future executive talent. |
JBT Corporation . Our core executive compensation principles will mirror those employed by FMC Technologies, although the peer companies we will use to establish our median potential compensation levels will differ. Those peer companies are listed below under Establishing Competitive Pay Levels.
Long Tenured Management Team and Internal Development
Four of our named executive officers are individuals who have devoted the majority of their professional careers to FMC Technologies and its predecessor, FMC Corporation. With tenure averaging 25.1 years, our executive management team has had a long-term, personal and financial interest in the success of FMC Technologies, which we expect to carry over into our company. FMC Technologies management philosophy strongly advocated promoting from within and developing its own talent and we expect to continue to have this bias toward internal executive talent development. FMC Technologies ability to develop and retain executive management talent is perceived to be a strong component of its business success and we anticipate that it will be similar positive contributor to our growth and success. However, we may need to recruit externally for certain of our executive corporate staff positions.
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Allocation of Pay Between Short- and Long-Term
FMC Technologies . FMC Technologies compensation programs are designed in a manner that provides incentives to its executive officers to achieve short- and long-term operating and strategic objectives. To foster a longer term view (i.e., longer than twelve months), FMC Technologies compensation programs are weighted toward longer term incentives in the form of equity incentive compensation with a three or four year vesting requirement and a variable performance-based component. Although these equity compensation incentives deliver a competitive economic value on the date of grant, their ultimate value to an executive depends upon the market value of the equity after the end of the vesting period. That value is largely dependent upon FMC Technologies future performance and market dynamics.
JBT Corporation . We intend to employ compensation programs that are similarly designed to foster both short- and long-term operating and strategic objectives.
Establishing Competitive Pay Levels
FMC Technologies. FMC Technologies Compensation Committee annually reviews executive pay, peer group practices and FMC Technologies performance to ensure that its total compensation program design is consistent with its stated compensation philosophies and that overall compensation is within appropriate parameters. Based on this review, which is detailed below, FMC Technologies Compensation Committee concluded that the total compensation paid in 2007 to its named executive officers, which included Mr. Cannon, was appropriate and reasonable. Although FMC Technologies Compensation Committee did not provide direct oversight over the individual compensation decisions of our other named executive officers, the Committee did evaluate the appropriateness of compensation paid to FMC Technologies executive officers generally as a group, which included Mr. Mambu, Mr. Podesta and Mr. Arvidsson. As Senior Vice President for FMC Technologies FoodTech Division, Mr. Cannon had the specific responsibility for evaluating the performance of Mr. Podesta and Mr. Arvidsson and establishing their final compensation amounts.
In determining 2007 compensation levels for its executive officers, FMC Technologies Compensation Committee reviewed compensation survey data supplied by Hewitt Associates, the independent executive compensation consultant it retained. The companies included in the Hewitt Associates survey were selected by FMC Technologies management and approved by its Compensation Committee for peer group comparison. For 2007, this peer group consisted of the 24 industrial companies listed below and included a subset of eight oilfield services companies with which its energy businesses directly compete for talent. The list is reviewed on an annual basis by FMC Technologies Compensation Committee to ensure continuing relevancy. In approving the companies to be included in the peer group, the Compensation Committee reviewed revenue and market capitalization of each company, as well as products and markets served, to determine whether it was appropriate to include the company in the peer group.
Ameron International Corporation | Ingersoll-Rand Company Limited | |
Baker Hughes Incorporated * | Lennox International Inc. | |
BJ Services Company * | McDermott International, Inc. | |
BorgWarner Inc. | Milacron Inc. | |
Cameron International Corporation * | National Oilwell Varco, Inc. * | |
Cooper Industries, Ltd. | Schlumberger Limited * | |
Cummins, Inc. | Smith International Inc. * | |
Dover Corporation | Snap-On Incorporated | |
Eaton Corporation | Stewart & Stevenson, Inc. | |
Federal-Mogul Corporation | Trinity Industries, Inc. | |
Foster Wheeler Ltd. | Weatherford International Ltd. * | |
Halliburton Company * | The Williams Companies, Inc. |
* | These companies comprise the oil field services subset. |
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Based on the survey market data provided by Hewitt Associates, FMC Technologies Compensation Committee reviewed the appropriateness of each of its executive officers base pay, annual non-equity incentive compensation, and annual equity award. FMC Technologies Compensation Committee allocated total compensation to its executives among the various elements of short-term cash compensation (base pay and annual non-equity incentive compensation) and long-term compensation (equity awards) to approximate the allocation of the peer group surveyed.
For 2007, Hewitt Associates compensation survey indicated that approximately 29% of annual compensation was base pay, 18% was annual non-equity incentive compensation, and 53% was allocated to long-term incentives (both cash and equity incentives) among the surveyed companies. The actual compensation delivered to our anticipated named executive officers who were employed by FMC Technologies for 2007 was 31% base pay, 26% annual non-equity incentive compensation and 43% equity compensation. The actual compensation paid to FMC Technologies named executive officers in 2007 was influenced by FMC Technologies overall financial results, which resulted in significantly higher annual non-equity incentive compensation than target .
When making compensation comparisons between its executive officers and the market data for 2007, FMC Technologies used either the 24 industrial companies or the eight oilfield services companies as the appropriate reference point depending on the responsibilities of the particular executive officer. Mr. Cannons 2007 compensation was compared to that of the executive officers in the wider group of 24 industrial companies since his responsibilities did not extend to FMC Technologies energy businesses. For each of its executive officers, including Mr. Cannon, FMC Technologies Compensation Committee compared each element of the executives compensation, as well as the executives total compensation, to his or her counterparts at companies in the relevant peer group.
JBT Corporation . FMC Technologies Compensation Committee commissioned Hewitt Associates to perform a compensation survey in order to provide initial executive compensation program and design advice for us and concluded that the planned total compensation for our named executive officers following the spin-off was appropriate and reasonable. The companies surveyed for this purpose were also selected by FMC Technologies management and approved by FMC Technologies Compensation Committee for peer group comparison. This peer group differs from that selected for benchmarking FMC Technologies executive compensation program because of our focus on the food and air transportation industries and our smaller market capitalization. The peer group consists of the following 28 industrial companies.
AAR Corp. | Intermec, Inc. | |
Applied Industrial Technologies Inc. | Kaman Corporation | |
BE Aerospace Inc. | Lance, Inc. | |
Briggs & Stratton Corporation | The Manitowoc Company | |
Church & Dwight Co., Inc. | The Middleby Corporation | |
Curtiss-Wright Corporation | Moog Inc. | |
Dresser Rand Group Inc. | Sanderson Farms, Inc. | |
EnPro Industries, Inc. | Sensient Technologies Corporation | |
ESCO Technologies, Inc. | Sequa Corporation | |
Federal Signal Corporation. | Standex International Corporation | |
Flowers Foods, Inc. | Tennant Company | |
Flowserve Corporation | Triumph Group, Inc. | |
Gardner-Denver, Inc. | Valmont Industries, Inc. | |
IDEX Corporation | Woodward Governor Company |
Although the companies included in both of the Hewitt Associates surveys vary in revenue size and market capitalization, the surveys utilized regression analysis to develop size-adjusted values for each element of compensation. Additionally, for equity based compensation, Hewitt Associates used Black-Scholes based options models to value stock options and other economic pricing models for other equity-based compensation.
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The selected group of 28 companies consists of similarly sized manufacturing and service companies that we would likely compete with for customers, suppliers, executive talent and, ultimately, investors. We believe that this group should provide a representative sample for comparison of financial and stock performance and also gives a broad spectrum of compensation philosophies. Similar to the analysis used by FMC Technologies, as described above, we intend to benchmark our compensation against our peer group.
Cash Pay ElementsBase Pay
FMC Technologies . The annual cash pay elements that FMC Technologies executive officers receive include a base salary and an opportunity to earn an annual non-equity incentive compensation award. FMC Technologies targets its executive base pay and annual non-equity incentive compensation opportunities at the 50 th percentile of its comparison group of peer companies on a size-adjusted basis.
FMC Technologies has four levels of performance in its pay for performance system: Needs Improvement, Good, Outstanding and Exceptional. Using these criteria, an executive who satisfies all of his or her major responsibilities areas (MRAs) for the year would be given a performance rating of Good for the year. If the executive were to exceed all MRAs, he or she would receive a performance rating of Outstanding. An Exceptional rating is unusual. This rating would be utilized in rare circumstances where performance and other criteria would dictate that an unusual level of incentive compensation was justifiable. A Needs Improvement rating would indicate that an executive failed to meet his or her MRAs for the year. FMC Technologies performance ratings and the corresponding position versus the base salary midpoint for each salary grade were as follows for 2007:
Performance Rating |
Base Salary
as a Percentage of Midpoint |
|
Exceptional |
115 - 125% | |
Outstanding |
105 - 114.9% | |
Good |
95 - 104.9% | |
Needs Improvement |
75 - 94.9% |
Annually, each FMC Technologies executive officers performance is evaluated by the executives immediate supervisor against MRAs established earlier in the year. Mr. Cannons evaluation for his 2007 compensation was conducted by FMC Technologies Chief Executive Officer. FMC Technologies MRAs vary depending on the roles and responsibilities of the particular executive and may, in part, be subjective. These individual subjective MRAs may include, as examples, goals for acquisitions or divestitures, safety performance, achieving recruiting targets, building management depth, technology innovations and improving market positions through profitable growth and new product introductions. A performance rating for each executive is then established based on an assessment of the executives performance against their MRAs and a merit base salary increase is planned based on the executives current position in the performance range. Merit increases guidelines are established annually for all employees (including executive officers) by FMC Technologies Compensation Committee based on annual market surveys, and applied as appropriate to adjust base salaries. Since FMC Technologies compensation philosophy is to pay at the 50th percentile when compared to peer companies, it participates in merit increase surveys that include companies against which it benchmarks its employees salaries. Any recommendation for a merit increase pool is similar to the average increase the survey indicates for benchmark companies. This practice keeps base salary compensation in line with that of companies with which FMC Technologies competes for talent.
JBT Corporation . Similar to FMC Technologies, our executive officers will also receive a base salary and an opportunity for an annual non-equity incentive compensation award, which we will also target to equate to the 50th percentile of our comparison group of peer companies on a size-adjusted basis. We will use our surveys
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median base pay value for comparable employees to set our base salary midpoint for each salary grade within our compensation program. Each salary grade range will set minimum pay at 75% of the midpoint and maximum pay at 125% of the midpoint. The range will be delineated into performance sections tied to MRAs such that an individuals base pay should be at the point in the range corresponding to his or her current level of performance on their MRAs. We expect to continue FMC Technologies practice of having four levels of performance in our pay for performance system: Needs Improvement, Good, Outstanding and Exceptional. We also intend to implement performance evaluation practices similar to those employed by FMC Technologies. Mr. Cannons evaluation will be performed by the Compensation Committee of our Board of Directors. Although we do not anticipate that our Compensation Committee will provide direct oversight over the individual compensation decisions of our other anticipated named executive officers, the Committee will evaluate the appropriateness of compensation paid to our executive officers generally as a group, which will include our other named executive officers.
Cash Pay ElementsAnnual Non-Equity Incentive Compensation
FMC Technologies . FMC Technologies annual non-equity incentive compensation plan is a variable cash-based incentive plan designed to focus management on performance factors important to the continued success of their business units and the overall performance of FMC Technologies. FMC Technologies compensation philosophy is to set total compensation for all its employees at the 50 th percentile of compensation for similar positions at peer group companies. For its named executive officers, total compensation includes base pay, annual non-equity incentive compensation, and long-term incentives in the form of time and performance based restricted stock. Annually, FMC Technologies conducts a salary survey and compares each element of compensation, as well as total target compensation against compensation of its named executive officers and other employees peers in comparable positions. The total compensation and base pay elements most closely mirror the market. The allocation between the other two elements annual non-equity incentive compensation and equity compensation award value may vary from the market, but will be established in a way that keeps total compensation in line with the market. The annual non-equity incentive compensation target for each officer follows an internal structure that sets these annual target percentages according to salary grade. This internal structure is based on market data and is periodically modified to reflect the market, such as a more recent trend of significant increases in variable components of compensation for senior line managers. Higher salary grade positions have broader responsibilities and more experienced personnel, and their target compensation has a larger variable component to ensure that FMC Technologies compensation program effectively motivates its most senior, experienced employees to pursue the companys most important objectives. Positions in business lines generally have higher target percentages than employees who hold corporate staff positions. In 2007, FMC Technologies annual non-equity incentive compensation percentages ranged from 24% to 110% of base salary, which were generally a function of salary grade. For 2007, FMC Technologies annual non-equity incentive compensation opportunity was weighted primarily toward business performance (70%), referred to generally as the BPI component, and secondarily to individual performance (30%), referred to as the API component.
FMC Technologies Compensation Committee establishes BPI targets for FMC Technologies annual non-equity incentive program annually utilizing measures it believes correlate highly to enterprise value growth and total shareholder returns. In 2007, the measures selected by FMC Technologies Compensation Committee for FMC Technologies BPI targets were EBITDA growth and Net Contribution. FMC Technologies Compensation Committee established a range of realistic results for these measures along a continuum. For instance, the Committee established one value for a targeted EBITDA growth at 1.0. If actual EBITDA growth results were less than the target, the BPI multiple would fall between 0.0 and 1.0. If FMC Technologies EBITDA growth exceeded the target, their BPI multiple would be established between 1.0 and 3.0. FMC Technologies resulting BPI multiple was then multiplied by its individual executive officers non-equity incentive compensation percentage to determine non-equity inventive compensation payout to that executive.
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All of FMC Technologies named executive officers received a corporate-wide BPI rating which is based on the consolidated results of FMC Technologies business units. In 2007, FMC Technologies BPI target for annual EBITDA growth was set at a 34% increase above 2006 and its Net Contribution target was set at an increase of 60% over 2006. FMC Technologies actual 2007 performance exceeded both of the targets resulting from its ability to benefit from high levels of oilfield activity. Actual EBITDA growth in 2007 was 40% above 2006 performance and compares to a target of 34%. The actual 2007 Net Contribution increase of $68,000,000 was 65% above 2006 versus the 60% target. This performance was rated a 1.58 based on the scale established at the beginning of the year.
A similar exercise is performed for the API. The API rating is based on the achievement by an executive officer of both quantifiable performance objectives as well as other, more subjective objectives. These objectives differ from MRAs utilized to determine performance ratings for establishing an executive officers base pay described above under Cash Pay ElementsBase Pay. If an executive officer failed to achieve all of his or her objectives, the API multiple would likely be 0.00. If the executive met some, but not all of the objectives, the API multiple would fall between the range of 0.00 to 2.0 depending upon the number of objectives accomplished, their relative importance and difficulty and the factors that may have prevented achievement of certain objectives. An executive achieving all objectives could potentially receive an API of 2.0, although this would be unusual due to our efforts to establish stretch objectives that may be extremely difficult to achieve. For individual API objectives, the level of performance and resulting individual ratings on objectives required to achieve an API rating of 2.0 is quite high and unusual, and would require achievement of multiple stretch objectives, as evidenced by the fact that the ratings did not fall outside a band of 1.2 to 1.4 over 2006 and 2007, despite successive years of strong financial performance for FMC Technologies overall.
For 2007, FMC Technologies executive officers that we anticipate being our named executive officers received API ratings ranging from 1.2 to 1.4 for 2007, with an average rating of 1.3. For purposes of comparison, our anticipated named executive officers received API ratings from FMC Technologies in 2006 that ranged from 1.25 to 1.40 and averaged 1.31. On average, the API portion of the annual non-equity incentive compensation represented less than 6% of the total compensation paid to our anticipated named executive officers by FMC Technologies (as set forth in the Summary Compensation Table below). Given API is a small component of our total compensation calculation, we do not believe providing the exact API rating for each of our anticipated named executive officers is material to understanding the basis of our compensation decisions and policies.
To illustrate the calculation of the annual non-equity incentive utilizing the compensation program we intend to adopt, assuming an executive officer has a base salary of $600,000, a 65% target bonus, a BPI rating of 1.58 and an API rating of 1.3, the executives annual non-equity incentive compensation payment would be calculated in the following manner:
BPI: |
$600,000 x .70 (BPI weighting) x .65 (target bonus) x 1.58 (corporate BPI achievement) | $ | 431,340 | ||
API: |
$600,000 x .30 (API weighting) x .65 (target bonus) x 1.3 (individual API rating) | $ | 152,100 | ||
Total Non-Equity Incentive Compensation | $ | 583,440 |
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The following table lists certain performance results by our anticipated named executive officers with respect to the API objective they had as employees of FMC Technologies. The items for Messrs. Mambu, Podesta and Arvidsson set forth below only include the executives performance with respect to API objectives that had a material impact on the executives annual 2007 compensation as employees of FMC Technologies. Messrs. Mambu, Podesta and Arvidsson were evaluated on a large number of quantitative and qualitative factors by the FMC Technologies executive officer to whom they reported. Certain API objectives that we consider commercially sensitive and believe will provide proprietary data to our competitors and could cause us competitive harm have been omitted.
Named Executive Officer |
2007 API Performance |
|
Charles H. Cannon, Jr. |
(40% weighting) customer focused EPS growth actions relating to: pursuing government funding for the Halvorsen program executing the Airport Systems divisions two other principal military programs (TMAC and DCEAC) within budget |
|
a specific target for sales of the divisions new RampSnake baggage loader continued commitment to FoodTechs customer focus program (40% weighting) execution oriented EPS growth objectives seeking to enhance profitability through better cost performance focused on: the improvement of working capital levels achieving specific profitability targets for certain FoodTech product lines successful divestiture of PPM business unit achievement of division cost-savings goals through low cost country sourcing initiatives (20% weighting) employee focused actions related to: achieving employee safety targets for recordable and lost time incidents MBA and undergraduate recruiting targets management retention targets filling open positions continuing publication of employee newsletter |
||
Ronald D. Mambu |
continued the successful transition of the FMC Technologies corporate accounting function from Chicago to Houston Continued to achieve annual efficiencies in corporate accounting by reducing headcount by 7% in 2007 assisted Chief Financial Officer with FMC Technologies strategic portfolio initiatives continued efforts worldwide to retain, develop and strengthen the FMC Technologies internal control function did not fully meet objective to stabilize foreign exchange accounting |
|
Juan C. Podesta |
returned European operation to consistently deliver a positive 21% return on average capital employed after three successive periods of negative returns achieved milestones toward development of critical mass for sourcing initiatives in Asia including new product assembled in Ningbo, China developed Asian market strategy, grew Asia sales by $7.8 million over prior year and achieved profit during first full year of operations in Ningbo, China strengthened global citrus processing franchise, gaining shares in Brazil, Mexico, Europe, the Middle East, Africa and China; won all new citrus processing projects or juice room expansions in Spain, Brazil and Florida |
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Named Executive Officer |
2007 API Performance |
|
continued growth of global canning systems on the strength of new products introductions, increasing year over year sales and earning by 14% and 21% led market development investments and effort in growth regions: year-over-year combined division sales expanded 60% in Asia, 30% in Eastern Europe and 25% in the Middle East did not fully achieve objective to reduce the cost impact of quality control improvement in one business unit |
||
Torbjörn Arvidsson |
achieved record revenue and EBIT performance for third consecutive year, exceeding prior year levels by 15% and 27%, respectively reduced working capital utilization to a negative 2.4% increased inbound Stein equipment in Europe, the Middle East and Africa by over 50% executed large, critical Australian poultry installation on time and within budget, resulting in strengthened Asian market position did not fully achieve product cost reduction goals where costs were overwhelmed by a strengthening Euro |
Mr. Cannon received his highest API achievement ratings for the execution oriented EPS growth objectives where he met or achieved exceptional performance on many of his objectives. Although Mr. Cannon did not succeed on all of his individual objectives related to customer focused EPS growth (such as his objectives for improvement in working capital levels with certain business units), he met most of them. Mr. Cannons execution oriented earnings per share growth objectives that were competitively sensitive required profitability improvement exceeding 10% and 16% for certain businesses. Mr. Cannon exceeded each of his objectives in his employee focused APIs.
JBT Corporation . Similar to FMC Technologies, the objectives of our annual non-equity incentive compensation plan will be focused on performance factors that FMC Technologies management and Compensation Committee has concluded will be important to the success of our businesses. For 2008, FMC Technologies Compensation Committee has established our initial annual non-equity incentive bonus percentages ranging from 24% to 85%, with specific percentages for each of our named executive officer depending primarily upon salary grade. The highest percentage (85%) is assigned to our Chief Executive Officer, with the range for our other named executive officers ranging from 55% to 60%. We will utilize the same weighting that are employed by FMC Technologies, 70% BPI and 30% API, for our annual non-equity incentive compensation opportunity for 2008. The annual non-equity incentive compensation awards paid in 2007 to Mr. Cannon, Mr. Mambu and our other anticipated named executive officers by FMC Technologies appear in column (g), Non-Equity Incentive Plan Compensation, in the Summary Compensation Table.
Similar to FMC Technologies, we intend to establish BPI targets for our annual non-equity incentive program. For our 2008 fiscal year, FMC Technologies Compensation Committee selected EBIT growth, EBIT as a Percentage of Sales and Net Contribution as the BPI measures, to be equally weighted, for our annual non-equity incentive compensation program and established a range of realistic results for these measures against which to measure 2008 performance for the incentive compensation multiples along a 0.0 to 3.0 continuum. The determination of our BPI multiple for 2008 will be made in the same manner as is described above for FMC Technologies. EBIT as a Percentage of Sales will measure how much our profitability improves from a margin improvement perspective. As an incentive measure, we believe that this will help us drive our executive officers to improve profitability while also increasing sales. In addition, we believe that EBIT is an appropriate measure for us because our internal reporting is based on EBIT, which will provide consistency among all our performance measures. Our Net Contribution will be net income plus after tax-interest expense minus a 10.5% charge for average capital employed (debt plus equity). This will show total net income generated for every dollar of capital we employ after subtracting a 10.5% charge as the cost of capital. As an incentive measure, Net Contribution will encourage our executives to grow the business while efficiently using capital.
We will adjust all of these measures to account for the cumulative effect of changes in accounting principles, significant acquisitions and divestitures and foreign exchanges movements, as has been the case for FMC Technologies. We anticipate using the same BPI and API non-equity incentive compensation calculation
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techniques as those employed by FMC Technologies. For our 2008 annual non-equity incentive compensation program, FMC Technologies Compensation Committee has approved an API range from 0.0 to 2.0.
Equity Compensation Practices
FMC Technologies . The long-term element of FMC Technologies executive compensation is equity stock awards, which provides its executive officers the opportunity to realize financial rewards if FMC Technologies stock price appreciates over the long term. FMC Technologies equity awards have vesting periods of three or four years. FMC Technologies used the Hewitt Associates survey data noted previously to establish a value for the equity compensation granted to each of its executive officers. To determine the appropriate amount of equity based compensation awards for its executive officers, FMC Technologies determines the size-adjusted median value of comparable equity compensation awards issued by its peer group of companies surveyed by Hewitt Associates to each named executive officers peers with the surveyed companies. The grant size of restricted stock or stock options for each of FMC Technologies executive officers is then set by dividing the size-adjusted median value for that officer by FMC Technologies prior year end closing stock price, discounted to reflect the risk of forfeiture.
Although FMC Technologies incentive compensation program permits its Compensation Committee the flexibility to approve equity compensation awards to its executive officers in a variety of forms, these awards have consisted only of stock options and restricted stock grants (with both time-based and performance-based vesting conditions) since the initial public offering of FMC Technologies in 2001.
The grant date of FMC Technologies annual equity awards is the date of its annual compensation approval meeting in February. Key manager restricted stock awards have historically been granted by FMC Technologies on the first day of the month following the month in which its Compensation Committee met and granted the award. Under FMC Technologies compensation plan, as long as an executive remains employed through the age of 62, any unvested equity awards remain outstanding after retirement and vest on the originally scheduled vesting date. Retirements prior to age 62 will result in the forfeiture of unvested awards.
JBT Corporation . Similar to FMC Technologies, we will also grant equity stock awards to our executive officers in order to link their compensation to long-term stock price appreciation. All of our named executive officers as well as certain other key employees will receive equity stock awards in connection with our spin-off from FMC Technologies. FMC Technologies Compensation Committee utilized the peer group survey data established for JBT Corporation to establish a value for these initial equity compensation awards that will be granted to executive officers at the time of the spin-off. We will follow the same methodology as has been employed by FMC Technologies and utilize our closing stock price on the date the awards are granted following the spin-off for the initial equity compensation awards. For subsequent annual awards beginning in 2009, we will utilize the prior years closing stock price to determine the economic value of the grants, discounted to reflect the risk of forfeiture.
Although we will also have the flexibility to grant equity compensation in a variety of forms, we currently anticipate that our equity compensation awards will be primarily in the form of restricted stock. We believe these performance-based equity compensation awards will align our executive officers financial interests with that of our shareholders and we are continuing FMC Technologies practice of using performance-based restricted stock for equity compensation. While stock options have historically been the other most commonly used form of performance based compensation, we feel it may be difficult to establish a value for our stock options since some of the variables in the Black-Scholes formula (e.g., volatility) will not be available until after the stock has been traded. We believe the combination of time-based and performance-based incentives will provide performance incentives for our executive officers in a manner that is consistent with our shareholders interests and serves as an effective retention vehicle for our executive officers. We anticipate our equity awards will generally have vesting periods of three years, although certain grants may have longer vesting periods to increase their retention incentive value.
By providing our executive officers with significant compensation opportunities in the form of equity awards, we intend to ensure that a significant portion of our executive officers total compensation remains at risk and continues to be tied to the creation of value for our stockholders.
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Non-Qualified Stock Options
FMC Technologies . FMC Technologies Incentive Compensation and Stock Plan grants its management the authority to issue non-qualified stock options to its executive officers and other key employees. All stock options granted by FMC Technologies to its executive officers are subject to vesting requirements requiring an additional three years of service by the executive before they may vest and the executive receives ownership and voting rights and expire on the tenth anniversary of their issuance. Vesting periods are utilized as a retention incentive.
With the exception of stock options issued in connection with FMC Technologies initial public offering in June 2001, FMC Technologies has issued stock options only in February of each year, following review and approval of the grants by its Compensation Committee during the regular committee meeting established to review compensation. FMC Technologies has not issued stock options to its executive officers since 2004. The exercise price for these stock options in each case was the closing price of FMC Technologies common stock on the date of the Compensation Committee meeting at which the awards were approved. The date for this Committee Meeting was established more than a year in advance when all FMC Technologies Board of Director and committee meetings were scheduled.
JBT Corporation . To the extent we issue stock options, we will also impose a vesting requirement and ten year terms for any such options issued to our executive officers and anticipate following similar practices for establishing the exercise price of such stock options as that employed by FMC Technologies. FMC Technologies stock options that are held by our employees at the time of the distribution will be converted into stock options exercisable into shares of our common stock in a manner that will provide the holders with stock options with an economic value equal to the value of their FMC Technologies stock options as of the effective date of the spin-off.
Time-Based Restricted Stock Grants
FMC Technologies . FMC Technologies issues grants of time-based restricted stock to its executive officers and other key employees under its Incentive Compensation and Stock Plan. All restricted stock awards granted by FMC Technologies to its executive officers are subject to vesting requirements requiring an additional three or four years of service by the executive before they may vest and the executive receives ownership and voting rights. Vesting periods are utilized as a retention incentive.
JBT Corporation . Following the spin-off, the annual FMC Technologies restricted stock grants issued in 2006 and outstanding FMC Technologies key manager restricted stock awards that are held by our employees will not be converted to our common stock and FMC Technologies Incentive Compensation and Stock Plan has been amended to permit our employees to continue to hold FMC Technologies restricted stock grants until they vest. All other unvested restricted stock grants that are not subject to performance conditions (described below) and are held by our employees will be converted into restricted grants of our common stock, subject to their existing remaining vesting periods, with an economic value that is equal to the value of their FMC Technologies restricted stock grants as of the effective date of the spin-off.
Subject to ratification by our Compensation Committee, FMC Technologies Compensation Committee has approved the issuance of grants of restricted stock awards to our anticipated executive officers and other key employees as a retention incentive in connection with the spin-off. These grants are expected to be issued by JBT Corporation in lieu of the annual equity incentive restricted stock grants that would have been issued to these executive officers and other employees in February 2008 by FMC Technologies. Vesting on these awards will begin to run from the date on which annual equity incentive grants would have been issued to these employees by FMC Technologies (e.g., February 2008).
Performance Based Restricted Stock Awards
FMC Technologies . In 2007, FMC Technologies Compensation Committee required that one-half of the amount of the restricted stock awards granted to its executive officers be based on meeting certain performance criteria. FMC Technologies performance-based awards link the ultimate amount of a grant of restricted stock to
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the achievement of performance targets relative to the performance of ten companies included in the PHLX Oil Service Section index (OSX) that compete with FMC Technologies in the oilfield services industry. In 2007, the OSX was composed of 15 companies that provide oil drilling and production services. FMC Technologies excludes the indexs five drilling companies as it is the remaining ten companies who most closely mirror FMC Technologies core business activities. The performance metrics for these ten companies are in publicly available information and provide FMC Technologies with readily available, reliable and relevant benchmarks against which to benchmark its performance. The ten companies utilized by FMC Technologies in 2007 to benchmark its performance targets from the OSX are listed below:
Baker Hughes Incorporated
BJ Services Company
Cameron International Corporation
Global Industries, LTD
Halliburton Company
National Oilwell Varco, Inc.
Schlumberger Limited
Smith International Inc.
Tidewater Inc.
Weatherford International Ltd.
This link puts a meaningful portion of each of FMC Technologies executives targeted equity award at risk. The percentage of the total performance-based restricted stock award an FMC Technologies executive officer ultimately receives is determined at the end of a one-year measurement period and is dependent upon the performance of FMC Technologies relative to a peer group of companies in the OSX with respect to EBITDA growth, return on investment (ROI) and total shareholder return (TSR) for that period.
The amount of the performance-based restricted stock award earned by FMC Technologies executive officers can vary between 0%-200% of the target award granted to the executive officer, depending on whether FMC Technologies full year performance against the EBITDA growth, return on investment and total shareholder return performance measures was determined to be above average, average or below average relative to the peer group of OSX companies, with one-third of the total grant being tied to each of the three performance measures. FMC Technologies defines its performance for each of the three performance measures as above average if its performance exceeds the performance of the midpoint between the third and fourth ranked peer companies; average if its performance is between the midpoint of the third and fourth ranked peer companies and the midpoint between the sixth and seventh ranked peer companies; and below average if its performance is below the midpoint between the sixth and seventh ranked peer companies. For below-average performance against any of the three performance measures, an FMC Technologies executive officer receives 0% of the one-third portion of the grant tied to such performance measures, for average performance, 100% of one-third of the grant, and for above-average performance, an executive would receive 200% of one-third of the grant. The vesting period for performance-based restricted stock awards is the same as the vesting period for time based restricted stock awards, which is three years from the grant date, meaning that although the performance period considered is one year, the awards do not vest for three years from the date of grant.
For 2007, the following table shows the measures used for FMC Technologies performance based restricted stock grants and its performance against each of the three performance measures utilized by FMC Technologies. The numbers in bold-face type in this table designate the level of FMC Technologies performance for each of the three measures.
Below Average
(0% of Target Grant) |
Average
(100% of Target Grant) |
Above Average
(200% of Target Grant) |
FMC Technologies
Performance |
||||||||
EBITDA Growth |
<9.6 | % | > 9.6% and <28.2% | >28.2 | % | 49.8 | % | ||||
Return on Investment |
<17.4 | % | >17.4% and <22.4% | >22.4 | % | 27.6 | % | ||||
Total Shareholder Return |
<19.0 | % | >19.0% and <72.7% | >72.7 | % | 84.0 | % |
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As a result of FMC Technologies strong financial results for 2007 summarized above, FMC Technologies executive officers will receive 200% of the performance-based portion of the restricted stock grants awarded on February 20, 2007, and these awards will vest on January 2, 2010. The final performance-based restricted stock award that Messrs. Cannon and Mambu received from FMC Technologies for 2007 are included in columns (g) and (h) of the Outstanding Equity Awards at Fiscal Year-End Table below. None of our other anticipated named executive officers were eligible to receive performance-based restricted stock awards from FMC Technologies. The performance-based restricted stock awards granted to Messrs. Cannon and Mambu will be converted into JBT Corporation restricted stock utilizing a conversion ratio that will preserve the economic value of these awards as of the effective date of our spin-off.
JBT Corporation . We anticipate that all of our named executive officers, as well as certain of our other executive officers, will have half of their restricted stock awards subject to performance criteria. For 2008, we anticipate that the percentage of the total performance-based restricted stock award any of our executive officers will be entitled to receive will be determined at the end of a one-year measurement period, and will be dependent upon our performance with respect to EBIDTA growth and Net Contribution. FMC Technologies Compensation Committee also approved alternative measures for our performance-based restricted stock awards that we may elect to utilize in future years, such as return on investment and total shareholder return, and we will have the ability, in the future, to tie performance-based restricted stock awards to performance measures relative to the performance of a peer group of companies.
As is currently the case with FMC Technologies program, our Incentive Compensation and Stock Plan will give our Compensation Committee the discretion to claw back or cancel outstanding performance-based restricted stock awards in the event a restatement of our financial results from a prior period results in a prior grants performance measures no longer being satisfied.
Also in conformity with FMC Technologies program, none of our executive officers will have the ability to adjust the performance measures approved by our Compensation Committee or to waive any conditions established for the performance based awards once established by the Compensation Committee.
Impact of Section 162(m) of the Internal Revenue Code on Executive Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for non-performance based compensation in excess of $1 million paid for any fiscal year to certain named executive officers. Among other requirements, in order for compensation to be considered performance-based for purposes of Section 162(m), it generally must be paid pursuant to a plan which is approved by the companys public shareholders. However, under transition rules related to spin-off transactions, any amount that is related to otherwise qualifying performance-based compensation paid or performance-based restricted stock granted, prior to the first regularly scheduled meeting of our shareholders will be fully deductible by us without regard to such shareholder approval. With respect to compensation paid, or restricted stock granted, after such date, our Compensation Committee will consider the impact of Section 162(m) on the income tax deductibility on all components of executive compensation, while recognizing that it may not be in the stockholders best interests to restrict the Compensation Committees discretion and flexibility in developing appropriate and competitive compensation and retention programs. Consequently, our Compensation Committee may approve compensation in future years for our named executive officers that is not fully deductible for federal income tax purposes.
Pension Plans
FMC Technologies . A longer term element of compensation for FMC Technologies executive officers is an IRS-qualified defined benefit pension plan (the U.S. Pension Plan) that provides income replacement retirement benefits. FMC Technologies management believes that its pension plan design is a powerful retention vehicle and that it has been a significant factor in the long tenure of its executive management team and, consequently, the depth of its management teams experience with FMC Technologies businesses. The U.S. Pension Plan utilizes the same benefit calculation formula for FMC Technologies executive officers as is used for its non-bargaining unit production personnel and administrative and technical staff. The U.S. Pension Plan is
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designed to provide income replacement in retirement to all of FMC Technologies current employees who meet the minimum service requirement of five years. The pension payment is based on final average pay, which is calculated for the period that includes the employees highest 60 consecutive months of pay in the final 120 months of service, and includes base pay and annual non-equity incentive compensation in the calculation. Eligible earnings under the provisions of the U.S. Pension Plan do not include the value of the equity grants (stock options or restricted stock awards), matching contributions to FMC Technologies Qualified Savings Plan, its Non-Qualified Savings Plan or perquisites. The U.S. Pension Plan is qualified under the United States Employment Retirement Income Security Act (ERISA).
FMC Technologies also has a non-qualified defined benefit pension plan (the U.S. Non-Qualified Pension Plan) to provide the same level of benefits for earnings above the IRS limits. The U.S. Non-Qualified Pension Plan uses the same pension calculation formula as the tax qualified U.S. Pension Plan. The benefits under this plan are FMC Technologies general obligations and are not protected by ERISA.
FMC Technologies executive management team has significant accrued pension benefits under the pension plans as a result of their long tenure with the company and its predecessor, FMC Corporation. FMC Technologies management believes that these pension benefits are a significant reason for the long-term retention of the companys management team. FMC Technologies executive officers as well as all other employees have been credited under the U.S. Pension Plan for their years of service with FMC Corporation, FMC Technologies former parent company, prior to FMC Technologies spin-off as a separate company in 2001.
Mr. Arvidsson participates in the Swedish occupational pension system (the Swedish Pension Plan) for private sector employees called ITP. This defined benefit is employer paid and includes a disability and survivors pension as well as the traditional retirement benefit. This benefit is based on salary at retirement, with pension payments beginning at age 65. The benefit is 10% of the base salary at retirement. There is a limit of 7.5 times a base amount on the salary covered by this benefit. In 2007, this limit was the equivalent of approximately $46,000. The value of this benefit appears in the Pension Benefits Table and the increase in value to the benefit in 2007 is in the Summary Compensation Table.
For the portion of an employees salary above this 7.5 multiple of the base amount, employers in Sweden may offer a defined contribution benefit, which requires employers to pay premiums into funds of the employees choice. FMC Technologies also provides this defined contribution benefit to Mr. Arvidsson. The premiums paid by FMC Technologies and Mr. Arvidssons ending balance and earnings are shown in the Non-Qualified Deferred Compensation Table. The premiums paid by FMC Technologies in 2007 appear in the Summary Compensation Table in the Other Compensation column and in footnote (3) to the table.
JBT Corporation . We have adopted a U.S. Pension Plan and a Non-Qualified Pension Plan with terms that are the same as those utilized by FMC Technologies. Our executive officers and all of our other employees who were employees of FMC Technologies have also been credited under our Pension Plan for their years of service with FMC Technologies and FMC Corporation.
Savings Plans
FMC Technologies . All of FMC Technologies U.S. based employees, including executive officers, are eligible to participate in FMC Technologies tax-qualified savings and investment plan (the Qualified Savings Plan). This plan provides an opportunity for employees to save for retirement on both a pre-tax and after-tax basis. Employees exceeding the IRS compensation limit for highly compensated employees can contribute between 2% and 20% of base pay and eligible incentives through pre-tax and after-tax contributions up to the maximum amount prescribed by law and the plan limits, and employees not considered highly compensated under IRS regulations can also contribute up to 75% of base pay and eligible incentives. FMC Technologies matches up to the first 5% of each employees contributions. Participants are vested on a five-year graded vesting schedule for employer matching contributions.
FMC Technologies executives are also eligible to participate in a pre-tax non-qualified defined contribution plan (the Non-Qualified Savings Plan), which provides executives and employees who reach contribution
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limits imposed by the Internal Revenue Service for the Qualified Savings Plan with the opportunity to participate in a tax advantaged savings plan comparable to the Qualified Savings Plan. The investment options offered to participants in FMC Technologies Non-Qualified Savings Plan are similar to those offered in its Qualified Savings Plan. Participants may elect to defer up to 100% of their remaining base pay or annual Non-Equity Incentive Compensation after reaching the contribution limits into the FMC Technologies Non-Qualified Savings Plan. FMC Technologies matches up to the first 5% of the employees contributions to the Non-Qualified Savings Plan. Participants are vested on a five-year graded vesting schedule for employer matching contributions.
Certain FMC Technologies employees who are not subject to U.S. taxes were eligible to participate in an FMC Technologies nonqualified defined contribution plan administered in the United Kingdom (the International Savings Plan). Participation in this plan is generally restricted to key employees with a salary grade of 20 or above and who are not subject to U.S. taxes (not citizens of the U.S., Canada or the Cayman Islands). Exceptions to the salary grade for eligibility can be made by the company. Participants can contribute up to 75% of base pay and eligible incentives. FMC Technologies matches up to the first 5% of each employees contributions. Both contributions to the International Savings Plan and the distributions from the International Savings Plan are made in U.S. dollars. All vested funds must be distributed upon an employees termination or retirement from the company.
JBT Corporation . Our U.S. based employees will also have the opportunity to participate in a tax qualified savings and investment plan with similar features to that of FMC Technologies plans. Employee contribution levels and our company match will be at the same levels as a currently offered by FMC Technologies to its employees. We will also create a pre-tax non-qualified defined contribution plan for our executives and other employees who reach contribution limits under the tax qualified plan. Our deferral levels and company match will be the same as FMC Technologies current plan. We will also offer an international savings plan for our key employees who are not subject to U.S. taxes with contribution limits and matching contributions at the same levels as are currently offered by FMC Technologies.
Change-in-Control Agreements
FMC Technologies . FMC Technologies entered into agreements with each of its executive officers that provides them with compensation under certain circumstances in the event of a change-in-control in FMC Technologies ownership or management.
JBT Corporation . We intend to enter into change-in-control agreements with certain of our executive officers following the spin-off. See Potential Payments Upon Change-in-Control for a further description of the terms and potential amounts payable under these agreements. These agreements will not be provided to all of our executive officers. Multi-year benefits under these agreements will be limited to a smaller subset of our executive officers and all of our change-in-control agreements will condition continuing availability of benefits on compliance with non-compete and non-solicitation provisions.
The benefits payable under our anticipated change-in-control agreements will be comparable to benefits for which executives in similar positions at peer companies are eligible under their change-in- control agreements. The competitive nature of these benefits will be reviewed and analyzed annually by the Compensation Committee of our Board of Directors with the assistance of the Committees compensation consultant.
All of the change-in-control agreements that we expect to enter into with our executive officers will be what are commonly referred to as double trigger agreements. Under these agreements, the benefits will only be payable to an executive if, in addition to the qualifying change-in-control event, the executive officers position is terminated or the executives responsibilities, salary, benefits and/or location are significantly changed.
General Executive Severance Benefits
FMC Technologies . Under FMC Technologies executive severance plan, executive officers who lose their job through no fault of their own are entitled to receive 15 months of severance pay (limited to base pay and the
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executives target annual non-equity incentive compensation), their pro-rated target annual non-equity incentive compensation through the date of termination, the continuation of medical and dental benefits for the same severance period at the employee premium rate, outplacement services, and tax preparation and financial planning assistance for the last calendar year of employment. See Potential Payments Upon Termination for a further description of the terms and potential amounts payable under the FMC Technologies executive severance plan for the individuals that we anticipate will be named executive officers of JBT Corporation following the spin-off. The availability of these severance benefits is conditioned on the executives compliance with non-disclosure, non-compete and non-solicitation covenants. In its approval of the executive severance plan, FMC Technologies Board of Directors granted its management with the authority to exercise its discretion with respect to the treatment of unvested options and restricted stock grants of terminated executive officers. Change-in-control agreements and severance benefits are exclusive of one another, and in no circumstances would any of FMC Technologies named executive officer receive benefits under both a change-in-control agreement and FMC Technologies general executive severance plan.
JBT Corporation . We intend to provide an executive severance plan to our executive officers with the same terms as FMC Technologies plan and our management will also have discretion with respect to how unvested options and restricted stock grants will be treated for terminated executive officers eligible for benefits under our executive severance plan.
Perquisites
FMC Technologies . FMC Technologies provides limited perquisites to its executive officers in order to facilitate the performance of their managerial and external marketing roles and to ensure a competitive total compensation package. The perquisites FMC Technologies provides to its executives include financial counseling, tax preparation, parking fees, personal use of company vehicles, dining club memberships and country club memberships and other minor expenses associated with their business responsibilities. FMC Technologies executives use of company vehicles and dining and country club membership benefits is primarily for business-related travel and entertainment and executives are required to report personal use of company vehicles and club memberships. FMC Technologies grossed up for the taxes due on the club memberships because personal use of these clubs is generally minimal and is generally related to the business use of these facilities.
JBT Corporation . Our executive officer perquisites will be similarly limited. The perquisites that we intend to provide to our executive officers will include financial counseling, tax preparation, parking fees and personal use of dining club and country club memberships and other minor expenses associated with their business responsibilities. Personal use of dining club and country club memberships will generally be incidental to business use, and our executives will be required to report personal use. We expect to continue FMC Technologies practice of grossing up for the taxes due on club memberships because personal use of these clubs is generally minimal and incidental to the business use of these facilities.
Stock Ownership Requirements
FMC Technologies Compensation Committee established executive officer stock ownership guidelines when FMC Technologies was formed in order to ensure a continuing alignment of executive and shareholder interests and we will impose similar requirements on our executive officers. Under our stock ownership guidelines, an executive officer will be expected to maintain ownership of shares (including restricted stock awards and shares held in the Qualified Savings Plan and the Non-Qualified Savings Plan, but not counting any shares underlying outstanding stock options) in an amount equal in value to a multiple of the individuals salary-grade midpoint. A newly appointed executive officer will have five years to accumulate sufficient amounts of our common stock to satisfy the ownership multiple, pro-rated 20% each year. Executive officers of JBT Corporation who formerly served as executive officers of FMC Technologies will have three years to reach their ownership multiple, pro-rated 33 1/3% a year. An executive may not sell any shares of our common stock that he or she may hold until he or she reaches their stock ownership guideline multiple. The stock ownership multiple for each of our anticipated named executive officers is provided in the following table. Each of our named executive officers currently satisfies our stock ownership guidelines.
Executive Officer |
Multiple of Salary
Grade Mid-Point |
|
Charles H. Cannon, Jr. |
5.0 | |
Ronald D. Mambu |
3.0 | |
Juan C. Podesta |
2.0 | |
Torbjorn Arvidsson |
2.0 |
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Summary Compensation Table
The following table summarizes the compensation earned by each of our anticipated named executive officers from all sources for services rendered in all of their capacities to FMC Technologies during the fiscal year ended December 31, 2007. The principal positions set forth below reflect their titles with JBT Corporation. We have also provided such information for Mr. Cannon for the fiscal year ended December 31, 2006, as such information was previously disclosed by FMC Technologies in its proxy statement.
Name and Principal Position |
Year |
Salary
($) |
Bonus
($) |
Stock
Awards ($) (1) |
Option
Awards ($) (1) |
Non-Equity
Incentive Plan Compensation ($) |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings ($) (2) |
All Other
Compensation ($) (3) |
Total
($) |
||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||
Charles H. Cannon, Jr. |
2007 | 443,309 | 0 | 821,882 | 0 | 365,375 | 170,867 | 75,410 | 1,876,843 | ||||||||||
Chairman of the Board,
|
2006 | 429,557 | 0 | 591,327 | 56,021 | 591,929 | 441,806 | 76,669 | 2,187,309 | ||||||||||
Ronald D. Mambu
Vice President,
|
2007 | 268,988 | 0 | 362,922 | 0 | 157,735 | 122,858 | 44,406 | 956,909 | ||||||||||
Juan C. Podesta Vice President |
2007 | 270,605 | 0 | 339,256 | 0 | 243,193 | 114,128 | 30,363 | 997,545 | ||||||||||
Torbjörn Arvidsson (4) Vice President |
2007 | 347,313 | 0 | 313,039 | 0 | 335,018 | 0 | (5) | 258,383 | 1,253,753 |
(1) | The amounts in columns (e) and (f) reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal years indicated in accordance with SFAS 123(R) of stock-based awards pursuant to the FMC Technologies Incentive Compensation and Stock Plan and as a result may include amounts from awards granted in and prior to those years. Assumptions used in the calculation of these amounts are described in note (8) to our audited combined financial statements for the fiscal year ended December 31, 2007 included in this Information Statement. These amounts are amortized over the vesting period of the grants which approximate three years. |
(2) | The amounts in column (h) reflect the actuarial increase in the present value of our anticipated named executive officers benefits at the first retirement date with unreduced benefits (age 62 for FMC Technologies U.S. pension plans). These amounts are determined using interest rates and mortality rate assumptions consistent with those used in FMC Technologies financial statements. All nonqualified deferred compensation earnings are actual investment earnings generated by the invested funds, and therefore, are not included in this column. |
(3) | The amounts in column (i) for the fiscal year ended December 31, 2007 reflect for each of our anticipated named executive officers the following perquisites received from FMC Technologies: |
Perquisites ($) |
Charles H. Cannon, Jr. | Ronald D. Mambu | Juan C. Podesta | Torbjörn Arvidsson | ||||
Personal Use of Club Memberships(*) |
265 | 95 | 492 | 0 | ||||
Financial Planning & Personal Tax Assistance(**) |
12,663 | 10,191 | 0 | 0 | ||||
Personal Use of Automobile*** |
0 | 0 | 0 | 11,090 | ||||
Parking |
4,920 | 4,920 | 3,120 | 0 | ||||
Total Perquisites |
17,848 | 15,206 | 3,612 | 11,090 | ||||
* | FMC Technologies cost for each club membership utilized by our anticipated named executive officer equals the amount of the annual dues paid by FMC Technologies for such membership multiplied by a fraction, the numerator of which is the number of days on which the club was used by the named executive officer primarily for non-business purposes, and the denominator of which is the total days on which the club was used for any purpose. |
** | FMC Technologies cost for financial planning and personal tax assistance includes the fees FMC Technologies paid to third party financial planning and tax advisors for service provided to our anticipated named executive officers, a portion of which is an annual retainer fee allocated to the individual officers on a pro rata basis. Other fees are specifically allocated to the individual named executive officers receiving the services to which such fees relate. |
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*** | Our cost for personal use of automobiles used by named executive officers is calculated by multiplying our estimate of the increased annual cost of the executive officers vehicle by the executive officers reported use for personal purposes. Since Mr. Arvidsson was not a named executive officer of FMC Technologies, he was not required to report the personal use of his company provided automobile and since the full value of this benefit is taxable to Mr. Arvidsson in Sweden, our full cost in providing an automobile to Mr. Arvidsson is reported in this table. |
Other Compensation ($) |
Charles H. Cannon, Jr. | Ronald D. Mambu | Juan C. Podesta | Torbjörn Arvidsson | ||||
Life Insurance |
5,565 | 2,829 | 2,566 | 0 | ||||
Company Contributions or Other Allocations to Vested and Unvested Defined Contribution Plans |
51,762 | 26,311 | 23,865 | 247,293 | ||||
Income Tax Gross-Ups |
235 | 62 | 320 | 0 |
(4) | The amounts reported as salary, non-equity incentive compensation and all other compensation that are reported for Mr. Arvidsson were paid in Swedish Krona. These amounts were converted into U.S. dollars in the Summary Compensation Table. These amounts were translated into U.S. dollars at the average exchange rate for each month. Mr. Arvidsson received a base salary increase effective May 1, 2007, resulting in a different average for the periods before and after May 1st. |
(5) | Although the value of Mr. Arvidssons International Savings Plan investments increased by $107 during 2007, the value of his U.S. Pension Plan investments decreased by $420 and the value of his Swedish Pension Plan investments decreased by $14,264 (in U.S. dollar equivalents) during 2007, resulting in a net negative change in the value of his Pension and Non-Qualified Deferred Compensation Earnings. In accordance with SEC regulations, this decrease in value is not reported in columns (h) or (j) of the Summary Compensation Table. |
None of our anticipated named executive officers is a party to written or oral employment contracts with FMC Technologies, nor will they have such agreements with JBT Corporation. Accordingly, they will remain employees at will. For a description of the material terms of their compensation arrangements, which includes base salary, annual non-equity incentive bonus, equity compensation awards, matching contributions to retirement savings plans, pension benefits and perquisites, and severance and change-in-control benefits, see Compensation Discussion and Analysis above. Performance targets for performance-based equity awards considered by FMC Technologies Compensation Committee for our anticipated named executive officers are also quantified in Compensation Discussion and Analysis. Based on the fair value of equity awards granted to our anticipated named executive officers in 2007 and their actual base salary and annual non-equity incentive bonuses for 2007, base salary and annual non-equity incentive bonuses together accounted for approximately 57% of the total base pay, annual non-equity incentive and equity compensation paid to our named executive officers by FMC Technologies in 2007. Because the Grants of Plan Based Awards Table below reflects the value of certain equity awards based on the SFAS 123(R) value rather than the grant date fair value, this percentage may not be able to be derived using the amounts reflected in the table.
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Grants of Plan-Based Awards Table
Shown below is information with respect to plan-based awards made by FMC Technologies in 2007 to each of our anticipated named executive officers.
Name |
Grant
Date |
Estimated Possible Payouts
Under Non-Equity Incentive Plan Awards |
Estimated Possible
Payouts Under Equity Incentive Plan Awards |
All
Other Stock Awards: Number of Shares of Stock or Units (#)(1) |
All Other
Option Awards: Number of Securities Underlying Options (#) |
Exercise
or Base Price of Option Awards ($/Sh) |
Grant
Date Fair Value of Stock and Option Awards ($)(2) |
|||||||||||||||
Threshold
($) |
Target
($) |
Maximum
($) |
Threshold
(#) |
Target
(#) |
Maximum
(#) |
|||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | |||||||||||
Charles H. Cannon, Jr. |
2/20/07
2/20/07 |
0 | 243,820 | 660,530 | 0 | 12,890 | 25,780 | 12,890 | | |
422,148
399,719 |
|||||||||||
Ronald D. Mambu |
2/20/07
2/20/07 |
0 | 107,595 | 290,507 | 0 | 5,500 | 11,000 | 5,500 | | |
180,125
170,555 |
|||||||||||
Juan C. Podesta |
2/20/07
2/20/07 |
0 | 148,833 | 403,201 | 0 | 0 | 0 | 10,480 | | | 343,220 | |||||||||||
Torbjörn Arvidsson |
2/20/07
2/20/07 |
0 | 191,022 | 517,496 | 0 | 0 | 0 | 10,480 | | | 343,220 |
(1) | The amounts shown in column (i) reflect the number of shares of stock subject to time-based vesting requirements granted by FMC Technologies to each of our anticipated named executive officer in 2007 pursuant to FMC Technologies Incentive Compensation and Stock Plan. |
(2) | The amounts in column (l) reflect the full grant date fair value calculated in accordance with SFAS 123(R) of awards of restricted stock to our anticipated named executive officers pursuant to FMC Technologies Incentive Compensation and Stock Plan in 2007. Generally, the full grant date fair value is the amount that would be expensed in FMC Technologies financial statements over the awards vesting schedule. Assumptions used in the calculation of these amounts are described in note (8) to our audited combined financial statements for the fiscal year ended December 31, 2007 included in this Information Statement. |
FMC Technologies did not make any grants of stock options or stock appreciation rights in 2007 under its Incentive Compensation and Stock Plan for services rendered during 2007 to any of our anticipated named executive officers. For a description of the material terms of the restricted stock awards, including the vesting schedules and a description of the performance targets and potential award amounts for those restricted shares subject to performance-based conditions, see the descriptions set forth in Compensation Discussion and Analysis above. FMC Technologies did not pay dividends on restricted stock awards or shares obtainable upon exercise of outstanding options. Dividends will be payable on equity compensation awards that we issue to our employees only if and when we declare dividends on our common stock.
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Outstanding Equity Awards at Fiscal Year-End Table
Option Awards | Stock Awards (2) | |||||||||||||||||
Name |
Number
of Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option
Exercise Price ($) |
Option
Expiration Date |
Number
of Shares or Units of Stock That Have Not Vested (#) |
Market
Value of Shares or Units of Stock That Have Not Vested ($) (1) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||
Charles H. Cannon, Jr. |
35,000 | | | 12.61 | 2/19/2014 | 111,894 | 6,344,390 | 0 | 0 | |||||||||
Ronald D. Mambu |
10,000
26,764 |
|
|
6.92
12.61 |
2/10/2010
2/19/2014 |
49,940 | 2,831,598 | 0 | 0 | |||||||||
Juan C. Podesta |
| |
|
| | 44,380 | 2,516,346 | 0 | 0 | |||||||||
Torbjörn Arvidsson |
17,850
14,250 14,000 |
|
|
9.70
12.61 8.68 |
2/20/2013
2/19/2014 2/21/2012 |
39,940 | 2,264,598 | 0 | 0 |
(1) | The market value of shares that have not vested is calculated using $56.70, the closing price of FMC Technologies common stock on December 31, 2007, the last trading day of 2007. The full grant date fair value of the FMC Technologies awards under SFAS 123R is $2,709,857 for Mr. Cannon; $1,190,048 for Mr. Mambu; $1,018,429 for Mr. Podesta; $944,148 for Mr. Arvidsson. |
(2) | The outstanding restricted stock awards presented above include awards in the amounts and with the vesting dates in the table below: |
Executive Officer |
Restricted Stock Grant
Date |
Restricted Stock Grant |
Restricted Stock
Vesting Date |
|||
Charles H. Cannon, Jr. |
2/22/2005 | 36,060 | 1/2/2008 | |||
2/21/2006 | 20,254 | 1/2/2009 | ||||
2/21/2006 | 16,910 | 1/2/2009 | ||||
2/20/2007 | 12,890 | 1/2/2010 | ||||
2/20/2007 | 25,780 | 1/2/2010 | ||||
Ronald D. Mambu |
2/22/2005 | 18,000 | 1/2/2008 | |||
2/21/2006 | 8,414 | 1/2/2009 | ||||
2/21/2006 | 7,026 | 1/2/2009 | ||||
2/20/2007 | 5,500 | 1/2/2010 | ||||
2/20/2007 | 11,000 | 1/2/2010 | ||||
Juan C. Podesta |
2/22/2005 | 18,860 | 1/2/2008 | |||
2/21/2006 | 15,040 | 1/2/2009 | ||||
2/20/2007 | 10,480 | 1/2/2010 | ||||
Torbjörn Arvidsson |
2/22/2005 | 14,420 | 1/2/2008 | |||
2/21/2006 | 15,040 | 1/2/2009 | ||||
2/20/2007 | 10,480 | 1/2/2010 |
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Option Exercises and Stock Vested Table
Shown below is information for each of our anticipated named executive officers with respect to options to purchase FMC Technologies common stock exercised in 2007 and restricted stock awards vested in 2007.
Option Awards | Stock Awards | |||||||
Name |
Number of
Shares Acquired on Exercise (#) |
Value Realized
on Exercise ($) |
Number of
Shares Acquired on Vesting (#) |
Value Realized
on Vesting ($) |
||||
(a) | (b) | (c) | (d) | (e) | ||||
Charles H. Cannon, Jr. |
168,000 | 4,829,009 | 31,800 | 979,917 | ||||
Ronald D. Mambu |
22,250 | 794,587 | 10,000 | 308,150 | ||||
Juan C. Podesta |
17,600 | 760,951 | 16,000 | 493,040 | ||||
Torbjörn Arvidsson |
12,640 | 302,474 | 12,950 | 399,054 |
Pension Benefits Table
The table below shows the present value of accumulated benefits payable to each of our anticipated named executive officers, including the number of years of service credited to each such named executive officer, under each of FMC Technologies pension plans as of December 31, 2007, determined using interest rate and mortality rate assumptions consistent with those used in FMC Technologies financial statements. Credited years of service for each of our anticipated named executive officers under the pension plans includes years of service with FMC Corporation, FMC Technologies predecessor. The FMC Technologies U.S. Pension Plan values are the present value of accrued benefits at the first retirement date for unreduced benefits. The FMC Technologies Non-Qualified Pension Plan value is the present value at December 31, 2007 of the lump sum payable at the first retirement date for unreduced benefits.
Name |
Plan Name |
Number
of Years Credited Service (#) |
Present
Value of Accumulated Benefit ($) (1) |
Payments
During Last Fiscal Year ($) |
|||||
(a) | (b) | (c) | (d) | (e) | |||||
Charles H. Cannon, Jr. |
FMC Technologies U.S. Pension Plan | 25.8 | 528,397 | 0 | |||||
FMC Technologies Non-Qualified Pension Plan | 25.8 | 1,959,727 | 0 | ||||||
Ronald D. Mambu |
FMC Technologies U.S. Pension Plan | 33.8 | 817,384 | 0 | |||||
FMC Technologies Non-Qualified Pension Plan | 33.8 | 1,045,154 | 0 | ||||||
Juan C. Podesta |
FMC Technologies U.S. Pension Plan | 18.5 | 394,827 | 0 | |||||
FMC Technologies Non-Qualified Pension Plan | 18.5 | 557,109 | 0 | ||||||
Torbjörn Arvidsson |
FMC Technologies U.S. Pension Plan | 1.6 | (2) | 37,371 | 0 | ||||
Swedish Pension Plan | 22.3 | 7,690 | 0 |
(1) | The present value of accumulated benefit as of December 31, 2007 reflects: |
|
The present value of the accumulated benefit under the U.S. FMC Technologies U.S. Pension Plan is calculated by multiplying the benefit amount as determined by FMC Technologies Pension Benefit formula described below by a present value factor to determine the benefit at age 62, the first age at which unreduced benefits are available under the FMC Technologies U.S. Pension Plan. This amount is discounted back to December 31, 2007 using SFAS 87 interest only assumptions of 6.5%. |
|
The present value of the benefit payable under the FMC Technologies Non-Qualified Pension Plan is calculated in the same manner as specified above for the FMC Technologies U.S. Pension Plan. However, the calculation assumes payment of benefit in the form of a lump sum payment at age 62. This amount is discounted back to December 31, 2007 using SFAS 87 interest only assumptions of 6.5%. |
(2) | Mr. Arvidssons number of years of credited service for the FMC Technologies U.S. Pension Plan represents the period of time he worked in the United States. |
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Pension Benefit Formula
FMC Technologies . FMC Technologies U.S. Pension Plan is a defined benefit plan that provides eligible employees with five or more years of service a pension benefit for retirement. An employees years of credited service and final average yearly earnings are used to calculate the pension benefit. The final average yearly earnings are based on the highest 60 consecutive months out of the final 120 months of compensation. The normal annual retirement benefit is the product of (a) and (b) below:
(a) | the sum of: |
(i) |
the sum of (1) 1% of the participants final average yearly earnings up to the Social Security covered compensation base (defined as the average of the maximum Social Security taxable wages bases for the 35-year period ending in the year in which Social Security retirement age is reached) plus (2) 1 1 / 2 % of the participants final average yearly earnings in excess of the Social Security covered compensation base multiplied by the participants expected years of credited service at age 65 up to 35 years of credited service; and |
(ii) |
1 1 / 2 % of the participants final average yearly earnings multiplied by the participants expected years of credited service at age 65 in excess of 35 years of credited service; and |
(b) | the ratio of actual years of credited service to expected years of credited service at age 65. |
The FMC Technologies U.S. Pension Plan normal retirement age is 65, with an unreduced early retirement benefit payable at age 62. All of our anticipated named executive officers are currently eligible for benefits under the FMC Technologies U.S. Pension Plan.
JBT Corporation . We will have a defined benefit plan which will have a pension benefit formula that is the same as that utilized in the FMC Technologies U.S. Pension Plan. Eligibility under the JBT Corporation Pension Plan and FMC Technologies U.S. Pension Plan terminates upon death or upon payment of the participants entire vested benefit. Additionally, four of our anticipated named executive officers (Messrs. Cannon, Mambu, Podesta and Arvidsson) were employees of FMC Technologies as well as employees of FMC Corporation, its parent and predecessor. All of our employees who were formerly employees of FMC Technologies or FMC Corporation received the benefit for the years of credited service under the FMC Technologies and FMC Corporation defined benefit pension plans under which they earned benefits.
Early Retirement
Similar to the FMC Technologies U.S. Pension Plan, the JBT Corporation U.S. Pension Plans early retirement date will be the participants 55th birthday in the case of a participant who became a participant in FMC Corporations Pension Plan, FMC Technologies predecessors pension plan, before January 1, 1984. Participants hired on or after January 1, 1984 are eligible for early retirement on or after age 55 with ten years of service. Three of our anticipated named executive officers (Messrs. Cannon, Mambu and Podesta) were participants in FMC Corporations pension plan before January 1, 1984. Messrs. Cannon, Mambu, Podesta and Arvidsson have reached the age of 55 and will be eligible to receive early retirement benefits under the JBT Corporation U.S. Pension Plan.
A participant in the JBT Corporation U.S. Pension Plan who retires on or after their early retirement date will be entitled to receive the early retirement benefit, which is equal to the normal retirement benefit reduced by 1/3 of 1% for each month by which the commencement of the participants early retirement benefit precedes the participants 62nd birthday. A participant in the JBT Corporation U.S. Pension Plan whose employment terminates prior to their early retirement date will be entitled to receive an early retirement benefit payable after attaining the age of 55, which will be equal to the normal retirement benefit reduced by 1/2 of 1% for each month by which the commencement of the participants early retirement benefit precedes the participants 65th birthday.
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Payment of Pension Benefit
The normal retirement benefit under the JBT Corporation U.S. Pension Plan will be an individual life annuity for single retirees and 50% joint and survivor annuity for married retirees. Our U.S. Pension Plan will also provide for a variety of other methods for receiving pension benefits such as 100% joint and survivor annuities, level income and lump sum for benefits with lump sum values of $1,000 or less. The levels of annuities will be actuarially determined based on the age of the participant and the age of the participants spouse for joint and survivor annuities. The JBT Corporation U.S. Pension Plan will also provide a 75% joint and survivor option as required by the Pension Protection Act of 2006. The actuarial reduction for a participant and spouse who are both age 62 is 7.9% reduction from the normal retirement benefit for the 50% joint and survivor annuity and 14.7% for the normal retirement benefit for the 100% joint and survivor annuity. The level income annuity will pay increased benefits to the retiree until Social Security benefits begin at age 62 and will reduce the benefit after age 62 so that the total of the retirement benefit and Social Security benefits is approximately equal before and after age 62.
Eligible Earnings
Eligible earnings under the JBT Corporation U.S. Pension Plan for our anticipated named executive officers will include the base salary and annual non-equity incentive compensation paid by JBT Corporation or its predecessors to the executives for each plan year in which they were eligible to participate in the plans. Equity compensation, such as restricted stock and stock option awards and deferrals to the Non-Qualified Savings Plan, will not be included. The Internal Revenue Service limits the annual amount of earnings that may be taken into account for the JBT Corporation U.S. Pension Plan to remain qualified under the Internal Revenue Code. Mr. Arvidssons U.S. Pension Plan benefit was generated on the basis of his earnings in 1999 and 2000, the only plan years during which he was employed in the United States and he had eligibility under the Plan. Since all of our presently eligible anticipated named executive officers eligible earnings will exceed that limitation, the eligible earnings for each of the named executive officers presently eligible to earn additional benefits under the JBT Corporation U.S. Pension Plan will be the same amount, which was $230,000 in 2008.
The JBT Corporation U.S. Pension Plan will limit annual pension benefits to Internal Revenue Service requirements for tax-qualified retirement savings plans. This amount was $185,000 in 2008.
Non-Qualified Pension Plan
FMC Technologies also established a Non-Qualified Pension Plan that permits its employees to obtain a mirror pension benefit under a non-qualified retirement plan for benefits limited under the FMC Technologies U.S. Pension Plan for (1) limitations due to the Internal Revenue Service maximum annual pension benefit limit, (2) earnings that exceed the Internal Revenue Service limitations on earnings eligible for the tax-qualified Pension Plan and (3) deferred compensation not included in the pensionable earnings definition in the FMC Technologies U.S. Pension Plan. We intend to adopt a similar Non-Qualified Pension Plan for our employees whose earnings exceed the Internal Revenue Service limitation. For amounts that accrued under FMC Technologies Non-Qualified Pension Plan for our anticipated named executive officers through December 31, 2004, benefit payments will be made by JBT Corporation at the same time and in the same manner as payments under FMC Technologies Pension Plan or in a lump sum distribution. For amounts that accrued under the FMC Technologies Non-Qualified Pension Plan for our anticipated named executive officers after January 1, 2005, only a lump sum distribution will be permitted. In addition, a participant may elect to transfer the entire lump sum payment of the post January 1, 2005 benefit in the JBT Corporation Non-Qualified Pension Plan into the JBT Corporation Non-Qualified Savings Plan. Lump sum distributions will be paid no sooner than six months after termination of employment for key employees as defined in the Internal Revenue Code. All of our anticipated named executive officers will be key employees. The distribution election may not be changed within 12 months of termination or retirement. Changes made prior to the 12 month requirement can result in deferral of participants distribution for an additional five years.
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Non-Qualified Deferred Compensation Table
Pursuant to JBT Corporations Non-Qualified Savings Plan, certain of our employees, including our anticipated named executive officers (excluding Mr. Arvidsson), may defer up to 100% of their remaining base salary and annual non-equity incentive compensation after exceeding IRS limits on contributions from their base salary and annual non-equity incentive compensation into the JBT Corporation Qualified Savings Plan. Mr. Arvidsson is eligible to participate in the International Savings Plan and may defer up to 20% (increased to 75% effective November 1, 2007) of base salary and annual non-equity incentive compensation. Deferral elections for the JBT Corporation Non-Qualified Savings Plan are made by eligible employees in November or December of each year for amounts earned (or granted with regard to incentive compensation awards) in the following year. The investment options for our Non-Qualified Savings Plan, our International Savings Plan and for the defined contribution benefit under the Swedish Pension Plan are publicly available mutual funds. Matching contribution will be made by us in the same investment allocations that the participant selects for his or her own contributions to the JBT Corporation Non-Qualified Savings Plan. In addition, our anticipated named executive officers who participate in JBT Corporations Non-Qualified Savings Plan may elect to defer all or any portion of their base pay and annual non-equity incentive compensation payments for the current year under the JBT Corporation Non-Qualified Savings Plan, and the deferred amounts will be deemed as being invested in any funds available under the JBT Corporation Non-Qualified Savings Plan. Participants in the International Savings Plan can change their deferral elections throughout the year.
The contributions made by our anticipated named executive officers to FMC Technologies Non-Qualified Savings Plan and the International Savings Plan in 2007, together with FMC Technologies matching contributions or other allocations to FMC Technologies Non-Qualified Savings Plan and the Swedish Pension Plan defined contribution benefit, earnings made on plan balances, any withdrawals or distributions, and the year-end balances in each of these plans were as follows.
Name |
Executive
Contributions in Last Fiscal Year ($) (1) |
Registrant
Contributions in Last Fiscal Year ($) (2) |
Aggregate
Earnings in Last Fiscal Year ($) |
Aggregate
Withdrawals/ Distributions ($) |
Aggregate
Balance at Last Fiscal Year End ($) (3)(4) |
||||||
(a) | (b) | (c) | (d) | (e) | (f) | ||||||
Charles H. Cannon, Jr. |
40,512 | 40,512 | 221,341 | | 1,302,574 | ||||||
Ronald D. Mambu |
38,212 | 15,061 | 96,399 | | 469,243 | ||||||
Juan C. Podesta |
22,951 | 12,615 | 77,455 | | 618,019 | ||||||
Torbjörn Arvidsson |
0
0 |
247,293
0 |
(14,264
107 |
)(5)
|
|
1,341,060
42,391 |
(1) | All of the executive officers contributions reported in column (b) are included in salary and non-equity incentive plan compensation reported for the executive officers in the Summary Compensation Table included above. |
(2) | All of the contributions made by FMC Technologies for our anticipated named executive officers reported in column (c) are included in All Other Compensation for the executive officers in the Summary Compensation Table included above. Amounts included in column (c) do not include 401(k) plan contributions. |
(3) | The portion of the Aggregate Balance at Last Fiscal Year End reported in the summary compensation table appearing in FMC Technologies proxy statements for fiscal years prior to the year ended December 31, 2007 for Mr. Cannon was $297,677. None of our other anticipated named executive officers was a named executive officer in FMC Technologies proxy statements in prior years. |
(4) | A portion of the Aggregate Balance at Last Fiscal Year End for each of our anticipated named executive officers (other than Mr. Arvidsson) consist of the accrued balance carried over from FMC Technologies predecessors non-qualified savings plan. These balances were: Mr. Cannon, $320,195; Mr. Mambu, $85,069; and Mr. Podesta, $151,228. |
(5) | The value of Mr. Arvidssons Swedish Pension Plan investments in 2007 decreased by $14,264 (in U.S. dollar equivalents). |
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Potential Payments Upon Termination
The compensation benefits that are payable to each of our anticipated named executive officers in the event of a voluntary termination will be the same as those available to all of our other salaried employees. In the event of the disability, retirement, involuntary not-for-cause termination or a change-in-control, our named executive officers will receive additional compensation benefits as described below. In the event of the death of a named executive officer, such officers estate will be entitled to receive the benefits described below. Termination payments and change-in-control payments will be mutually exclusive and our anticipated named executive officers will not be entitled to receive both forms of payments under any circumstances.
Payments in the Event of Death, Disability or Retirement
In the event of the death or disability of a named executive officer during active employment with JBT Corporation, all outstanding equity awards will vest on the first business day following death or disability. This same death or disability benefit will exist for any of our employees who hold an unvested equity award at the time of their death or disability. In the event of the retirement of any of our named executive officers after reaching the age of 62, all outstanding equity awards will be retained and will vest in accordance with their pre-retirement normal vesting schedule. The following table shows the value to each of our anticipated named executive officers should any of these events have occurred on December 31, 2007 under FMC Technologies plans, policies and agreements.
Executive Benefits and Payments in the Event of Death, Disability or Retirement on December 31, 2007
Charles H.
Cannon, Jr. |
Ronald D.
Mambu |
Juan C.
Podesta |
Torbjörn
Arvidsson |
|||||
Long-Term Incentive Compensation ($) (1) |
||||||||
Performance-Based Restricted Stock |
1,689,660 | 710,224 | 0 | 0 | ||||
Stock Options/SARs (2) |
||||||||
Unvested and Accelerated |
0 | 0 | 0 | 0 | ||||
Restricted Stock (2) |
||||||||
Unvested and Accelerated |
3,923,867 | 1,809,524 | 2,516,346 | 2,264,598 | ||||
Total ($) |
5,613,527 | 2,519,748 | 2,516,346 | 2,264,598 | ||||
(1) | Represents the value of unvested equity awards that may be retained until their normal vesting date in the case of retirement at age 62. Retirement will not result in accelerated vesting. |
(2) | A portion of the total value of the stock options and restricted stock shown above resulting from accelerated vesting upon death or disability on December 31, 2007 would have vested without accelerating on January 2, 2008, the awards normal vesting date, pursuant to the terms of those awards which were granted on February 22, 2008. That portion of the value is: Mr. Cannon, $2,044,602; Mr. Mambu, $1,020,600; Mr. Podesta, $1,069,362; Mr. Arvidsson, $817,614. |
Payments Made in an Involuntary Termination
Our named executive officers will receive payments pursuant to our executive severance plan described in Compensation Discussion and AnalysisGeneral Executive Severance Benefits above in the event their employment is terminated by us for reasons other than cause or a change-in-control. This plan will provide certain enhanced benefits to our executive officers in addition to those provided under our general severance plan for all of our non-union employees. These include:
|
a severance payment equal to 15 months of base pay and target annual non-equity incentive bonus; |
|
pro rata payment of annual non-equity incentive bonus at target amount through termination date; |
|
continuing medical and dental benefits for the executive, their spouse and dependents for the severance period of 15 months at employee premiums; |
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|
outplacement assistance; |
|
financial planning and tax preparation assistance for last calendar year of employment; and |
|
accelerated vesting of unvested options and restricted stock grants at the discretion of management. |
Benefits under our executive severance plan will be contingent upon continuing compliance by the terminated executive with non-disclosure, non-compete and non-solicitation covenants.
The amounts shown in the table below are calculated using the assumption that an involuntary not for cause termination was effective as of December 31, 2007, and as a result are based on amounts earned through such time from FMC Technologies and are only estimates of amounts which would be paid out to our anticipated named executive officers in the event of such a termination under FMC Technologies executive severance plan. The actual amounts that would be paid out if such a termination were to occur can only be determined at the time of such executive officers actual termination and would be subject to their current salaries and benefits and the terms of our executive severance plan in effect at such time, which may differ in some respects from FMC Technologies executive severance plan.
Executive Benefits and Payments for Involuntary Termination Occurring on December 31, 2007
Charles H.
Cannon, Jr. |
Ronald D.
Mambu |
Juan C.
Podesta |
Torbjörn
Arvidsson |
|||||
Compensation ($) |
||||||||
Severance Payment |
872,853 | 474,744 | 533,568 | 696,937 | ||||
Pro-Rated Target Annual Non-Equity Incentive Bonus |
243,820 | 107,595 | 148,833 | 191,022 | ||||
Benefits and Perquisites ($) |
||||||||
Medical and Dental Benefit (1) |
7,200 | 7,200 | 10,800 | 0 | ||||
Financial Planning and Tax Preparation Assistance |
12,663 | 10,191 | 10,190 | 10,190 | ||||
Outplacement Services |
67,576 | 40,692 | 41,309 | 53,956 | ||||
Total ($): |
1,204,112 | 640,422 | 744,700 | 952,105 | ||||
(1) | Assumes no change in current premium cost paid by such named executive officer for medical and dental benefits. |
In the event of an involuntary termination, the treatment of an executive officers outstanding equity awards is at the discretion of our Chief Executive Officer and Compensation Committee. An executive officer may be permitted to retain all or a portion of these awards subject to their existing vesting schedule. For the valuation of these awards at December 31, 2007, see the Outstanding Equity Awards at Fiscal Year-End Table set forth above.
Potential Payments Upon Change-in-Control
We expect it to be our policy to offer a change-in-control benefit to certain of our executive officers to ensure that they have an incentive to continue to work in our best interests during the period of time when a change of control transaction is taking place and in order to ensure we have the ability to maintain continuity of management. It will also be our policy to grant this benefit to provide these executives with the assurance they will not be adversely affected by a change-in-control transaction without fair compensation, provided their termination is not for cause. Finally, we believe a change-in-control agreement is necessary for us to remain competitive in the market for skilled and experienced executive talent.
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We intend to enter into change-in-control agreements with each of our anticipated named executive officers pursuant to which in the event of both a qualifying change-in-control and a qualifying adverse change in employment circumstances, each of our named executive officers will be entitled to the following benefits:
|
a multiple of their annual base pay (three times for Mr. Cannon and two times for each of our other anticipated named executive officers) and the same multiple of the greater of the executives annual target annual non-equity incentive compensation or the average of the actual annual non-equity incentive compensation paid to the executive in the prior two years; |
|
a pro rata payment equal to the amount of the executives annual target non-equity incentive compensation for the year the executive is terminated; |
|
accrued but unpaid base salary and unused and accrued vacation pay; |
|
elimination of ownership guidelines and accelerated vesting of any unvested stock options and stock appreciation rights; |
|
restricted stock awards subject to performance conditions are considered earned and fully payable at the target amount (or 100%) of the original grant; |
|
elimination of all restrictions on transferability and ownership and retention guidelines and accelerated vesting of all restricted stock awards; |
|
additional age and service credit for purposes of benefit determination in the JBT Corporation Non-Qualified Pension Plan (three years for Mr. Cannon and two years for each of our other named executive officers other than Mr. Arvidsson, who is not eligible for this plan); |
|
medical, dental, life, accidental death and dismemberment insurance and long-term disability insurance coverage for eighteen months for the executive and the executives spouse and dependents, provided the executive continues to pay employee premiums for such insurance coverage then in effect; |
|
executive officers subject to an excise tax on benefits received under the change-in-control agreement will be reimbursed for such taxes (fully for Mr. Cannon and to a more limited extent for all of our other named executive officers); |
|
reimbursement for the costs of all outplacement services obtained by the executive within two years of the termination date (limited to 15% of the executives base salary on termination); and |
|
reimbursement for legal fees and other litigation costs incurred in good faith by an executive officer as a result of our refusal to provide severance benefits under the change-in-control agreement, contesting the enforceability or validity of the agreement or as a result of conflicts in the interpretation of its requirements. |
The severance payment will be required to be paid in a single lump sum payment no later than 30 days after the date of termination.
If a named executive officers employment is terminated due to a disability subsequent to a change-in-control, the executive will receive base salary through the effective date of termination and any disability benefits payable to the executive under our short and long term disability programs, but will not be entitled to the severance benefits under the change-in-control agreement. The named executive officers disability benefits will be the same as are available to all other employees under our disability benefit plans.
If a named executive officers employment is terminated due to death subsequent to a change-in-control, the benefits paid to the executives estate will be determined under our retirement, survivors benefits, insurance and other programs, but the executive officers estate will not be entitled to severance benefits under the change-in-control agreement.
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Executive officers will not be obligated to seek other employment in mitigation of amounts payable under the change-in-control agreements, and their subsequent re-employment will not impact our obligation to make the severance payments provided for under the change-in-control agreements provided the executives employment does not violate any non-compete obligation under the change-in-control agreement.
Our executive officers who receive severance benefits under the anticipated change-in-control agreements will not be entitled to receive additional severance benefits under our general executive severance plan described above under Potential Payments Made Upon Termination and in Compensation Discussion and AnalysisGeneral Executive Severance Benefits.
Under our change-in-control agreements, our named executive officers will be entitled to payments and other benefits upon the occurrence of any of the following change-in-control events, provided a qualifying termination occurs. A qualifying termination is:
|
an acquisition of more than 20% of our outstanding common stock or of any of our other securities entitled to vote in an election of directors, excluding acquisitions directly from us, acquisitions by us, acquisitions by or for any of our employee benefit plans and certain neutral corporate transactions described below; |
|
a change in the composition of our Board of Directors that results in our current board members, or board members who are subsequently appointed or nominated for election to the Board by a majority of our current board members or those who are subsequently so appointed or nominated (the incumbent Board), ceasing for any reason to constitute at least a majority of our Board of Directors, excluding any such subsequent appointee or nominee who became a board member as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of anyone other than the Board of Directors; |
|
a reorganization, merger or consolidation, sale or other disposition of all or substantially all of our assets, or acquisition by us of the assets or stock of another entity (corporate transaction); excluding, however, any such corporate transaction (a neutral corporate transaction) pursuant to which: |
|
all or substantially all of our stockholders immediately prior to such corporate transaction will continue to own more than 60% of the outstanding shares of our common stock or combined voting power of the outstanding securities entitled to vote generally in the election of directors of the corporation resulting from such corporate transaction (including, without limitation, any corporation which as a result of such a transaction owns us or all or substantially all of our assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such corporate transaction, of our outstanding common stock; |
|
no one (other than us, any of our employee benefit plans or the surviving corporation resulting from such corporate transaction) will own 20% or more of the outstanding shares of our common stock or the combined voting power of the outstanding securities entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the corporate transaction; and |
|
the individuals who were members of the our incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such corporate transaction; or |
|
the approval by our stockholders of our complete liquidation or dissolution. |
A qualifying termination includes (a) an involuntary termination of the named executive officers employment for reasons other than cause, disability or death; within 24 months of the change-in-control, (b) a voluntary termination by the named executive officer for good reason within 24 months of the change-in-control or (c) we breach or any successor breaches any of the provisions of the change-in-control agreement.
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Under the change-in-control agreements, a named executive officer will be considered terminated for cause for:
|
willful and continued failure to substantially perform the executive officers employment duties in any material respect (other than any such failure resulting from physical or mental incapacity or occurring after an executive officer has provided notification to us of a voluntary termination for a good reason) after proper written notification has been provided to the executive officer and the executive officer fails to resume substantial performance of the executive officers duties on a continuous basis within 30 days of receipt of such notice; |
|
willfully engaging in conduct which breaches a non-competition, non-solicitation and confidentiality covenant or in any other conduct which is demonstrably and materially injurious to us or an affiliate; or |
|
conviction for, or pleading guilty or not contesting, a felony charge under federal or state law. |
A named executive officers voluntary termination will be considered to be for good reason for purposes of the change-in-control agreements if, without the executives express written consent, any one or more of the following events occurs:
|
assignment to duties materially inconsistent with the executive officers authorities, duties, responsibilities, and status (including, without limitation, offices, titles and reporting requirements) as our employee, or a reduction or alteration in the nature or status of the executives authorities, duties, or responsibilities from the greatest of (i) those in effect on the effective date of the change-in-control agreement; (ii) those in effect during the fiscal year immediately preceding the year of the change-in-control; and (iii) those in effect immediately preceding the change-in-control; |
|
requiring the executive officer to be based at a location which is at least 50 miles further from the executives then current primary residence than is such residence from the office where the executive is located at the time of the change-in-control, except for required travel on our business to an extent substantially consistent with the executive officers business obligations as of the effective date of such executives change-in-control agreement or as the same may have been subsequently changed prior to a change-in-control; |
|
a material reduction of the executive officers base salary as in effect on the effective date of the change-in-control agreement or as the same may have been subsequently increased; |
|
a material reduction in the executive officers level of participation in any of our short-term and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the executive officer participates from the greatest of the levels in place: (i) on the effective date of the change-in-control agreement; (ii) during the fiscal year immediately preceding the fiscal year of the change-in-control; and (iii) on the date immediately preceding the date of the change-in-control; |
|
our failure to obtain a satisfactory agreement from any successor to assume our obligations under the change-in-control agreement; or |
|
any termination of the executive officers employment that is not effected pursuant to a written notice of termination satisfying the requirements for such a notice under the change-in-control agreement. |
The existence of good reason for a voluntary termination will not be affected by an executive officers temporary incapacity due to physical or mental illness not constituting a disability. The executive officers continued employment will not constitute a waiver of the executives rights with respect to any circumstance constituting good reason.
The amounts shown in the table below are calculated using the assumption that a change-in-control and qualifying termination was effective under the change-in-control agreements as of December 31, 2007, and as a result are based on amounts earned through such time from FMC Technologies and are only estimates of the
109
amounts which would be paid out to our anticipated named executive officers in the event of such a termination under the change-in-control agreements our
anticipated named executive officers have with FMC Technologies. The actual amounts that would be paid out if such a termination were to occur can only be determined at the time of such executive officers actual termination and would be
subject to the terms of our change-in-control agreements in effect at such time with such officers, which differ in some respects from FMC Technologies change-in-control agreements, and their salaries, incentives and other benefits at that
time as our employees. Following a change-in-control, if a named executive officer is terminated either: (a) by us for cause or (b) by the executive officer (other than for retirement, good reason or other
circumstances that constitute a qualifying termination) we will pay the executive an amount equal to the executives accrued and unpaid base salary, accrued and unused vacation and any other amounts the executive is entitled to
Executive Benefits and Payments for Change-in-Control Termination Occurring on December 31, 2007
Charles H.
Cannon, Jr. |
Ronald D.
Mambu |
Juan C.
Podesta |
Torbjörn
Arvidsson |
|||||
Compensation ($) |
||||||||
Base Salary Multiple (1) |
1,351,515 | 542,564 | 275,390 | 347,313 | ||||
Annual Non-Equity Incentive Bonus Multiple |
1,411,548 | 411,538 | 182,676 | 308,720 | ||||
Pro-Rated Annual Target Non-Equity Incentive Bonus |
243,820 | 107,595 | 148,833 | 191,022 | ||||
Long-Term Incentive Compensation |
||||||||
Performance-Based Restricted Stock |
1,689,660 | 710,224 | 0 | 0 | ||||
Stock Options/SARs (2) |
||||||||
Unvested and Accelerated |
0 | 0 | 0 | 0 | ||||
Restricted Stock (2) |
||||||||
Unvested and Accelerated |
3,923,867 | 1,809,524 | 2,516,346 | 2,264,598 | ||||
Benefits and Perquisites ($) |
||||||||
Value of Additional Years of Age and Service Credit for JBT Corporation Non-Qualified Pension Plan (3) |
775,431 | 319,066 | 251,387 | 0 | ||||
Medical, Dental, Life Insurance and Disability Benefits (4) |
16,988 | 12,884 | 16,809 | |||||
Outplacement Services |
67,576 | 40,692 | 40,859 | 52,097 | ||||
280G Tax Gross-up |
0 | 0 | 0 | 0 | ||||
Total ($): |
9,480,405 | 3,954,087 | 3,432,300 | 3,163,750 | ||||
(1) | The base salary multiples reflect the terms of these officers change-in-control agreements with FMC Technologies as of December 31, 2007. Although those multiples will be the same for Mr. Cannon and Mr. Mambu under their change-in-control agreements with us, the base salary multiples for Messrs. Podesta and Arvidsson will increase from 1x to 2x. |
(2) | A portion of the total value of the stock options and restricted stock shown above resulting from accelerated vesting upon a change-in-control taking place on December 31, 2007 would have vested without accelerating on January 2, 2008, the awards normal vesting date, pursuant to the terms of those awards which were granted on February 25, 2005. That portion of the value is: Mr. Cannon, $2,044,602; Mr. Mambu, $1,020,600; Mr. Podesta, $1,069,362; and Mr. Arvidsson, $817,614. |
(3) | The amount representing the value of additional years of age and service credit for the JBT Corporation Non-Qualified Pension Plan is based on the assumptions of a lump sum payment calculated as the present value of benefits immediately payable on December 31, 2007, reduced by the JBT Corporation Non-Qualified Pension Plans early retirement factor using the named executive officers age at December 31, 2007 plus the three years of additional credited service granted under the change-in-control agreement. Mr. Arvidsson is not eligible to participate in the Non-Qualified Pension Plan. |
(4) | Assumes no change in current premium cost paid for such named executive officers medical, dental, life insurance and disability benefits. |
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CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding shares of our common stock are, and will be, prior to the distribution, held beneficially and of record by FMC Technologies. The following table sets forth information concerning shares of our common stock projected to be beneficially owned immediately after the distribution date by:
|
each person or entity known by us to be the beneficial owner of 5% or more of the outstanding shares of FMC Technologies common stock; |
|
each person who we currently anticipate will be one of our directors at the time of the distribution; |
|
each person who we currently anticipate will be one of our named executive officers at the time of the distribution; and |
|
all persons who we currently anticipate will be our directors and executive officers at the time of the distribution as a group. |
The projected share amounts in the table below are based on the number of shares of FMC Technologies common stock owned by each person or entity at [ ] , 2008, as adjusted to reflect the distribution ratio of .216 of a share of our common stock for every share of FMC Technologies common stock. To our knowledge, except as otherwise indicated in the footnotes below, each person or entity has sole voting and investment power with respect to the shares of common stock set forth opposite such persons or entitys name. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to the securities. Shares of common stock and stock options that are vested or are scheduled to vest within 60 days are deemed to be outstanding and to be beneficially owned by the persons holding the options for the purpose of computing the percentage ownership of the person.
Name |
Amount and Nature of Beneficial
Ownership of JBT Corporation Common Stock |
Percent of Class of JBT
Corporation Common Stock (1) |
||
Charles H. Cannon, Jr. |
* | |||
Ronald D. Mambu |
* | |||
Juan C. Podesta |
* | |||
Torbjörn Arvidsson |
* | |||
Alan D. Feldman |
* | |||
C. Maury Devine |
* | |||
James E. Goodwin |
* | |||
Polly B. Kawalek |
* | |||
James M. Ringler |
* | |||
James R. Thompson |
* | |||
T. Rowe Price Associates, Inc. (2) |
||||
FMR LLC (3) |
||||
Columbia Wanger Asset Management, L.P. (4) |
||||
All directors and executive officers as a group |
* | Indicates a less than 1% ownership interest. |
(1) | Percentages are calculated on the basis of the amount of outstanding shares (exclusive of treasury shares) plus shares deemed outstanding pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934 as of [ ], 2008. |
111
(2) | Based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2008 believed to be reliable, and adjusted to reflect the distribution ratio of .216 of a share of JBT Corporation common stock for every share of FMC Technologies common stock, T. Rowe Price Associates, Inc. have sole voting power over [647,813] of such shares and sole dispositive power over all such shares. These securities are owned by various individual and institutional investors for which T. Rowe Price Associates, Inc. serves as investment adviser. T. Rowe Price Associates, Inc. expressly disclaims beneficial ownership of these securities The business address for T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202. |
(3) | Based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2008 believed to be reliable, and adjusted to reflect the distribution ratio of .216 of a share of JBT Corporation common stock for every share of FMC Technologies common stock, FMR LLC and Edward C. Johnson 3d have sole voting power over [22,354] of such shares and sole dispositive power over all of such shares. The address for FMR LLC is 82 Devonshire Street, Boston, Massachusetts 02109. |
(4) | Based on a Schedule 13G/A filed with the Securities and Exchange Commission on January 28, 2008 believed to be reliable, and adjusted to reflect the distribution ratio of .216 of a share of JBT Corporation common stock for every share of FMC Technologies common stock, Columbia Wanger Asset Management, L.P. and Columbia Acorn Trust jointly have sole voting power over [2,134,642] of such shares, shared voting power of [119,405] of such shares and sole dispositive power over all such shares. The address for Columbia Wanger Asset Management, L.P. is 227 West Monroe Street, Suite 300, Chicago, Illinois 60606. |
112
OUR RELATIONSHIP WITH FMC TECHNOLOGIES AFTER THE SPIN-OFF
General
In connection with the spin-off, we and FMC Technologies will enter into the Separation Agreement and several ancillary agreements to complete the separation of our businesses from FMC Technologies and to distribute our common stock to FMC Technologies stockholders. These agreements will govern the relationship between us and FMC Technologies after the distribution and will also provide for the allocation of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the distribution. The agreements will have been prepared before the distribution, and will reflect agreement between affiliated parties established without arms-length negotiation. However, we believe that the terms of these agreements will equitably reflect the benefits and costs of our ongoing relationships with FMC Technologies. The ancillary agreements include:
|
Tax Sharing Agreement; |
|
Transition Services Agreement; |
|
Distribution Agreements; |
|
Sublease Agreements; |
|
Trademark License Agreement; and |
|
Trademark Assignment and Coexistence Agreement. |
These agreements and various other agreements governing our future relationships with FMC Technologies are summarized below. We may enter into other agreements with FMC Technologies prior to or concurrently with the separation that would relate to other aspects of our relationship with FMC Technologies following the spin-off. Following the separation, we may enter into other commercial agreements with FMC Technologies from time to time, the terms of which will be determined at those relevant times.
Of the agreements summarized below, the material agreements have been or will be filed as exhibits to the registration statement that we have filed with the SEC, of which this information statement forms a part. The summaries of material agreements are qualified in their entireties by reference to the full text of the agreements.
Separation and Distribution Agreement
The Separation and Distribution Agreement, which we refer to as the Separation Agreement, sets forth the agreement between us and FMC Technologies with respect to the principal corporate transactions required to effect our separation from FMC Technologies; the transfer of certain assets and liabilities required to effect such separation; the distribution of our shares to FMC Technologies stockholders; our dividend to FMC Technologies; and other agreements governing the relationship between FMC Technologies and us following the separation. FMC Technologies will only consummate the spin-off if specified conditions are met. These conditions include, among others, the receipt of a private letter ruling from the Internal Revenue Service, in form and substance satisfactory to FMC Technologies to the effect that no gain or loss will be recognized by FMC Technologies, its shareholders, us or our shareholders for federal income tax purposes as a result of the distribution or the contribution, final approval of the distribution given by the Board of Directors of FMC Technologies, and the actions and filings necessary or appropriate under federal and state securities laws and state blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the distribution shall have been taken and, where applicable, become effective or accepted. For additional information regarding conditions to the distribution, see The Spin-OffSpin-Off Conditions and Termination beginning on page 31.
Even if these conditions are satisfied, other events or circumstances could occur that could impact the timing or terms of the spin-off or FMC Technologies ability or plans to consummate the spin-off. As a result of these factors, the spin-off may not occur and, if it does occur, it may not occur on the terms or in the manner described, or in the timeframe currently contemplated.
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The Contribution; Allocation of Assets and Liabilities; No Representations and Warranties
In connection with the distribution, FMC Technologies has contributed or will contribute to us certain business segments and assets to be included in our business, as described in this information statement. It will effect this contribution by transferring, or causing its subsidiaries to transfer, certain assets related to the conduct of our business. FMC Technologies will have no interest in our assets and business and, subject to certain exceptions described below, generally will have no obligation with respect to our liabilities after the distribution. Similarly, we will have no interest in the assets of FMC Technologies other business segments and generally will have no obligation with respect to the liabilities of FMC Technologies retained businesses after the distribution.
On or before the distribution date, we will pay approximately $200 million in a cash dividend to FMC Technologies, adjusted by the value of our after-tax operating cash flow for the period from and including January 1, 2008 to and including the distribution date. If the spin-off were to occur on July 31, 2008, we estimate that this dividend would be approximately $175 million, after adjustments.
Except as expressly set forth in the Separation Agreement or in any ancillary agreement, FMC Technologies will make no representations or warranties as to the assets, businesses or liabilities transferred or assumed as part of the contribution. Furthermore, unless expressly provided to the contrary in any ancillary agreement, all assets will be transferred on an as is, where is basis, and the respective transferees will agree to bear the economic and legal risks that any conveyance is insufficient to vest in the transferee good and marketable title free and clear of any security interest and that any necessary consents or approvals are not obtained or that requirements of laws or judgments are not complied with.
The Distribution
Following the satisfaction or waiver of all conditions to the distribution as set forth in the Separation Agreement, FMC Technologies will deliver to the distribution agent a certificate or certificates representing all of the outstanding shares of our common stock. FMC Technologies will instruct the distribution agent to distribute those shares on [ ] , 2008 or as soon thereafter as practicable, so that each FMC Technologies stockholder will receive .216 of a share of our common stock for every share of FMC Technologies common stock such stockholder owns as of the record date of the spin-off.
No fractional shares of our common stock shall be distributed in the distribution. FMC Technologies shall direct the distribution agent to determine, as soon as practicable, the sum of fractional shares of our common stock that would have been issued in the distribution and sell the nearest number of whole shares equal to such sum in open market transactions or otherwise, in each case at then prevailing trading prices. The distribution agent shall then cause to be distributed to the holders of FMC Technologies common stock entitled to receive such proceeds in lieu of fractional shares an amount in cash equal to such holders ratable share of the proceeds of such sale, without interest, after making appropriate deductions of the amount required to be withheld for federal income tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale.
Indemnification and Survival
Except as specifically otherwise provided in the ancillary agreements, FMC Technologies will indemnify, defend and hold harmless us, our affiliates, our respective representatives and each of the heirs, executors, successors and assigns of any of the foregoing from and against all indemnifiable losses relating to, arising out of or resulting from:
(a) the failure of FMC Technologies:
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(i) to pay or otherwise promptly discharge any of FMC Technologies liabilities, whether such indemnifiable losses relate to events, occurrences or circumstances occurring or existing, or whether such indemnifiable losses are asserted, before or after the distribution; or |
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(ii) to perform any of its obligations under the Separation Agreement; or |
(b) FMC Technologies business and liabilities, except to the extent such liabilities relate to our business or except as otherwise specifically provided in the Separation Agreement.
Except as specifically otherwise provided in the ancillary agreements, we will indemnify, defend and hold harmless FMC Technologies, its affiliates, their respective representatives and each of the heirs, executors, successors and assigns of any of the foregoing from and against all indemnifiable losses relating to, arising out of or resulting from:
(a) the failure by us:
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(i) to pay or otherwise promptly discharge any of our liabilities (which liabilities shall include all liabilities, whether incurred before or after the spin-off, of JBT Corporation and of the former FoodTech and Airport Systems business segments of FMC Technologies, and whether or not currently owned, used or occupied by FMC Technologies and its subsidiaries or affiliates), whether such indemnifiable losses relate to events, occurrences or circumstances occurring or existing, or whether such indemnifiable losses are asserted before or after the distribution; or |
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(ii) to perform any of our obligations under the Separation Agreement; or |
(b) any untrue statement or alleged untrue statement of a material fact, or omission or alleged omission to state a material fact required to be stated, in any portion of the registration statement or information statement (or any preliminary or final form thereof or any amendment thereto) to be filed with the SEC, or necessary to make any assertions in the registration statement or information statement not misleading.
All covenants and agreements of the parties contained in the Separation Agreement will survive the contribution, separation and distribution. Our rights and obligations as well as those of FMC Technologies and any respective indemnitees under the Separation Agreement will survive the sale or other transfer by any party or its respective subsidiaries of any assets or businesses or the assignment by it of any liabilities. Additionally, indemnity and contribution provisions contained in the Separation Agreement will remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any indemnitee; (ii) the knowledge by the indemnitee of indemnifiable losses for which it might be entitled to indemnification or contribution hereunder; or (iii) any termination of the Separation Agreement.
Non-solicitation of employees
We and FMC Technologies will agree not to, for a period of 18 months following the separation, directly or indirectly solicit employees of the other party or its subsidiaries with the exception of solicitations made by non-targeted job opportunity advertisements or headhunter searches and employees who were terminated by the other party prior to the solicitation or who voluntarily resigned more than six months prior to such solicitation.
We and FMC Technologies further agree not to hire each others employees (or persons who were employees within the prior six months) for the same period of time with the exception of employees terminated as part of a reduction in force or any for any other reason other than cause.
Expenses
Except as expressly set forth in the Separation Agreement or any ancillary agreement, if the separation and distribution are completed, all third party fees, costs and expenses paid or incurred in connection with the transactions contemplated by the Separation Agreement and the ancillary agreements will be paid by FMC Technologies. If the separation and distribution does not occur, FMC Technologies shall bear all such fees, costs and expenses.
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Dispute Resolution
The Separation Agreement will contain provisions that govern, except as otherwise provided in any ancillary agreements, the resolution of disputes, controversies or claims that may arise between us and FMC Technologies. In the event of any dispute or disagreement between us and FMC Technologies as to the interpretation of any provision of the Separation Agreement (or the performance of obligations hereunder), we and FMC Technologies will promptly meet in a good faith effort to resolve the dispute. If the officers do not agree upon a decision within 30 days after reference of the matter to them, each of the parties will submit any controversy, dispute or claim arising out of or relating in any way to the Separation Agreement or the transactions arising hereunder for arbitration in the City of Chicago, Illinois, and such arbitration shall be the sole remedy for such monetary claims; provided that disputes regarding the amount of any post spin-off true-up of the dividend to be paid on the date of the distribution (to assure that the 2008 cash flow of the JBT Corporation business has been properly apportioned) shall be finally resolved by an independent accountant if the parties have not been able to reach a timely agreement on any such dispute. Such arbitration will be administered by the Center for Public Resources Institute for Dispute Resolutions in accordance with its then prevailing Rules for Non-Administered Arbitration of Business Disputes (except as otherwise provided in the Separation Agreement), by an arbitrator or arbitrators as selected and described in the Separation Agreement. The arbitration will be governed by the United States Arbitration Act, 9 U.S.C. § 1 et seq. The award rendered by the arbitrator(s) shall be final and not subject to judicial review and judgment thereon may be entered in any court of competent jurisdiction.
The fees and expenses of the Center for Public Resources Institute for Dispute Resolution and the arbitrator(s) will be shared equally by us and FMC Technologies.
Tax Sharing Agreement
The tax sharing agreement will set forth the responsibilities of FMC Technologies and JBT Corporation with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the spin-off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods. FMC Technologies will generally be responsible for the filing of tax returns and the payment of our federal, state, local and foreign income taxes for periods before and including the spin-off. However, under the agreement we will generally be responsible for making payments to FMC Technologies for income tax liabilities with respect to such periods to the extent such income tax liabilities are attributable to taxable income generated by our operations, after adjustment for any losses, credits, or other tax attributes generated by our operations in such periods. We will generally be responsible for the payment of all other taxes relating to our business. FMC Technologies will generally be responsible for managing disputes with taxing authorities that relate to liabilities for federal, state, local and foreign income taxes for such periods. However, under the agreement we will have rights to control and contest certain audit or tax proceedings that relate to income taxes for which we are responsible. Under certain circumstances, FMC Technologies and we may jointly control disputes relating to income taxes for which both parties are responsible. We will generally be responsible for managing disputes relating to all other taxes for which we are responsible. The tax sharing agreement will also provide that we will have to indemnify FMC Technologies for some or all of the taxes resulting from the transactions related to the distribution of our common stock if we take certain actions which ultimately result in disqualifying the distribution as tax-free under Sections 355 and 368 of the Code. The tax sharing agreement will also require FMC Technologies to indemnify us against any liability for tax if FMC Technologies actions cause the disqualification of the spin-off as tax free under the Code.
To maintain the qualification of the distribution as tax-free under sections 368(a)(1)(D) and 355 of the Code, there are material limitations on transactions in which we may be involved during the two-year period following the distribution date. Specifically, during this two-year period, we will agree to refrain from engaging in any of the transactions listed below unless we first obtain a private letter ruling from the IRS or an opinion reasonably acceptable in substance to FMC Technologies from a tax advisor reasonably acceptable to FMC Technologies providing that the transaction will not affect the tax-free treatment of the distribution.
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We are restricted from entering into any negotiations, agreements, understandings, or arrangements with respect to transactions or events that may cause the spin-off to be treated as part of a plan pursuant to which one or more persons acquire (other than pursuant to the spin-off) directly or indirectly our stock representing a 50-percent or greater interest therein within the meaning of Section 355(d)(4) of the Code, including stock issuances pursuant to the exercise of options, lapsing of restrictions on restricted stock, or otherwise or option grants (excluding option grants made pursuant to compensatory equity incentive arrangements satisfying specified conditions and stock issuances made pursuant to the exercise of options or the lapse of restrictions on stock granted under any such arrangement), capital contributions or acquisitions, entering into any partnership or joint venture arrangements or a series of such transactions or events, and any of the following:
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Merging or consolidating with or into another corporation; |
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Liquidating or partially liquidating; |
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Selling or transferring all or substantially all of our assets in a single transaction or series of related transactions, or selling or transferring any portion of our assets that would violate certain continuity requirements imposed by the Code; or |
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Redeeming or otherwise repurchasing any of our capital stock other than pursuant to open market stock repurchase programs meeting certain IRS requirements. |
If we enter into any of these transactions, with or without the required private letter ruling or opinion from tax counsel, we will be responsible for, and will indemnify FMC Technologies from and against, any tax liability resulting from any such transaction, under terms reasonably acceptable to FMC Technologies, including, in certain circumstances, the posting of an acceptable letter of credit or other security.
Transition Services Agreement
In connection with the spin-off, we will enter into a transition services agreement with FMC Technologies whereby we will provide certain resources and services to FMC Technologies and FMC Technologies will provide certain resources and services to us. The services to be provided pursuant to the transition services agreement will be set forth in annexes to the transition services agreement that provide detail of the services and the geographical locations at which such services are to be provided. In addition to the services described in the transition services agreement annexes, FMC Technologies will agree in the transition services agreement to provide additional services to us, subject to the negotiation of acceptable terms and costs, if those services were provided to us prior to the spin-off and would assist us in the orderly transition of the business. The services to be provided pursuant to the transition services agreement will generally expire not later than December 31, 2008 unless extended as a result of arms length negotiations between the parties, and we and FMC Technologies have agreed to reduce or eliminate the dependency on such transition services as soon as reasonably practicable after the spin-off. Services provided pursuant to the transition services agreement will be provided at the providing partys agreed upon rate as indicated in the annex related to each such service, in each case billed and payable monthly and generally without any further markup, unless other or additional arrangements are reached as a result of any negotiation between the parties. We and FMC Technologies will agree in the transition services agreement to provide the services in a manner consistent with past practice, and will make no other representations or warranties regarding the adequacy or effectiveness of such services. Each partys liability with respect to performance of the transition services will be limited to the direct damages of the party receiving such services arising from the providing partys failure to provide such services consistently with past practice, and each party will expressly release the other party and its affiliates for any claims for consequential, incidental, indirect or punitive damages, including lost profits. The rights and obligations of each party to the transition services agreement will generally not be assignable, other than with respect to permitted assignments to affiliates or as a result of transfers of substantially all of a partys assets.
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The specific services set forth in the annexes to the transition services agreement are expected to include the following:
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We will provide office space and some or all of accounting, payroll and human resources services, and office supplies and equipment, in China, Thailand and Chalfont, Pennsylvania; |
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FMC Technologies will provide office space and some or all of accounting, payroll and human resources services, and office supplies and equipment, in Indonesia, Dubai and Russia; |
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We and FMC Technologies will provide each other with support and assistance as needed for corporate purposes, including preparation of tax returns, management of certain audits and other tax planning, accounting and related services; |
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FMC Technologies will provide certain accounting consolidation services, fixed asset and inventory accounting services, security and protection services, environmental, health and safety training and services, internal audit services and employee relocation services; |
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We will provide human resources, accounting, and payroll services in South Africa, Italy and India, along with sales, distribution, finance and technology services in Italy and tax and compliance services in India. We will also provide limited human resources services in Vietnam; and |
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FMC Technologies will provide some or all of human resources, payroll and accounting services in Malaysia, Singapore, Canada, the United Kingdom and Mexico, along with tax assistance in Mexico. |
Distribution Agreements
Certain FMC Technologies products are currently, and will need to be on a continuing basis after the distribution date, distributed by third parties or by internal distribution resources that will be transferred to us upon the spin-off. As a result, FMC Technologies will require that certain distribution agreements with respect to such products are in place upon the spin-off so that FMC Technologies will continue to effectively operate its ongoing businesses. These distribution agreements will set forth the terms and conditions pursuant to which we will provide distribution services for certain products in certain specified geographic locations for the benefit of FMC Technologies following the distribution date. The distribution services provided generally may not be assigned or transferred to another party by us. We will act as an independent contractor of FMC Technologies, and will make certain covenants and agreements for the benefit of FMC Technologies, including that we will not distribute goods that are competitive with the products covered by the distribution agreements and that we will comply with laws and regulations in connection with its activities under the distribution agreements. We will pay the specified prices (generally the then current listed price for standard models of products discounted to a negotiated level) to FMC Technologies for the products covered by the distribution agreements, and we will be compensated solely to the extent of the excess of the price we charge customers for the products over the price charged to us by FMC Technologies for such products. As the sale and distribution of the products in the territories covered by the distribution agreements are important to the FMC Technologies business, we will agree in the distribution agreements to use efforts to develop and promote the products in the relevant territory and to meet certain minimum order targets as agreed by the parties. We will purchase and maintain certain minimum insurance coverage at all times during the term of the distribution agreements in order to protect against losses resulting therefrom, and will agree to indemnify FMC Technologies for losses we cause in respect of the distribution services and our performance under the distribution agreements. FMC Technologies will provide warranties with respect to the products covered by the distribution agreements to the extent of the standard terms and conditions for such products, and will provide us with sales, technical and promotional support as FMC Technologies considers appropriate.
Sublease Agreements
We currently occupy office space leased by FMC Technologies at 200 East Randolph Drive in Chicago, Illinois. In order to continue operating out of this location, we will enter into a sublease agreement on the date of
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the spin-off pursuant to which FMC Technologies will sublease office space to us. The sublease will be effective only upon consent from FMC Technologies landlord. Unless otherwise agreed, the term of the sublease is expected to expire on December 31, 2010. We will pay rent to FMC Technologies equal to 50% of the rent paid by FMC Technologies to its landlord pursuant to the underlying lease during the term of the sublease, and we will further be responsible for approximately 50% of utilities and certain other costs and expenses (with each party bearing those costs directly attributable to its operations). The sublease will be non-assignable without FMC Technologies consent. We and FMC Technologies will agree to indemnify each other with respect to claims arising out of the acts or omissions of the other under the sublease agreement. Other terms and conditions of the underlying lease between FMC Technologies and its landlord will be incorporated into the sublease, and we will be bound by those provisions as if we were a direct party to such underlying lease.
We also currently occupy office space leased by FMC Technologies at 400 Highpoint Drive in Chalfont, Pennsylvania. In order to allow FMC Technologies and us to continue operating out of this location, FMC Technologies will assign its rights under the existing lease for the property to us on the date of the spin-off, and we will sublease back to FMC Technologies a portion of such space. We will indemnify FMC Technologies for any obligations accruing on the underlying lease after the spin-off, and FMC Technologies will indemnify us for any obligations accruing on the lease prior to the spin-off. The sublease term will expire on February 29, 2016, unless the underlying lease is terminated earlier. FMC Technologies will initially pay rent equal to 24.18% of the rent, facilities costs and operating costs of the premises (adjusted annually based upon the actual space used by each of us and FMC Technologies). The sublease will be non-assignable without our consent. We and FMC Technologies will agree to indemnify each other with respect to claims arising out of the acts or omissions of the other under the sublease agreement. Other terms and conditions of the underlying lease being assigned to us will be incorporated into the sublease, and FMC Technologies will be bound by those provisions as if it were a direct party to such underlying lease.
Trademark License Agreement
FMC Technologies will license certain trademarks to us pursuant to a trademark license agreement to be entered into on the date of the spin-off. The trademark license agreement will allow us to use certain trademarks owned or licensed by FMC Technologies after the spin-off. This agreement will allow the continued use of these trademarks on our installed base of equipment at the time of the spin-off indefinitely. We will have the right to utilize these trademarks on our existing stock of inventory and supplies through the earlier of a one year period after the spin-off date or the exhaustion of such inventory and supplies in the ordinary course. The agreement will also permit us to indicate our former affiliation with FMC Technologies and maintain a web site link from FMC Technologies web site to our own web site for up to two years following the spin-off date. Promptly following termination of our rights to utilize FMC Technologies trademarks, we will be required either to destroy any materials in our possession that include the licensed trademarks or to label items that are not removable or destroyable in a manner that clearly indicates the owner of the trademark.
The license will be worldwide, royalty-free and non-exclusive, and will generally be non-assignable. The licensee will agree in the trademark license agreement that the licensor retains full ownership of the trademarks, and that it will comply with all applicable laws and ensure that its use of the other parties trademarks will meet or exceed the quality standards of the licensor. We and FMC Technologies will each agree to indemnify the other for any breaches of the trademark license agreement and for any liabilities related to or arising from such partys use of the trademarks.
Trademark Assignment Coexistence Agreement
FMC Technologies ownership rights in the Bean, John Bean and related trademarks will generally be transferred to us for our exclusive use in our business pursuant to a trademark assignment and coexistence agreement. FMC Technologies will retain the ownership, however, of such trademarks to the extent used in connection with pumps manufactured, used, sold, leased or otherwise disposed of by FMC Technologies existing energy business. We will agree in the trademark assignment and coexistence agreement to not use the trademarks in connection with the businesses for which FMC Technologies has retained ownership, and FMC Technologies will agree to limit its use to such businesses.
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DESCRIPTION OF OUR CAPITAL STOCK
Upon the completion of this spin-off, we will be authorized to issue 120,000,000 shares of our common stock, $0.01 par value, and 20,000,000 shares of undesignated preferred stock, $0.01 par value. The following description of our capital stock is subject to and qualified in its entirety by our Certificate of Incorporation and By-laws, which are included as exhibits to the registration statement of which this information statement is a part, and by the provisions of applicable Delaware law.
Authorized and Outstanding Capital Stock
Immediately following the spin-off, our authorized capital stock will consist of 120,000,000 shares of common stock, par value $0.01 per share, and 20,000,000 shares of preferred stock, par value $0.01 per share. The authorized preferred shares shall include [ ] shares of series A junior participating preferred stock. Based on the approximately [127,785,251] shares of FMC Technologies common stock that we expect to be outstanding on the record date, and a distribution ratio of .216 of a share of our common stock for every share of FMC Technologies common stock, we will have approximately [27,601,614] shares of common stock outstanding immediately following the spin-off. The actual number of shares to be distributed will be determined on the record date. No shares of preferred stock will be outstanding immediately following the spin-off.
Common Stock
Prior to this spin-off, there were 53 shares of our common stock outstanding, all of which were held of record by FMC Technologies.
The holders of our common stock are entitled to one vote per share on all matters to be voted upon by our stockholders. Subject to preferences that may be applicable to any of our outstanding preferred stock, the holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available for that purpose. See Dividend Policy. In the event of our liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of our preferred stock, if any, then outstanding. The holders of our common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to our common stock.
Preferred Stock
Our Board of Directors has the authority, without action by our stockholders, to designate and issue our preferred stock in one or more series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of our common stock. It is not possible to state the actual effect of the issuance of any shares of our preferred stock upon the rights of holders of our common stock until our Board of Directors determines the specific rights of the holders of our preferred stock. However, the effects might include, among other things:
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restricting dividends on our common stock; |
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diluting the voting power of our common stock; |
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impairing the liquidation rights of our common stock; or |
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delaying or preventing a change-in-control of our company without further action by our stockholders. |
At the closing of this spin-off, no shares of our preferred stock will be outstanding, and, other than shares of our preferred stock that may become issuable pursuant to our rights agreement, we have no present plans to issue any shares of our preferred stock. See Description of Our Capital StockThe Rights Agreement.
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As of the closing of this spin-off, [ ] shares of our junior participating preferred stock will be reserved for issuance upon exercise of our preferred share purchase rights.
Authorized but Unissued Capital Stock
Delaware law does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of the NYSE, which would apply so long as the common stock remains listed on the NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then-outstanding number of shares of common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our Board of Directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.
Anti-Takeover Effects of Provisions of Delaware Law and Our Charter and By-Laws
Some provisions of Delaware law and our certificate of incorporation and by-laws could make the following more difficult:
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acquisition of us by means of a tender offer; |
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acquisition of us by means of a proxy contest or otherwise; or |
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removal of our incumbent officers and directors. |
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions also are designed to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us and outweigh the disadvantages of discouraging those proposals because negotiation of them could result in an improvement of their terms.
Delaware Law
Our Certificate of Incorporation provides that Section 203 of the Delaware General Corporation Law, an anti-takeover law, does not apply to us until FMC Technologies owns less than 15% of our outstanding common stock.
In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder, unless the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an interested stockholder is a person that together with affiliates and associates, owns or within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporations voting stock. Section 203 is not applicable to business combinations with FMC Technologies. The existence of this provision after FMC Technologies no longer owns at least 15% of our outstanding shares may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, including discouraging attempts that might result in a premium over the market price for the shares of our common stock.
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Certificate of Incorporation; By-Laws
Our certificate of incorporation and by-laws contain provisions that could make more difficult the acquisition of JBT Corporation by means of a tender offer, a proxy contest or otherwise. These provisions are summarized below.
Undesignated Preferred Stock . The authorization of our undesignated preferred stock makes it possible for our Board of Directors to issue our preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes of control of our management.
Size of Board and Vacancies . Our Certificate of Incorporation provides that the number of directors on our Board of Directors will be fixed exclusively by our Board of Directors. Newly created directorships resulting from any increase in our authorized number of directors or any vacancies in our Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause will be filled solely by the vote of our remaining directors in office.
Elimination of Stockholder Action by Written Consent . Our Certificate of Incorporation permits our stockholders to act by written consent without a meeting as long as FMC Technologies owns at least 50% of our voting stock. Once FMC Technologies ceases to own that percentage of our voting stock, our Certificate of Incorporation eliminates the right of our stockholders to act by written consent.
Requirements for Advance Notification of Stockholder Nominations and Proposals. Our by-laws establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors other than nominations made by or at the direction of our Board of Directors or a committee of our Board of Directors.
Classified Board of Directors . Our Certificate of Incorporation provides that our Board of Directors is divided into three classes. The term of the first class of directors expires at our 2009 annual meeting of stockholders, the term of the second class of directors expires at our 2010 annual meeting of stockholders and the term of the third class of directors expires at our 2011 annual meeting of stockholders. At each of our annual meetings of stockholders, the successors of the class of directors whose term expires at that meeting of stockholders will be elected for a three-year term, one class being elected each year by our stockholders. This system of electing and removing directors may discourage a third party from making a tender offer or otherwise attempting to obtain control of us if FMC Technologies no longer controls us because it generally makes it more difficult for stockholders to replace a majority of the directors. Our Certificate of Incorporation also provides that directors may be removed with or without cause only by the vote of holders of at least 80% of our outstanding shares of stock entitled to vote generally in the election of directors.
No Cumulative Voting. Our certificate of incorporation and by-laws do not provide for cumulative voting in the election of directors.
Stockholder Meetings. Under our by-laws, only our Board of Directors may call special meetings of our stockholders.
Amendments of Certificate of Incorporation Provisions. The amendment of any of the above provisions in our certificate of incorporation would require approval by holders of at least 80% of our outstanding common stock.
Amendments to Our By-laws . Our certificate of incorporation and by-laws provide that our by-laws may only be amended by the vote of a majority of our whole Board of Directors or by the vote of holders of at least 80% of the outstanding shares of our voting stock.
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Rights Agreement
Our Board of Directors will adopt a rights agreement prior to the spin-off. Pursuant to our rights agreement, one preferred share purchase right will be issued for each outstanding share of our common stock. Our rights being issued are subject to the terms of our rights agreement.
Our Board of Directors will adopt our rights agreement to protect our stockholders from coercive or otherwise unfair takeover tactics. In general terms, our rights agreement works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common stock without the approval of our Board of Directors.
For those interested in the specific terms of our rights agreement, we provide the following summary description. Please note, however, that this description is only a summary, is not complete, and should be read together with our entire rights agreement, which will be publicly filed with the SEC as an exhibit to the registration statement of which this information statement is a part.
The Rights
Our Board of Directors authorized the issuance of one of our rights for each share of our common stock outstanding on [ ], 2008. Our rights initially trade with, and are inseparable from, our common stock. Our rights are evidenced only by certificates that represent shares of our common stock. New rights will accompany any new shares of common stock we issue after [ ], 2008 until the date on which the rights are distributed as described below.
Exercise Price
Each of our rights will allow its holder to purchase from us one one-hundredth of a share of our series A junior participating preferred stock for $72.00, once the rights become exercisable. This portion of our preferred stock will give our stockholders approximately the same dividend, voting, and liquidation rights as would one share of our common stock. Prior to exercise, our right does not give its holder any dividend, voting, or liquidation rights.
Expiration
Our rights will expire on [ ] , 2018.
Exercisability
Our rights will not be exercisable until:
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ten days after the public announcement that a person or group has become an acquiring person by obtaining beneficial ownership of 15% or more of our outstanding common stock, or, if earlier, |
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ten business days (or a later date determined by our Board of Directors before any person or group becomes an acquiring person) after a person or group begins a tender or exchange offer that, if completed, would result in that person or group becoming an acquiring person. |
Until the date our rights become exercisable, our common stock certificates also evidence our rights, and any transfer of shares of our common stock constitutes a transfer of our rights. After that date, our rights will separate from our common stock and be evidenced by book-entry credits or by rights certificates that we will mail to all eligible holders of our common stock. Any of our rights held by an acquiring person are void and may not be exercised.
123
Consequences of a Person or Group Becoming an Acquiring Person
|
Flip In . If a person or group becomes an acquiring person, all holders of our rights except the acquiring person may, for $72.00 purchase shares of our common stock with a market value of $144.00, based on the market price of our common stock prior to such acquisition. |
|
Flip Over . If we are later acquired in a merger or similar transaction after the date our rights become exercisable, all holders of our rights except the acquiring person may, for $72.00, purchase shares of the acquiring corporation with a market value of $144.00 based on the market price of the acquiring corporations stock prior to such merger. |
Our Preferred Share Provisions
Each one one-hundredth of a share of our preferred stock, if issued:
|
will not be redeemable; |
|
will entitle holders to quarterly dividend payments of $0.01 per share, or an amount equal to the dividend paid on one share of our common stock, whichever is greater; |
|
will entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of our common stock, whichever is greater; |
|
will have the same voting power as one share of our common stock; and |
|
if shares of our common stock are exchanged via merger, consolidation or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of our common stock. |
The value of one one-hundredth interest in a share of our preferred stock should approximate the value of one share of our common stock.
Exchange
After a person or group becomes an acquiring person, but before an acquiring person owns 50% or more of our outstanding common stock, our Board of Directors may extinguish our rights by exchanging one share of our common stock or an equivalent security for each right, other than rights held by the acquiring person.
Redemption
Our Board of Directors may redeem our rights for $0.01 per right at any time before any person or group becomes an acquiring person. If our Board of Directors redeems any of our rights, it must redeem all of our rights. Once our rights are redeemed, the only right of the holders of our rights will be to receive the redemption price of $0.01 per right. The redemption price will be adjusted if we have a stock split or stock dividends of our common stock.
Amendments
The terms of our rights agreement may be amended by our Board of Directors without the consent of the holders of our rights. After a person or group becomes an acquiring person, our Board of Directors may not amend the agreement in a way that adversely affects holders of our rights.
Anti-Dilution Provisions
Our Board of Directors may adjust the purchase price of our preferred stock, the number of shares of our preferred stock issuable and the number of our outstanding rights to prevent dilution that may occur from a stock dividend, a stock split or a reclassification of our preferred stock or common stock. No adjustments to the purchase price of our preferred stock of less than 1% will be made.
124
Indemnification and Limitation of Liability of Directors and Officers
Section 145 of the Delaware General Corporation Law provides that, among other things, a corporation may indemnify directors and officers as well as other employees and agents of the corporation against expenses (including attorneys fees), judgments, fines, and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than actions by or in the right of the corporation, i.e. a derivative action), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys fees) incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporations by-laws, disinterested director vote, stockholder vote, agreement or otherwise.
Our certificate of incorporation and by-laws require indemnification to the fullest extent permitted by Delaware law. We also intend to obtain directors and officers liability insurance providing coverage to our officers and directors. Our certificate of incorporation requires the advancement of expenses incurred by officers and directors in relation to any action, suit or proceeding.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability (i) for any transaction from which the director derives an improper personal benefit, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (certain illegal distributions), or (iv) for any breach of a directors duty of loyalty to the corporation or its stockholders. Our certificate of incorporation includes such a provision.
2009 Annual Meeting of Stockholders
Our by-laws provide that an annual meeting of stockholders will be held each year on a date fixed by resolution of our Board of Directors. The first annual meeting of our stockholders after the spin-off is expected to be held in May 2009.
In order for a shareholder to bring, pursuant to our by-laws, nominations or other proposals before the 2009 annual stockholders meeting, the shareholder must provide written notice, delivered to our principal executive offices set forth on page 4, Attn: Corporate Secretary, no earlier than the close of business on the 120th day prior to the annual meeting and not later than the close of business on the later of the 90th day prior to the annual meeting or the 10th day following the day on which we make the first public announcement of the date of the annual meeting. Such notice must contain the specific information required by our by-laws regarding the nominee or proposal, including, but not limited to, name, address, class and number of shares held, information regarding the nominee or a description of the proposal and other specified matters.
You can obtain a copy of our by-laws without charge by writing to the Corporate Secretary at the address shown above.
125
Our indebtedness is expected to consist of the following after the spin-off:
(in millions) |
Revolving
Credit Facility |
Senior Unsecured
Loan |
Total | ||||||
Bank credit facilities and/or notes |
$ | 225 | $ | 75 | $ | 300 | |||
Outstanding |
100 | 75 | 175 | ||||||
Letters of credit outstanding |
10 | | 10 | ||||||
Unused commitments |
65 | | 65 |
We anticipate entering into one or more credit facilities, including a term loan and a revolving credit facility in the aggregate amount of approximately $300 million, in order to fund a cash dividend to FMC Technologies estimated to be approximately $175 million, after adjustments (assuming a spin-off date of July 31, 2008), to satisfy our working capital needs, to support letters of credit and to fund other general corporate requirements, including the financing of acquisitions. We are paying the dividend to FMC Technologies at their request as our sole stockholder prior to the spin-off. FMC Technologies believes that this dividend compensates it for the capital that it historically contributed to our businesses and that the payment of the dividend will result in the us having an appropriate level of indebtedness following the spin-off. FMC Technologies intends to use the proceeds from the dividend to repurchase stock and repay indebtedness. Our credit facilities will be utilized at the effective date of the spin-off to replace certain FMC Technologies letters of credit and surety bonds currently in place with respect to our obligations.
The terms and conditions for our credit facilities are expected to be substantially similar to those of other companies of similar standing.
We expect that the terms of the new credit facilities will contain certain customary events of default which generally give the banks the right to accelerate payments of outstanding debt, including without limitation:
|
failure to maintain required covenant ratios, as described below; |
|
failure to make a payment of principal, interest or fees within a grace period; and |
|
default, beyond any applicable grace period, on any of our aggregate indebtedness exceeding a certain amount. |
The bank credit facilities will contain certain customary financial covenants limiting our indebtedness (maximum leverage ratios) and requiring minimum EBITDA coverage of interest expense (minimum interest coverage ratios) as well as limitations on additional debt, dividends and asset sales.
126
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form 10 with respect to the shares of our common stock to be received by the stockholders of FMC Technologies in the spin-off. This information statement does not contain all of the information set forth in the Form 10 registration statement and the exhibits to the Form 10 registration statement. For further information with respect to JBT Corporation and the shares of our common stock, reference is hereby made to the Form 10 registration statement, including its exhibits. Statements made in this information statement relating to the contents of any contract, agreement or other documents are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document, with each such statement being qualified in all respects by reference to the document to which it refers. You may review a copy of the Form 10 registration statement, including its exhibits, at the SECs public reference room, located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of these materials from the SEC upon the payment of certain fees prescribed by the SEC. You may obtain further information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, copies of the Form 10 registration statement and related documents may be obtained through the SEC Internet address at http://www.sec.gov.
As a result of the spin-off, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934 and, in accordance with the Exchange Act, will file reports, proxy statements and other information with the SEC. After the spin-off, these reports, proxy statements and other information may be inspected and copied at the public reference facilities of the SEC listed above. You also will be able to obtain copies of this material from the public reference facilities of the SEC as described above, or inspect them without charge at the SECs web site.
In addition, we intend to furnish holders of our common stock with annual reports containing consolidated financial statements audited by an independent accounting firm.
127
INDEX TO COMBINED FINANCIAL STATEMENTS*
COMBINED FINANCIAL STATEMENTS OF
JOHN BEAN TECHNOLOGIES CORPORATION
Page | ||
Combined Financial Statements: |
||
Report of KPMG LLP, Independent Registered Public Accounting Firm |
F-2 | |
Combined Statements of Income for the Years Ended December 31, 2007, 2006 and 2005 |
F-3 | |
F-4 | ||
Combined Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005 |
F-5 | |
F-6 | ||
F-7 | ||
Financial Statement Schedule: |
||
F-30 | ||
Unaudited Interim Condensed Combined Financial Statements: |
||
Condensed Combined Statements of Income for the Three Months Ended March 31, 2008 and 2007 |
F-31 | |
Condensed Combined Balance Sheets as of March 31, 2008 and December 31, 2007 |
F-32 | |
Condensed Combined Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 |
F-33 | |
F-34 |
* | As described in the Risk Factors and elsewhere in the information statement, these financial statements should not be relied upon as an indication of John Bean Technologies Corporations future financial performance or expense structure. |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of FMC Technologies, Inc.:
We have audited the accompanying combined balance sheets of John Bean Technologies Corporation (formerly known as FMC FoodTech Inc., and consisting of the FoodTech and Airport Systems businesses of FMC Technologies, Inc.) as of December 31, 2007 and 2006, and the related combined statements of income, changes in owners equity, and cash flows for each of the years in the three-year period ended December 31, 2007. These combined financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 combined financial statements referred to above present fairly, in all material respects, the financial position of John Bean Technologies Corporation and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
As described in Note 7 to the combined financial statements, effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan Amendment of FASB Statements No. 87, 88, 106, and 132R , which changed the method of accounting for pension and postretirement benefits. As described in Note 1 to the combined financial statements, effective October 1, 2005, the Company adopted SFAS No. 123R, Share-Based Payment , modifying the method of accounting for share-based compensation.
/s/ KPMG LLP
Chicago, Illinois
April 30, 2008
F-2
JOHN BEAN TECHNOLOGIES CORPORATION
COMBINED STATEMENTS OF INCOME
Year Ended December 31, | ||||||||||||
(In millions) | 2007 | 2006 | 2005 | |||||||||
Revenue: |
||||||||||||
Product revenue |
$ | 864.6 | $ | 755.4 | $ | 738.0 | ||||||
Service revenue |
113.4 | 88.9 | 85.3 | |||||||||
Total revenue |
978.0 | 844.3 | 823.3 | |||||||||
Costs and expenses: |
||||||||||||
Cost of products |
657.4 | 567.9 | 562.0 | |||||||||
Cost of services |
83.4 | 63.2 | 62.8 | |||||||||
Selling, general and administrative expense |
153.8 | 146.7 | 138.9 | |||||||||
Research and development expense |
18.7 | 16.2 | 18.0 | |||||||||
Total costs and expenses |
913.3 | 794.0 | 781.7 | |||||||||
Other income (expense), net |
(3.6 | ) | 0.1 | 0.7 | ||||||||
Income before interest income, net and income taxes |
61.1 | 50.4 | 42.3 | |||||||||
Interest income, net |
0.5 | 0.4 | 0.1 | |||||||||
Income from continuing operations before income taxes |
61.6 | 50.8 | 42.4 | |||||||||
Provision for income taxes |
21.5 | 16.0 | 16.0 | |||||||||
Income from continuing operations |
40.1 | 34.8 | 26.4 | |||||||||
Discontinued operations (Note 2) |
||||||||||||
Loss from discontinued operations, net of income taxes |
(6.8 | ) | (0.2 | ) | (1.9 | ) | ||||||
Gain on disposition of discontinued operations, net of income taxes |
3.1 | | | |||||||||
Loss from discontinued operations, net of income taxes |
(3.7 | ) | (0.2 | ) | (1.9 | ) | ||||||
Net income |
$ | 36.4 | $ | 34.6 | $ | 24.5 | ||||||
The accompanying notes are an integral part of the combined financial statements.
F-3
JOHN BEAN TECHNOLOGIES CORPORATION
COMBINED BALANCE SHEETS
December 31, | ||||||||
(In millions) | 2007 | 2006 | ||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 9.5 | $ | 10.3 | ||||
Trade receivables, net of allowances of $6.2 in 2007 and $5.9 in 2006 |
179.2 | 151.0 | ||||||
Inventories (Note 3) |
147.2 | 110.2 | ||||||
Prepaid expenses |
4.1 | 4.2 | ||||||
Deferred income taxes (Note 6) |
6.1 | 6.3 | ||||||
Other current assets |
21.3 | 13.4 | ||||||
Assets of discontinued operations (Note 2) |
2.4 | 18.0 | ||||||
Total current assets |
369.8 | 313.4 | ||||||
Investments |
7.2 | 6.2 | ||||||
Property, plant and equipment, net (Note 4) |
126.8 | 119.8 | ||||||
Goodwill (Note 5) |
23.8 | 23.4 | ||||||
Intangible assets, net (Note 5) |
21.2 | 23.3 | ||||||
Other assets |
9.2 | 8.8 | ||||||
Deferred income taxes (Note 6) |
15.9 | 21.7 | ||||||
Total assets |
$ | 573.9 | $ | 516.6 | ||||
Liabilities and owners equity |
||||||||
Current liabilities: |
||||||||
Accounts payable, trade and other |
$ | 101.3 | $ | 83.5 | ||||
Advance payments and progress billings |
105.3 | 103.2 | ||||||
Accrued payroll |
33.7 | 28.7 | ||||||
Other current liabilities |
63.9 | 52.4 | ||||||
Liabilities of discontinued operations (Note 2) |
2.0 | 11.4 | ||||||
Total current liabilities |
306.2 | 279.2 | ||||||
Accrued pension benefits, less current portion (Note 7) |
19.2 | 16.9 | ||||||
Other liabilities |
34.3 | 30.5 | ||||||
Commitments and contingent liabilities (Note 12) |
||||||||
Owners equity: |
||||||||
Owners net investment |
218.3 | 197.6 | ||||||
Accumulated other comprehensive loss |
(4.1 | ) | (7.6 | ) | ||||
Total owners equity |
214.2 | 190.0 | ||||||
Total liabilities and owners equity |
$ | 573.9 | $ | 516.6 | ||||
The accompanying notes are an integral part of the combined financial statements.
F-4
JOHN BEAN TECHNOLOGIES CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
Year Ended December 31, | ||||||||||||
(In millions) | 2007 | 2006 | 2005 | |||||||||
Cash provided (required) by operating activities: |
||||||||||||
Net income |
$ | 36.4 | $ | 34.6 | $ | 24.5 | ||||||
Loss from discontinued operations, net of income taxes |
3.7 | 0.2 | 1.9 | |||||||||
Income from continuing operations |
40.1 | 34.8 | 26.4 | |||||||||
Adjustments to reconcile income to cash provided (required) by operating activities of continuing operations: |
||||||||||||
Depreciation |
19.8 | 18.8 | 17.5 | |||||||||
Amortization |
5.3 | 4.4 | 4.7 | |||||||||
Stock based compensation |
8.6 | 7.8 | 6.6 | |||||||||
Net (gain) loss on disposal of assets |
0.1 | (1.1 | ) | (3.1 | ) | |||||||
Other |
7.4 | 3.0 | 3.2 | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
Trade receivables, net |
(17.3 | ) | 14.1 | (12.7 | ) | |||||||
Inventories |
(32.0 | ) | (11.5 | ) | (12.5 | ) | ||||||
Accounts payable, trade and other |
13.6 | 6.4 | 4.1 | |||||||||
Advance payments and progress billings |
(8.4 | ) | 11.3 | (3.6 | ) | |||||||
Other assets and liabilities, net |
(5.3 | ) | 0.8 | 21.7 | ||||||||
Income taxes payable |
7.1 | 7.5 | 1.7 | |||||||||
Cash provided by operating activities of continuing operations |
39.0 | 96.3 | 54.0 | |||||||||
Net cash provided (required) by discontinued operationsoperating |
(5.3 | ) | (0.3 | ) | 5.6 | |||||||
Cash provided by operating activities |
33.7 | 96.0 | 59.6 | |||||||||
Cash provided (required) by investing activities: |
||||||||||||
Capital expenditures |
(23.0 | ) | (22.7 | ) | (21.6 | ) | ||||||
Proceeds from disposal of assets |
3.1 | 3.1 | 7.0 | |||||||||
Cash required by investing activities of continuing operations |
(19.9 | ) | (19.6 | ) | (14.6 | ) | ||||||
Cash provided (required) by discontinued operations, net of cash soldinvesting |
7.8 | (0.4 | ) | (0.1 | ) | |||||||
Cash required by investing activities |
(12.1 | ) | (20.0 | ) | (14.7 | ) | ||||||
Cash provided (required) by financing activities: |
||||||||||||
Transfers to parent, net |
(24.1 | ) | (68.8 | ) | (49.6 | ) | ||||||
Other |
0.9 | (0.1 | ) | (0.1 | ) | |||||||
Cash required by financing activities |
(23.2 | ) | (68.9 | ) | (49.7 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents |
0.8 | 0.5 | (0.5 | ) | ||||||||
(Decrease) increase in cash and cash equivalents |
(0.8 | ) | 7.6 | (5.3 | ) | |||||||
Cash and cash equivalents, beginning of year |
10.3 | 2.7 | 8.0 | |||||||||
Cash and cash equivalents, end of year |
$ | 9.5 | $ | 10.3 | $ | 2.7 | ||||||
The accompanying notes are an integral part of the combined financial statements.
F-5
JOHN BEAN TECHNOLOGIES CORPORATION
COMBINED STATEMENTS OF CHANGES IN OWNERS EQUITY
(In millions) |
Owners net
investment |
Accumulated
other comprehensive income (loss) |
Total |
Comprehensive
income (loss) |
||||||||||||
Balance at December 31, 2004 |
$ | 242.1 | $ | (15.9 | ) | $ | 226.2 | |||||||||
Net income |
24.5 | | 24.5 | $ | 24.5 | |||||||||||
Foreign currency translation adjustment |
| 3.5 | 3.5 | 3.5 | ||||||||||||
Net deferral of hedging losses (net of income taxes
|
| 1.0 | 1.0 | 1.0 | ||||||||||||
Net transfers to parent |
(42.7 | ) | | (42.7 | ) | |||||||||||
$ | 29.0 | |||||||||||||||
Balance at December 31, 2005 |
$ | 223.9 | $ | (11.4 | ) | $ | 212.5 | |||||||||
Net income |
34.6 | | 34.6 | $ | 34.6 | |||||||||||
Foreign currency translation adjustment |
| 1.6 | 1.6 | 1.6 | ||||||||||||
Net deferral of hedging losses (net of income taxes
|
| 0.5 | 0.5 | 0.5 | ||||||||||||
Minimum pension liability adjustment (net of income taxes of $0.1) |
| (0.3 | ) | (0.3 | ) | (0.3 | ) | |||||||||
Adjustment for adoption of SFAS No. 158 (net of income taxes of $1.1) |
| 2.0 | 2.0 | |||||||||||||
Net transfers to parent |
(60.9 | ) | | (60.9 | ) | |||||||||||
$ | 36.4 | |||||||||||||||
Balance at December 31, 2006 |
$ | 197.6 | $ | (7.6 | ) | $ | 190.0 | |||||||||
Net income |
36.4 | | 36.4 | $ | 36.4 | |||||||||||
Foreign currency translation adjustment |
| 5.5 | 5.5 | 5.5 | ||||||||||||
Net deferral of hedging gains (net of income taxes
|
| (0.9 | ) | (0.9 | ) | (0.9 | ) | |||||||||
Change in pension and other postretirement benefit losses (net of income taxes of $0.4) |
| (1.1 | ) | (1.1 | ) | (1.1 | ) | |||||||||
Net transfers to parent |
(15.7 | ) | | (15.7 | ) | |||||||||||
$ | 39.9 | |||||||||||||||
Balance at December 31, 2007 |
$ | 218.3 | $ | (4.1 | ) | $ | 214.2 | |||||||||
The accompanying notes are an integral part of the combined financial statements.
F-6
JOHN BEAN TECHNOLOGIES CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On October 29, 2007, FMC Technologies, Inc. (FMC Technologies or Owner) announced an intention to separate into two independent publicly-traded companies through the spin-off and distribution of 100% of the FoodTech and Airport Systems businesses. In order to effect the separation, FMC FoodTech Inc., a Delaware corporation wholly-owned by FMC Technologies, changed its name to John Bean Technologies Corporation (JBT Corporation or we) on April 28, 2008. Prior to the separation, the assets and liabilities of the FoodTech and Airport Systems businesses will be transferred to JBT Corporation. Upon spin-off, the common stock of JBT Corporation will be distributed to the shareholders of FMC Technologies. The transaction is expected to be tax-free to shareholders and will not require their vote.
FMC Technologies has operated the businesses it will transfer to JBT Corporation in the separation as internal units of FMC Technologies through various divisions and subsidiaries. Prior to the separation, FMC Technologies intends to contribute substantially all of its ownership interests in the businesses included in these combined financial statements to JBT Corporation with the remainder to be transferred shortly after the closing. We will enter into a Separation and Distribution Agreement (Separation Agreement) and several ancillary agreements with FMC Technologies to effect the separation and provide a framework for our relationship with FMC Technologies after the spin-off. These combined financial statements reflect the combined results of the businesses as if they had been contributed to JBT Corporation for all periods. We prepared combined financial statements, as opposed to consolidated financial statements, as the businesses of JBT Corporation are affiliated companies and do not have a parent-subsidiary relationship. This presentation incorporates the same principles used when preparing consolidated financial statements, including elimination of intercompany transactions. Subsequent to the separation, all of the businesses included in these combined financial statements will be consolidated subsidiaries or divisions of JBT Corporation.
JBT Corporation designs, manufactures, tests and services technologically sophisticated systems and products for, and provides services to, customers in the food processing and air transportation industries. We have manufacturing operations worldwide and are strategically located to facilitate delivery of our products and services to our customers. We report our results through two business segmentsJBT FoodTech and JBT AeroTech.
Basis of presentation Our combined financial statements have been prepared in United States dollars and in accordance with United States generally accepted accounting principles (GAAP) on a carve-out basis from the consolidated financial statements of FMC Technologies using the historical results of operations and bases of the assets and liabilities of the transferred businesses and including allocations from FMC Technologies. Allocated expenses include general and administrative services such as accounting, treasury, tax, legal, human resources, information technology and other corporate and infrastructure services. Many assets, liabilities and expenses could be specifically identified with JBT Corporation businesses or personnel and were directly allocated. To the extent amounts could not be specifically identified and allocated, we primarily used JBT Corporations proportion of total FMC Technologies revenue as a reasonable allocation method. Allocations have been determined on the basis of assumptions and estimates that management believes to be a reasonable reflection of JBT Corporations utilization of those services. These allocations and estimates, however, are not necessarily indicative of the assets, liabilities and expenses that would have resulted if JBT Corporation had operated as a separate entity in the past, or that may result in the future. For information relating to JBT Corporations relationship with FMC Technologies and services between JBT Corporation and FMC Technologies following the separation, see Note 10.
The combined financial statements do not reflect the debt or interest expense JBT Corporation might have incurred if it were a stand-alone entity. In addition, the combined financial statements may not be indicative of
F-7
the our combined financial position, operating results or cash flows in the future or what our financial position, operating results and cash flows would have been had JBT Corporation been a separate, stand-alone entity during the periods presented. The combined financial statements do not reflect any changes that will occur in our funding or operations as a result of separation and JBT Corporation becoming a stand-alone entity.
Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. We base our estimates on historical experience and on other assumptions that we believe to be relevant under the circumstances.
Revenue recognition Revenue is recognized when all of the following criteria are met:
|
there is evidence of a customer arrangement with a fixed or determinable value, |
|
delivery has occurred, and |
|
there is reasonable assurance of collectibility. |
Certain of our product sales recorded in the JBT AeroTech segment relate to long-term construction contracts and are recognized under the percentage of completion method. Under this method, revenue is recognized as work progresses on each contract. We primarily measure progress toward completion by units of work completed. Any expected losses are charged to earnings, in total, in the period the losses are identified.
Progress billings generally are issued contingent on completion of certain phases of the work as stipulated in the contract. Revenue in excess of progress billings on contracts amounted to $31.0 million and $27.3 million at December 31, 2007 and 2006, respectively. These unbilled receivables are reported in trade receivables on the combined balance sheets. Progress billings and cash collections in excess of revenue recognized on a contract are classified as advance payments and progress billings within current liabilities on the combined balance sheets.
Service revenue is recognized on a straight-line basis over the period of its underlying contract, unless another and more systematic basis is better representative of the pattern in which performance occurs. If current period revenue is dependent on future obligations, such revenue is deferred until performance is complete.
Some of our operating lease revenue is earned from full-service leases for which we are paid annual fixed rates plus, in some cases, payment based on production volumes. Revenue from production volumes is recognized when determinable and collectible.
Each customer arrangement is evaluated to determine the presence of multiple deliverables that represent separate elements of revenue recognition. For multiple-element revenue arrangements, such as the sale of equipment with a service agreement, we generally allocate the contract value to the various elements based on objective evidence of relative fair value for each element and recognize revenue consistent with the nature of each deliverable. Where separate deliverables are contractually contingent on future obligations, revenue is deferred until performance is complete for all contingent elements.
Cash management The majority of our cash resources are managed under a centralized system wherein receipts are deposited to the corporate accounts of FMC Technologies and disbursements are centrally funded. Accordingly, settlement of certain assets and liabilities arising from common services or activities provided by FMC Technologies and certain related-party transactions are reflected as owners net investment contributions or distributions to FMC Technologies.
We hold bank accounts for certain foreign operations that are presented in our cash and cash equivalents line on the balance sheet. Our cash is held by high credit quality financial institutions and all of our cash equivalents are short-term, highly liquid securities, with original maturities of three months or less.
F-8
Trade receivables We provide an allowance for doubtful accounts on trade receivables equal to the estimated uncollectible amounts. This estimate is based on historical collection experience and a specific review of each customers trade receivable balance.
Inventories Inventories are stated at the lower of cost or net realizable value, which includes an estimate for excess and obsolete inventories. Inventory costs include those costs directly attributable to products, including all manufacturing overhead but excluding costs to distribute. Cost is determined on the last-in, first-out (LIFO) basis for all domestic inventories, except certain inventories relating to construction-type contracts, which are stated at the actual production cost incurred to date, reduced by the portion of these costs identified with revenue recognized. The first-in, first-out (FIFO) method is used to determine the cost for all other inventories.
Impairment of long-lived and intangible assets Long-lived assets, including property, plant and equipment, identifiable intangible assets being amortized and capitalized software costs are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that an impairment loss has occurred, the loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value.
Property, plant, and equipment Property, plant, and equipment is recorded at cost. Depreciation for financial reporting purposes is provided principally on the straight-line basis over the estimated useful lives of the assets (land improvements20 to 35 years, buildings20 to 50 years; and machinery and equipment3 to 20 years). Gains and losses are reflected in income upon the sale or retirement of assets. Expenditures that extend the useful lives of property, plant, and equipment are capitalized and depreciated over the estimated new remaining life of the asset.
Capitalized software costs Other assets include the capitalized cost of internal use software (including Internet web sites). The assets are stated at cost less accumulated amortization and totaled $5.6 million and $6.8 million at December 31, 2007 and 2006, respectively. These software costs include significant purchases of software and internal and external costs incurred during the application development stage of software projects. These costs are amortized on a straight-line basis over the estimated useful lives of the assets. For internal use software, the useful lives range from three to ten years. For Internet web site costs, the estimated useful lives do not exceed three years.
Goodwill and other intangible assets Goodwill is not subject to amortization but is tested for impairment on an annual basis (or more frequently if impairment indicators arise) under the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. We have established October 31 as the date of our annual test for impairment of goodwill. Impairment losses are calculated at the reporting unit level, and represent the excess of the carrying value of reporting unit goodwill over its implied fair value. The implied fair value of goodwill is determined by a two-step process. The first compares the fair value of the reporting unit (measured as the present value of expected future cash flows) to its carrying amount. If the fair value of the reporting unit is less than its carrying amount, a second step is performed. In this step, the fair value of the reporting unit is allocated to its assets and liabilities to determine the implied fair value of goodwill, which is used to measure the impairment loss. We have not recognized any impairment for the years ended December 31, 2007, 2006 or 2005 as the fair values of our reporting units with goodwill balances exceed our carrying amounts.
Our acquired intangible assets are being amortized on a straight-line basis over their estimated useful lives, which generally range from 7 to 40 years. None of our acquired intangible assets have indefinite lives.
Debt FMC Technologies debt has not been allocated to the JBT Corporation combined financial statements. See Note 10 for a further description of the financing arrangements relating to the separation.
F-9
Income taxes The provision for income taxes has been computed as if JBT Corporation were a stand-alone entity and filed separate tax returns. The provision was impacted by FMC Technologies tax structure and strategies, which were designed to optimize an overall tax position and not that of JBT as part of its multiple businesses. Current income taxes are provided on income reported for financial statement purposes, adjusted for transactions that do not enter into the computation of income taxes payable in the same year. Deferred tax assets and liabilities are measured using enacted tax rates for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is established whenever management believes that it is more likely than not that deferred tax assets may not be realizable.
Income taxes are not provided on our equity in undistributed earnings of foreign subsidiaries or affiliates when it is managements intention that such earnings will remain invested in those companies. Taxes are provided on such earnings in the year in which the decision is made to repatriate the earnings.
Pension and postretirement benefits JBT Corporation employees are eligible to participate in pension and postretirement benefit plans sponsored by FMC Technologies. As JBT Corporation participated in FMC Technologies plans, we accounted for our pension and postretirement benefit costs under the multiemployer plan approach and have recognized the pension and postretirement benefit costs allocated to us by FMC Technologies as expense, with a corresponding contribution in owners net investment. The expense has been allocated to us based on the service cost from JBT Corporation employees and other FMC Technologies employees who provided support services to JBT Corporation. Certain of JBT Corporations foreign subsidiaries provide company or government sponsored benefit plans to which we contribute. We have presented the obligations and costs for foreign benefit plans that are exclusive to JBT Corporation employees in our combined financial statements.
Stock-based employee compensation Stock-based compensation represents the costs related to FMC Technologies share-based awards granted to employees of JBT Corporation. Prior to October 1, 2005, we applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under the fair value recognition provisions of SFAS No. 123, stock-based compensation cost is measured based on the market price at the grant date and the number of shares awarded. The compensation cost for each award is recognized ratably over the requisite service period. On October 1, 2005, we adopted the provisions of SFAS No. 123R, Share-Based Payment, which modified our recognition of share-based compensation by (i) incorporating an estimate of forfeitures in the calculation of current expense to record and (ii) adjusting the requisite service period for new awards to reflect the lesser of the stated vesting period or the period until the employee becomes retirement eligible.
Owners net investment Owners net investment on the combined balance sheets represents FMC Technologies historical investment of capital into JBT Corporation, JBT Corporations accumulated net earnings after taxes, and the net effect of transactions with and allocations from FMC Technologies.
Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss) consisted of the following:
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Cumulative foreign currency translation adjustments |
$ | (2.1 | ) | $ | (7.6 | ) | ||
Cumulative deferral of hedging gains (losses), net of tax of $0.1 and ($0.4), respectively |
(0.2 | ) | 0.7 | |||||
Cumulative deferral of pension losses, net of tax of $0.7 and $0.3, respectively |
(1.8 | ) | (0.7 | ) | ||||
Accumulated other comprehensive loss |
$ | (4.1 | ) | $ | (7.6 | ) | ||
F-10
Foreign currency Financial statements of operations for which the U.S. dollar is not the functional currency are translated to the U.S. dollar prior to consolidation. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date, while income statement accounts are translated at the average exchange rate for each period. For these operations, translation gains and losses are recorded as a component of accumulated other comprehensive income (loss) in owners equity until the foreign entity is sold or liquidated.
Derivative financial instruments Derivatives are recognized in the combined balance sheets at fair value, with classification as current or non-current based upon the maturity of the derivative instrument. Changes in the fair value of derivative instruments are recorded in current earnings or deferred in accumulated other comprehensive income (loss), depending on the type of hedging transaction and whether a derivative is designated as, and is effective as, a hedge.
Hedge accounting is only applied when the derivative is deemed to be highly effective at offsetting changes in anticipated cash flows of the hedged item or transaction. Changes in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive income (loss) until the underlying transactions are recognized in earnings. At such time related deferred hedging gains or losses are also recorded in operating earnings on the same line as the hedged item. Effectiveness is assessed at the inception of the hedge and on a quarterly basis. Effectiveness of forward contract cash flow hedges are assessed based solely on changes in fair value attributable to the change in the spot rate. The change in the fair value of the contract related to the change in forward rates is excluded from the assessment of hedge effectiveness. Changes in this excluded component of the derivative instrument, along with any ineffectiveness identified, are recorded in operating earnings as incurred. We document our risk management strategy and hedge effectiveness at the inception of and during the term of each hedge. We also use forward contracts to hedge foreign currency assets and liabilities. These contracts are not designated as hedges; therefore, the changes in fair value of these contracts are recognized in other income (expense), net as they occur and offset gains or losses on the remeasurement of the related asset or liability.
Cash flows from derivative contracts are reported in the combined statements of cash flows in the same categories as the cash flows from the underlying transactions.
Certain of JBT Corporations exposures to foreign currency exchange rate fluctuations have been netted with those of other FMC Technologies business and hedged as described above on a combined basis. A portion of the gains and losses related to these non-hedge derivatives has been allocated to JBT Corporation based on the proportion of its foreign currency exposures to FMC Technologies consolidated exposures.
Recently issued accounting pronouncements In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective in fiscal years beginning after November 15, 2007. Delayed application is permitted for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008. We adopted SFAS No. 157 on January 1, 2008 for financial assets and financial liabilities and have chosen to delay the adoption for nonfinancial assets and nonfinancial liabilities until January 1, 2009. We do not believe that the final adoption of this pronouncement will have a material effect on our results of operations or financial position.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure certain financial instruments and other items at fair value. Under SFAS No. 159, the decision to measure items at fair value is made at specified election dates on an irrevocable instrument-by-instrument basis. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. We did not elect this option of measurement on any of our financial instruments, and therefore, the adoption of SFAS No. 159 on January 1, 2008 did not have a significant impact on our financial position, results of operations or cash flows.
F-11
In December 2007, the FASB issued SFAS No. 141R (revised 2007), Business Combinations, replacing SFAS No. 141. SFAS No. 141R changes or clarifies the acquisition method of accounting for acquired contingencies, transaction costs, step acquisitions, restructuring costs and other major areas affecting how the acquirer recognizes and measures the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. In addition, this pronouncement amends previous interpretations of intangible asset accounting by requiring the capitalization of in-process research and development and proscribing impacts to current income tax expense (rather than a reduction to goodwill) for changes in deferred tax benefits related to a business combination. SFAS No. 141R will be applied prospectively for business combinations occurring after December 31, 2008.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS No. 160 will standardize the accounting for and reporting of minority interests in the financial statements, which will be presented as noncontrolling interests and classified as a component of equity. In addition, statements of operations will report consolidated net income before an allocation to both the parent and the noncontrolling interest. This new presentation will have an impact on the basic financial statements as well as the disclosures to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling interests. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. We have not yet determined the impact, if any, that the adoption of SFAS No. 160 will have on our results of operations or financial position.
NOTE 2. DISCONTINUED OPERATIONS
We report discontinued operations in accordance with the guidance of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, we report businesses or asset groups as discontinued operations when we commit to a plan to divest the business or asset group and the sale of the business or asset group is deemed probable within the next 12 months. During the fourth quarter of 2006, our Harvester Systems (Harvester) business from the JBT FoodTech segment met these requirements. The final sale was completed during the first quarter of 2008. Additionally, our Food Handling Equipment business (FHE) from the JBT FoodTech segment qualified as a discontinued operation upon its sale in the third quarter of 2007. We recorded a gain of $3.1 million, net of tax of $1.1 million, on the sale of FHE. Proceeds from the sale of FHE totaled $8.0 million. Both Harvester and FHE results have been reported as discontinued operations for all periods presented.
The combined statements of income included the following in discontinued operations:
Year Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenue |
$ | 23.2 | $ | 37.2 | $ | 40.0 | ||||||
Loss before income taxes |
$ | (7.3 | ) | $ | (0.3 | ) | $ | (2.1 | ) | |||
Income tax provision (benefit) |
(0.5 | ) | (0.1 | ) | (0.2 | ) | ||||||
Gain on disposition of discontinued operations, net of income taxes |
3.1 | | | |||||||||
Loss from discontinued operations |
$ | (3.7 | ) | $ | (0.2 | ) | $ | (1.9 | ) | |||
During 2007, we recorded restructuring expense and provisions for doubtful accounts and inventory obsolescence totaling $4.5 million related to Harvester.
F-12
The major classes of assets and liabilities of businesses reported as discontinued operations included in the accompanying combined balance sheets are shown below:
Year Ended December 31, | ||||||
2007 | 2006 | |||||
(In millions) | ||||||
Assets: |
||||||
Trade receivables, net |
$ | 1.5 | $ | 7.9 | ||
Inventories |
0.9 | 7.6 | ||||
Property, plant and equipment, net |
| 1.3 | ||||
Other assets |
| 1.2 | ||||
Assets of discontinued operations |
$ | 2.4 | $ | 18.0 | ||
Liabilities: |
||||||
Accounts payable, trade and other |
$ | 0.2 | $ | 2.6 | ||
Advance payments and progress billings |
0.1 | 3.4 | ||||
Other liabilities |
1.7 | 5.4 | ||||
Liabilities of discontinued operations |
$ | 2.0 | $ | 11.4 | ||
NOTE 3. INVENTORIES
Inventories consisted of the following:
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Raw materials |
$ | 63.9 | $ | 53.1 | ||||
Work in process |
59.1 | 46.5 | ||||||
Finished goods |
76.5 | 57.2 | ||||||
Gross inventories before LIFO reserves and valuation adjustments |
199.5 | 156.8 | ||||||
LIFO reserves and valuation adjustments |
(52.3 | ) | (46.6 | ) | ||||
Net inventories |
$ | 147.2 | $ | 110.2 | ||||
Inventories accounted for under the LIFO method totaled $105.6 million and $91.1 million at December 31, 2007 and 2006, respectively. The current replacement costs of LIFO inventories exceeded their recorded values by $40.4 million and $37.9 million at December 31, 2007 and 2006, respectively. During 2006, we reduced certain LIFO inventories which were carried at costs lower than the current replacement costs. The result was a decrease in cost of sales of approximately $0.1 million. There were no reductions of LIFO inventory in 2007 or 2005.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Land and land improvements |
$ | 6.1 | $ | 5.7 | ||||
Buildings |
55.5 | 53.1 | ||||||
Machinery and equipment |
264.4 | 238.2 | ||||||
Construction in process |
8.8 | 6.8 | ||||||
334.8 | 303.8 | |||||||
Accumulated depreciation |
(208.0 | ) | (184.0 | ) | ||||
Property, plant and equipment, net |
$ | 126.8 | $ | 119.8 | ||||
F-13
Depreciation expense was $19.8 million, $18.8 million, and $17.5 million in 2007, 2006, and 2005,
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
Goodwill The carrying amount of goodwill by business segment was as follows:
December 31, | ||||||
2007 | 2006 | |||||
(In millions) | ||||||
JBT FoodTech |
$ | 15.7 | $ | 15.4 | ||
JBT AeroTech |
8.1 | 8.0 | ||||
Total goodwill |
$ | 23.8 | $ | 23.4 | ||
Certain of our goodwill balances are subject to foreign currency translation adjustments. Fluctuations in exchange rates accounted for the entire increase in the total goodwill balance for 2007 and 2006.
Intangible assets The components of intangible assets were as follows:
December 31, | ||||||||||||
2007 | 2006 | |||||||||||
Gross
carrying amount |
Accumulated
amortization |
Gross
carrying amount |
Accumulated
amortization |
|||||||||
(In millions) | ||||||||||||
Customer lists |
$ | 15.2 | $ | 6.6 | $ | 15.0 | $ | 6.4 | ||||
Patents and acquired technology |
24.3 | 21.8 | 23.4 | 19.5 | ||||||||
Trademarks |
16.3 | 6.2 | 15.8 | 5.0 | ||||||||
Total intangible assets |
$ | 55.8 | $ | 34.6 | $ | 54.2 | $ | 30.9 | ||||
All of our acquired identifiable intangible assets are subject to amortization and, where applicable, foreign currency translation adjustments. We recorded $2.6 million in amortization expense related to acquired intangible assets during each of the years in the three year period ended December 31, 2007. Annual amortization expense is expected to be $2.5 million in 2008 and $2.0 million during the years 2009 through 2012.
NOTE 6. INCOME TAXES
The operating results of JBT Corporation have been included in FMC Technologies U.S. consolidated income tax returns and in certain state and foreign tax returns of FMC Technologies and its domestic affiliates. In certain instances, income of JBT Corporation or its domestic subsidiaries is reported on separate state income tax returns of the domestic subsidiaries. In addition, foreign operating results of JBT Corporation have been included in the tax returns of foreign affiliates of FMC Technologies. As long as FMC Technologies continues to own at least 80% of the voting power and value of JBT Corporations outstanding capital stock, JBT Corporation will continue to be included in the U.S. consolidated income tax returns of FMC Technologies and certain state and foreign income tax returns of FMC Technologies and its affiliates.
The provision for income taxes in JBT Corporations combined financial statements has been prepared as if JBT Corporation was a stand-alone entity and filed separate tax returns.
F-14
Domestic and foreign components of income before income taxes are shown below:
Year Ended December 31, | |||||||||
2007 | 2006 | 2005 | |||||||
(In millions) | |||||||||
Domestic |
$ | 16.0 | $ | 11.4 | $ | 9.6 | |||
Foreign |
45.6 | 39.4 | 32.8 | ||||||
Income before income taxes |
$ | 61.6 | $ | 50.8 | $ | 42.4 | |||
The provision for income taxes consisted of:
Year Ended December 31, | |||||||||||
2007 | 2006 | 2005 | |||||||||
(In millions) | |||||||||||
Current: |
|||||||||||
Federal |
$ | | $ | | $ | | |||||
State |
0.5 | 0.8 | 0.5 | ||||||||
Foreign |
15.7 | 9.5 | 10.4 | ||||||||
Total current |
16.2 | 10.3 | 10.9 | ||||||||
Deferred: |
|||||||||||
(Decrease) increase in the valuation allowance for deferred tax assets |
(0.2 | ) | (0.5 | ) | 1.7 | ||||||
Other deferred tax expense |
5.5 | 6.2 | 3.4 | ||||||||
Total deferred |
5.3 | 5.7 | 5.1 | ||||||||
Provision for income taxes |
$ | 21.5 | $ | 16.0 | $ | 16.0 | |||||
Significant components of our deferred tax assets and liabilities were as follows:
December 31, | ||||||||
(In millions) | 2007 | 2006 | ||||||
Deferred tax assets attributable to: |
||||||||
Accrued expenses |
$ | 15.0 | $ | 15.9 | ||||
Foreign tax credit carryforwards |
10.5 | 12.0 | ||||||
Accrued pension and other postretirement benefits |
2.6 | 2.4 | ||||||
Stock-based compensation |
3.3 | 3.5 | ||||||
Net operating loss carryforwards |
2.1 | 3.0 | ||||||
Inventories |
2.8 | 2.7 | ||||||
Foreign exchange |
4.1 | 2.8 | ||||||
Deferred tax assets |
40.4 | 42.3 | ||||||
Valuation allowance |
(2.1 | ) | (2.3 | ) | ||||
Deferred tax assets, net of valuation allowance |
38.3 | 40.0 | ||||||
Deferred tax liabilities attributable to: |
||||||||
Liquidation of subsidiary for income tax purposes |
12.7 | 13.3 | ||||||
Property, plant and equipment, goodwill and other assets |
11.7 | 7.7 | ||||||
Deferred tax liabilities |
24.4 | 21.0 | ||||||
Net deferred tax assets |
$ | 13.9 | $ | 19.0 | ||||
Deferred tax liabilities of $1.2 million and $1.0 million as of December 31, 2007 and 2006, respectively, are included in other current liabilities in the combined balance sheets. Additionally, other liabilities include $6.9 million and $8.0 million of non-current deferred tax liabilities as of December 31, 2007 and 2006, respectively.
F-15
At December 31, 2007 and 2006 the carrying amount of net deferred tax assets and the related valuation allowance included the impact of foreign currency translation adjustments.
The deferred tax assets and liabilities presented have been determined as if JBT Corporation was a stand-alone entity and filed separate tax returns. However, certain deferred tax assets and liabilities, such as foreign tax credit carryforwards, have actually been utilized in consolidated or combined filings made with FMC Technologies. Therefore, pursuant to applicable tax law, deferred income tax assets and liabilities actually distributed upon spin-off may vary from the amounts presented herein.
The effective income tax rate was different from the statutory U.S. federal income tax rate due to the following:
Year Ended December 31, | |||||||||
2007 | 2006 | 2005 | |||||||
Statutory U.S. federal income tax rate |
35 | % | 35 | % | 35 | % | |||
Net difference resulting from: |
|||||||||
Foreign earnings subject to different tax rates |
(1 | ) | (2 | ) | (2 | ) | |||
Tax on foreign intercompany dividends and deemed dividends for tax purposes |
1 | | 1 | ||||||
Export tax benefits |
| (1 | ) | (1 | ) | ||||
Nondeductible expenses |
1 | 1 | 1 | ||||||
Change in valuation allowance |
| (1 | ) | 4 | |||||
Other |
(1 | ) | (1 | ) | | ||||
Total difference |
(0 | ) | (4 | ) | 3 | ||||
Effective income tax rate |
35 | % | 31 | % | 38 | % | |||
U.S. income taxes have not been provided on undistributed earnings of foreign subsidiaries. The cumulative balance of these undistributed earnings was $75.4 million at December 31, 2007. It is not practicable to determine the amount of applicable taxes that would be incurred if any of these earnings were repatriated. However, we expect that earnings of foreign subsidiaries generated after the spin-off will not remain indefinitely invested in foreign operations. Consequently, we expect that the provision for income taxes for periods after the spin-off will reflect U.S. income taxes on such earnings, regardless of whether they are actually distributed.
In June 2006, the FASB issued Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, which changes the threshold for recognizing the benefit of an uncertain tax position, prescribes a method for measuring the tax benefit to be recorded and requires incremental quantitative and qualitative disclosures about uncertain tax positions. Under FIN No. 48, a tax position that meets a more likely than not recognition threshold, based solely on the technical merits of the position, will be recognized in the financial statements. The tax position is measured at the largest amount of benefit that is more likely than not to be realized upon ultimate settlement. The guidance was effective for the first fiscal year beginning after December 15, 2006, and the impact of adoption did not have a material effect on our results of operations or financial position. It is our policy to classify interest expense and penalties recognized on underpayments of income taxes as income tax expense.
The following tax years remain subject to examination in the following jurisdictions:
United States |
2002 2007 | |
Brazil |
2001 2007 | |
Sweden |
2004 2007 | |
Belgium |
2005 2007 | |
Spain |
2002 2007 |
F-16
NOTE 7. PENSIONS AND POSTRETIREMENT AND OTHER BENEFIT PLANS
Shared Plans
JBT Corporation employees are eligible to participate in pension and other postretirement benefit plans sponsored by FMC Technologies. For countries with shared plans such as the U.S. and the United Kingdom, where our employees participated in the FMC Technologies plans, we have accounted for our pension and other postretirement benefit costs under the multiemployer approach. Accordingly, we have recognized the pension and other postretirement benefit costs allocated to us by FMC Technologies as an expense, with a corresponding contribution in owners net investment. Upon completion of the spin-off, JBT Corporation and FMC Technologies will split the obligations and assets of the shared plans in the U.S. under the terms of the Separation Agreement. After the spin-off and establishment of a separate JBT Corporation pension and other retirement benefit plans in the U.S., we may be required or elect to contribute to those plans.
The funded status and unrecognized actuarial gains and losses for the FMC Technologies U.S. and U.K. shared plans as of December 31, 2007 were as follows:
Funded
(Unfunded) Status |
Unrecognized
Actuarial (Gains) & Losses |
|||||||
(In millions) | ||||||||
U.S. qualified pension plan |
$ | 11.9 | $ | 36.7 | ||||
U.S. non-qualified pension plan |
$ | (38.9 | ) | $ | 8.8 | |||
U.S. other postretirement benefit plans |
$ | (19.7 | ) | $ | (12.0 | ) | ||
U.K. qualified pension plan |
$ | 4.9 | $ | 38.3 | ||||
The funded status and actuarial gains and losses will be adjusted at the spin-off date based on the results of actuarial valuations.
Pension and other postretirement benefit costs associated with JBT Corporation employees in the shared plans were as follows for each of the three years ended December 31, 2007:
December 31, | |||||||||||
(In millions) | 2007 | 2006 | 2005 | ||||||||
Net annual benefit cost (income): |
|||||||||||
Pensions |
$ | 6.5 | $ | 6.6 | $ | 5.8 | |||||
Other postretirement benefits |
$ | (0.4 | ) | $ | (0.4 | ) | $ | | |||
F-17
JBT Corporation Plans
We also have pension plans in locations populated solely by JBT Corporation employees, including our plans in Sweden and Belgium. We have adopted the provisions of SFAS No. 87, Employers Accounting for Pensions, as amended by SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans , an amendment of FASB Statements No. 87, 88, 106, and 132(R) for these plans. The funded status of these foreign pension plans, together with the associated balances recognized in our combined financial statements as of December 31, 2007 and 2006, were as follows:
F-18
The following table summarizes the components of net periodic benefit cost:
(In millions) | 2007 | 2006 | 2005 | |||||||||
Components of net annual benefit cost: |
||||||||||||
Service cost |
$ | 0.8 | $ | 0.8 | $ | 0.7 | ||||||
Interest cost |
1.2 | 1.0 | 1.0 | |||||||||
Expected return on plan assets |
(0.4 | ) | (0.3 | ) | (0.3 | ) | ||||||
Amortization of net actuarial loss |
| | 0.1 | |||||||||
Net annual benefit cost |
$ | 1.6 | $ | 1.5 | $ | 1.5 | ||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income: |
||||||||||||
Net actuarial loss |
$ | 1.5 | ||||||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 3.1 | ||||||||||
The estimated net actuarial loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $0.1 million. Unrecognized actuarial losses are amortized on a straight-line basis over the average remaining service period of employees eligible to receive benefits under the plan.
Key assumptions The following weighted-average assumptions were used to determine the benefit obligations:
Pensions | ||||||
2007 | 2006 | |||||
Discount rate |
4.86 | % | 4.63 | % | ||
Rate of compensation increase |
3.46 | % | 3.36 | % |
The following weighted-average assumptions were used to determine net periodic benefit cost:
Pensions | |||||||||
2007 | 2006 | 2005 | |||||||
Discount rate |
4.63 | % | 4.35 | % | 4.94 | % | |||
Rate of compensation increase |
3.36 | % | 3.42 | % | 3.56 | % | |||
Expected rate of return on plan assets |
4.50 | % | 4.00 | % | 4.50 | % |
Plan assets For plans that are funded, our pension plan assets are invested entirely in insurance contracts. This strategy is conservative, emphasizing the preservation of capital to fund future payments. With a low asset base relative to the obligation and a conservative investment strategy, we may be required to make cash contributions to the plans to fund benefit payouts. Our estimate of expected rate of return on plan assets is based primarily on the historical experience of investment returns allocated by the insurance company.
Contributions We expect to contribute approximately $1.5 million to our JBT Corporation pension plans in 2008.
F-19
Estimated future benefit payments The following table summarizes expected benefit payments from our JBT Corporation pension plans through 2017. Actual benefit payments may differ from expected benefit payments.
(In millions) | Pensions | ||
2008 |
$ | 1.2 | |
2009 |
1.8 | ||
2010 |
1.4 | ||
2011 |
2.1 | ||
2012 |
2.6 | ||
2013-2017 |
9.7 |
Savings Plans
U.S. employees and some international employees of JBT Corporation participate in defined contribution savings plans sponsored by FMC Technologies. These plans generally provide either a specified percent of pay or a matching contribution on participating employees voluntary contributions. Additionally, certain highly compensated employees participate in a non-qualified deferred compensation plan, which also allows for company matching contributions up to predetermined limits. Expenses from the defined contribution savings plans were allocated to us by FMC Technologies. Our portion of the expense for matching contributions was $4.4 million, $4.1 million and $4.1 million in 2007, 2006 and 2005, respectively. As of December 31, 2007 and 2006, we had investments for the non-qualified deferred compensation plan totaling $7.0 million and $5.9 million, respectively, recorded at their fair market value.
NOTE 8. STOCK-BASED COMPENSATION
JBT Corporations stock-based compensation reflected awards for FMC Technologies stock options and nonvested stock (also known as restricted stock) granted to JBT Corporation employees, as well as an allocation of the expense from awards granted to FMC Technologies corporate staff and directors. The stock-based compensation expense and the corresponding income tax benefits allocated for each of the years in the three year period ended December 31, 2007 were as follows:
(In millions) | 2007 | 2006 | 2005 | ||||||
Stock-based compensation expense |
|||||||||
Restricted stock |
$ | 8.6 | $ | 7.2 | $ | 5.1 | |||
Stock options |
| 0.6 | 1.5 | ||||||
Total stock-based compensation expense |
$ | 8.6 | $ | 7.8 | $ | 6.6 | |||
Allocated income tax benefits related to stock-based compensation expense |
$ | 3.2 | $ | 3.0 | $ | 2.6 |
Incentive Compensation and Stock Plan Stock-based awards have been granted under the provisions of the FMC Technologies, Inc. Incentive Compensation and Stock Plan (the FMC Technologies Plan) which provides certain incentives and awards to officers, employees, directors and consultants of FMC Technologies or its affiliates. The FMC Technologies Plan allows the Board of Directors of FMC Technologies (the Board) to make various types of awards to non-employee directors and the Compensation Committee (the Committee) of the Board to make various types of awards to other eligible individuals. Awards include management incentive awards, common stock, stock options, stock appreciation rights, restricted stock and stock units.
Management incentive awards may be awards of cash, common stock options, restricted stock or a combination thereof. Grants of common stock options may be incentive and/or nonqualified stock options. Under the FMC Technologies Plan, the exercise price for options cannot be less than the market value of FMC Technologies common stock at the date of grant. Options vest in accordance with the terms of the award as determined by the Committee, which is generally after three years of service, and expire not later than 10 years
F-20
after the grant date. Restricted stock grants specify any applicable performance goals, the time and rate of vesting and such other provisions as determined by the Committee. Restricted stock grants generally vest after three to four years of service. Additionally, most awards vest immediately upon a change of control as defined in the FMC Technologies Plan agreement. A change of control is deemed to have occurred if (i) an individual or group acquires 20% or more of FMC Technologies then outstanding stock, (ii) a sale or other disposition of all or substantially all of FMC Technologies assets is consummated, (iii) a reorganization or merger is completed resulting in the shareholders of FMC Technologies immediately prior to the transaction holding 60% or less of the shares of the newly created corporation or (iv) a majority of the Board is replaced by means of an election contest or solicitation of proxies.
An aggregate of 33.0 million shares of FMC Technologies common stock were authorized for awards under the FMC Technologies Plan for employees of FMC Technologies and JBT Corporation. Currently, FMC Technologies holds treasury shares that it uses for issuances under its employee stock plans. JBT Corporation does not have treasury shares and expects to issue new shares to satisfy its obligations under employee stock plans. See Impact of Separation later in this footnote for additional discussion of expected incentive compensation and stock plans of JBT Corporation.
Restricted Stock A summary of the restricted stock awards of FMC Technologies held by JBT Corporation employees as of December 31, 2007 and changes during the year are presented below:
(Number of restricted shares of FMC Technologies, Inc. in thousands) |
Shares |
Weighted-average
grant date fair value |
||||
Nonvested at December 31, 2006 |
690 | $ | 17.62 | |||
Granted |
153 | $ | 32.46 | |||
Vested / Settled |
(213 | ) | $ | 12.85 | ||
Forfeited |
(23 | ) | $ | 19.40 | ||
Nonvested at December 31, 2007 |
607 | $ | 22.96 | |||
In 2007, FMC Technologies granted time-based restricted stock awards, as well as awards with performance and market conditions to JBT Corporation employees. The vesting period for these awards is three years from the grant date.
For current year performance and market-based awards, the payout was dependent upon FMC Technologies EBITDA, return on investment and total shareholder value performance relative to a peer group of companies from the energy sector for the year ending December 31, 2007. Based on results for the performance period, the payout to JBT Corporation employees will be 26,000 shares at the vesting date in January 2010. Compensation cost for these awards has been calculated using the fair market value on the grant date for performance-based awards, as estimated using a Monte Carlo simulation for market-based awards.
The following summarizes values for restricted stock activity in each of the years in the three year period ended December 31, 2007:
2007 | 2006 | 2005 | |||||||
Weighted average grant date fair value of restricted stock awards granted |
$ | 32.46 | $ | 24.36 | $ | 16.84 | |||
Fair value of restricted stock vested (in millions) |
$ | 6.8 | $ | 3.7 | $ | 1.5 |
On January 2, 2008, restricted stock awards vested and approximately 230 thousand were issued to JBT Corporation employees.
Stock Options FMC Technologies has not granted options in 2007, 2006 or 2005. Options issued prior to these years are still outstanding. There were no forfeitures or expirations for JBT Corporation employees during the year ended December 31, 2007.
F-21
The following shows stock option activity of JBT Corporation employees for the year ended December 31, 2007:
(Number of stock options of FMC Technologies, Inc.
|
Shares
under option |
Weighted-
average exercise price |
Weighted-
average remaining contractual term |
Aggregate
Intrinsic Value |
|||||||
Outstanding at December 31, 2006 |
672 | $ | 10.42 | ||||||||
Exercised |
(355 | ) | $ | 10.53 | |||||||
Outstanding and exercisable at December 31, 2007 |
317 | $ | 10.29 | 4.8 years | $ | 14.7 | |||||
The aggregate intrinsic value reflects the value to the option holders, or the difference between the market price as of December 31, 2007 and the exercise price of the option, which would have been received by the option holders had all options been exercised as of that date. While the intrinsic value is representative of the value to be gained by the option holders, this value is not indicative of compensation expense allocated to us. Compensation expense on stock options was calculated on the date of grant using the fair value of the options, as determined by a Black-Scholes option pricing model and the number of options granted, reduced by estimated forfeitures.
The intrinsic value of options exercised for each of the years in the three year period ended December 31, 2007 was $11.3 million, $7.0 million and $4.4 million, respectively.
Key assumptions Compensation expense allocated to us from FMC Technologies includes market-based restricted stock amortization from grants in 2007 and 2006. A Monte Carlo simulation was used to determine the fair value of market-based awards utilized the following weighted-average assumptions.
2007 | 2006 | |||||
Risk-free interest rate |
4.8 | % | 4.8 | % | ||
Stock volatility |
23.0 | % | 17.7 | % | ||
Expected life in years |
3 | 3 | ||||
Expected dividend yield |
| |
The expected volatility is based on historical information on FMC Technologies share price as well as data from comparable companies. The expected life in years assumption is based primarily on historical vesting experience.
Impact of Separation The JBT Corporation Board of Directors is expected to adopt an incentive compensation and stock plan providing future awards to JBT Corporation employees.
We expect to treat outstanding FMC Technologies options and restricted stock as follows:
|
all stock option awards and restricted stock awards held by FMC Technologies employees and directors will, at the spin-off, be substituted with new FMC Technologies awards with the number of shares and, in the case of options, the exercise price adjusted to preserve the intrinsic value of the award as immediately prior to spin-off; |
|
all stock option awards held by JBT Corporation employees will, at the spin-off, be substituted with JBT Corporation stock options with the number of shares and the exercise price adjusted to preserve the intrinsic value of the award as immediately prior to spin-off; |
F-22
|
certain restricted stock awards held by JBT Corporation employees will, at the spin-off, be substituted with JBT Corporation restricted stock awards with the number of shares adjusted to preserve the intrinsic value of the award as immediately prior to spin-off; |
|
certain restricted stock awards held by JBT Corporation employees will, at the spin-off, be substituted with new FMC Technologies restricted stock awards with the number of shares adjusted to preserve the intrinsic value of the award as immediately prior to spin-off. |
As of December 31, 2007, there was $9.3 million in unrecognized stock-based compensation expense for outstanding awards expected to be recognized over a weighted-average period of 1.5 years.
NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Derivative financial instruments We hold derivative financial instruments for the purpose of hedging the risks of certain identifiable and anticipated transactions. In general, the types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates and interest rates. We hold the following types of derivative instruments:
Foreign exchange rate forward contractsThe purpose of this instrument is to hedge the risk of changes in future cash flows of anticipated purchase or sale commitments denominated in foreign currencies.
Foreign exchange rate instruments embedded in purchase and sale contractsThe purpose of this instrument is to match offsetting currency payments for particular projects, or comply with government restrictions on the currency used to purchase goods in certain countries.
We manufacture and sell our products in a number of countries throughout the world and, as a result, are exposed to movements in foreign currency exchange rates. Our major foreign currency exposures involve the markets in Western and Eastern Europe, South America, and Asia. The purpose of our foreign currency hedging activities is to manage the volatility associated with anticipated foreign currency purchases and sales created in the normal course of business. We primarily utilize forward exchange contracts with maturities of less than 3 years.
Our policy is to hold derivatives only for the purpose of hedging risks and not for trading purposes where the objective is solely to generate profit. Generally, we enter into hedging relationships such that changes in the fair values or cash flows of items and transactions being hedged are expected to be offset by corresponding changes in the fair value of the derivatives.
The following table of all outstanding derivative instruments is based on estimated fair value amounts that have been determined using available market information and commonly accepted valuation methodologies. Accordingly, the estimates presented may not be indicative of potential gains or losses on these agreements.
December 31,
2007 |
December 31,
2006 |
|||||||||||
(In millions) |
Short
Term |
Long
Term |
Short
Term |
Long
Term |
||||||||
Assets |
$ | 5.4 | $ | 1.4 | $ | 1.5 | $ | 0.6 | ||||
Liabilities |
$ | 3.9 | $ | 3.7 | $ | 1.6 | $ | 0.6 | ||||
Hedge ineffectiveness and the portion of cash flow hedges excluded from the assessment of hedge effectiveness were not material for the years ended December 31, 2007, 2006, 2005, respectively. These gains and losses are recorded in cost of sales on the combined statements of income and in other expense, net in the reconciliation of segment operating profit to income before income taxes.
Losses related to discontinued hedging relationships were $0.3 million, $0.1 million, and nil for the years ending December 31, 2007, 2006, and 2005, respectively. These losses are recorded in cost of sales on the combined statements of income and in segment operating profit in the reconciliation of segment operating profit to income before income taxes.
F-23
Cash flow hedges of forecasted transactions, net of tax, resulted in accumulated other comprehensive loss of $0.2 million at December 31, 2007. All forecasted transactions currently being hedged are expected to occur by 2012.
We enter into derivative contracts to create a hedge against exchange rate exposure for assets and liabilities included on our balance sheet denominated in a currency other than the local functional currency. These derivatives are not designated as hedges and therefore gains or losses for the period are recognized in earnings immediately. The gains and losses, net of remeasurement of assets and liabilities, recorded in earnings for instruments not designated as hedging instruments were a loss of $3.5 million, $1.0 million, and $2.4 million for the years ending December 31, 2007, 2006, and 2005, respectively. These gains and losses are recorded in other income (expense), net on the combined statements of income and in other expense, net in the reconciliation of segment operating profit to income before income taxes.
Fair value disclosures The carrying amounts of cash and cash equivalents, trade receivables, and accounts payable, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value because of their short - term maturities. Investments and derivative financial instruments are carried at fair value, determined using available market information.
Credit risk By their nature financial instruments involve risk including credit risk for nonperformance by counterparties. Financial instruments that potentially subject us to credit risk primarily consist of trade receivables and derivative contracts. We manage the credit risk on financial instruments by transacting only with financially secure counterparties, requiring credit approvals and credit limits, and monitoring counterparties financial condition. Our maximum exposure to credit loss in the event of nonperformance by the counterparty is limited to the amount drawn and outstanding on the financial instrument. Allowances for losses are established based on collectibility assessments.
NOTE 10. RELATED PARTY TRANSACTIONS
FMC Technologies In connection with the spin - off, JBT Corporation and FMC Technologies will enter into a Separation Agreement and several ancillary agreements to complete the separation of our businesses from FMC Technologies. These agreements will govern the relationship between us and FMC Technologies after the distribution and will also provide for the allocation of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the distribution.
Prior to the spin - off, FMC Technologies has allocated to us, among other things, $11.1 million in 2005, $12.0 million in 2006 and $11.3 million in 2007 of expenses incurred by FMC Technologies for providing us with the following services: legal, tax, general accounting, communications, corporate development, benefits and human resources, information systems, payroll services, web hosting services and other public company costs.
Upon the separation, we will pay FMC Technologies a $200 million dividend, as adjusted based on the provisions of the Separation Agreement. To fund the dividend, we intend to negotiate and sign new bank credit facilities with available borrowing capacity of approximately $275 million prior to the separation.
F-24
NOTE 11. WARRANTY OBLIGATIONS
We provide warranties of various lengths and terms to certain of our customers based on standard terms and conditions and negotiated agreements. We provide for the estimated cost of warranties at the time revenue is recognized for products where reliable, historical experience of warranty claims and costs exists. We also provide warranty liability when additional specific obligations are identified. The obligation reflected in other current liabilities in the combined balance sheets is based on historical experience by product and considers failure rates and the related costs in correcting a product failure. Warranty cost and accrual information is as follows:
(In millions) | 2007 | 2006 | ||||||
Balance at beginning of year |
$ | 8.7 | $ | 6.7 | ||||
Expenses for new warranties |
14.4 | 13.2 | ||||||
Adjustments to existing accruals |
0.8 | (0.1 | ) | |||||
Claims paid |
(11.6 | ) | (11.1 | ) | ||||
Balance at end of year |
$ | 12.3 | $ | 8.7 | ||||
NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments We lease office space, manufacturing facilities and various types of manufacturing and data processing equipment. Leases of real estate generally provide for payment of property taxes, insurance and repairs by us. Substantially all leases are classified as operating leases for accounting purposes. Rent expense under operating leases amounted to $7.5 million, $6.0 million and $5.6 million in 2007, 2006 and 2005, respectively.
Minimum future rental payments under noncancelable operating leases amounted to approximately $16.6 million as of December 31, 2007, and are payable as follows: $3.7 million in 2008, $2.9 million in 2009, $2.3 million in 2010, $1.9 million in 2011, $2.1 million in 2012 and $3.7 million thereafter. There were no minimum future rental payments to be received under noncancelable subleases at December 31, 2007.
Contingent liabilities associated with guarantees On our behalf, FMC Technologies, in the ordinary course of business with customers, vendors and others, issues standby letters of credit, performance bonds, surety bonds and other guarantees. These financial instruments, which totaled approximately $182.3 million at December 31, 2007, represented guarantees of our future performance. FMC Technologies also has provided on our behalf approximately $12.8 million of bank guarantees and letters of credit to secure a portion of our existing financial obligations. The majority of these financial instruments expire within two years; we expect to replace them through the issuance of new or the extension of existing letters of credit and surety bonds.
We were primarily liable for an Industrial Development Revenue Bond payable to Franklin County, Ohio, until the obligations under the bond were assigned to a third party when we sold the property securing the bond. At December 31, 2007, the maximum potential amount of undiscounted future payments that we could be required to make under this bond is $1.8 million through final maturity in October 2009. Should we be required to make any payments under the bond, we may recover the property from the current owner, sell the property and use the proceeds to satisfy our payments under the bond. Management believes that proceeds from the sale of the property would cover a substantial portion of any potential future payments required.
Management believes that the ultimate resolution of our known contingencies will not materially affect our combined financial position or results of operations.
Contingent liabilities associated with legal matters Under the Separation Agreement with FMC Technologies, which contains key provisions related to our spin-off from FMC Technologies, we will assume liabilities related to specified legal proceedings arising from our business prior to separation. As a result,
F-25
although FMC Technologies will remain the named defendant, we will manage the litigation and indemnify FMC Technologies for costs, expenses and judgments arising from this existing litigation. We do not believe that any existing litigation we will assume will have a material effect on our results of operations, financial condition or liquidity.
We are involved in legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, we do not believe that the resolution of the proceedings that we are involved in, either individually or taken as a whole will have a material adverse effect on our business, results of operations or financial condition.
NOTE 13. BUSINESS SEGMENTS
Our determination of our two reportable segments was made on the basis of our strategic business units and the commonalities among the products and services within each segment, and corresponds to the manner in which our management reviews and evaluates operating performance. We have combined certain similar operating segments that meet applicable criteria established under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.
Our reportable segments are:
|
JBT FoodTechdesigns, manufactures and services technologically sophisticated food processing and handling systems used for, among other things, fruit juice production, frozen food production, shelf-stable food production and convenience food preparation by the food industry. |
|
JBT AeroTechdesigns, manufactures and services technologically advanced equipment and systems primarily for commercial airlines, air freight companies, and airports. |
Total revenue by segment includes intersegment sales, which are made at prices approximating those that the selling entity is able to obtain on external sales. Segment operating profit is defined as total segment revenue less segment operating expenses. The following items have been excluded in computing segment operating profit: corporate staff expense, income taxes, and other expense, net.
F-26
Segment revenue and segment operating profit
Year Ended December 31, | ||||||||||||
(In millions) | 2007 | 2006 | 2005 | |||||||||
Revenue: |
||||||||||||
JBT FoodTech |
$ | 593.2 | $ | 496.2 | $ | 497.4 | ||||||
JBT AeroTech |
386.0 | 348.7 | 326.7 | |||||||||
Intercompany eliminations |
(1.2 | ) | (0.6 | ) | (0.8 | ) | ||||||
Total revenue |
$ | 978.0 | $ | 844.3 | $ | 823.3 | ||||||
Income before income taxes: |
||||||||||||
Segment operating profit: |
||||||||||||
JBT FoodTech |
$ | 56.0 | $ | 46.3 | $ | 39.8 | ||||||
JBT AeroTech |
32.4 | 27.1 | 24.5 | |||||||||
Total segment operating profit |
88.4 | 73.4 | 64.3 | |||||||||
Corporate items: |
||||||||||||
Corporate expense (1) |
(11.3 | ) | (12.0 | ) | (11.1 | ) | ||||||
Other expense, net (2) |
(16.0 | ) | (11.0 | ) | (10.9 | ) | ||||||
Interest income |
0.5 | 0.4 | 0.1 | |||||||||
Total corporate items |
(26.8 | ) | (22.6 | ) | (21.9 | ) | ||||||
Income from continuing operations before income taxes |
61.6 | 50.8 | 42.4 | |||||||||
Provision for income taxes |
21.5 | 16.0 | 16.0 | |||||||||
Income from continuing operations |
40.1 | 34.8 | 26.4 | |||||||||
Loss from discontinued operations, net of tax |
(3.7 | ) | (0.2 | ) | (1.9 | ) | ||||||
Net income |
$ | 36.4 | $ | 34.6 | $ | 24.5 | ||||||
(1) | Corporate expense primarily includes corporate staff expenses. |
(2) | Other expense, net, generally includes stock-based compensation, other employee benefits, LIFO adjustments, and the impact of unusual transactions not representative of segment operations. |
Segment operating capital employed and segment assets
December 31, | ||||||||
(In millions) | 2007 | 2006 | ||||||
Segment operating capital employed (1): |
||||||||
JBT FoodTech |
$ | 164.6 | $ | 145.5 | ||||
JBT AeroTech |
112.1 | 89.1 | ||||||
Total segment operating capital employed |
276.7 | 234.6 | ||||||
Segment liabilities included in total segment operating capital employed (2) |
286.4 | 254.2 | ||||||
Corporate (3) |
8.4 | 9.8 | ||||||
Assets of discontinued operations |
2.4 | 18.0 | ||||||
Total assets |
$ | 573.9 | $ | 516.6 | ||||
Segment assets: |
||||||||
JBT FoodTech |
$ | 365.0 | $ | 331.7 | ||||
JBT AeroTech |
198.8 | 158.2 | ||||||
Intercompany eliminations |
(0.7 | ) | (1.1 | ) | ||||
Total segment assets |
563.1 | 488.8 | ||||||
Corporate (3) |
8.4 | 9.8 | ||||||
Assets of discontinued operations |
2.4 | 18.0 | ||||||
Total assets |
$ | 573.9 | $ | 516.6 | ||||
(1) |
Management views segment operating capital employed, which consists of assets, net of liabilities, as the primary measure of segment capital. Segment operating capital employed excludes pension liabilities, income taxes and LIFO reserves. |
F-27
(2) | Segment liabilities included in total segment operating capital employed consist of trade and other accounts payable, advance payments and progress billings, accrued payroll and other liabilities. |
(3) | Corporate includes cash, investments, LIFO inventory reserves, deferred income tax balances and property, plant and equipment not associated with a specific segment. |
Geographic segment information
Geographic segment sales were identified based on the location where our products and services were delivered. Geographic segment long-lived assets include investments; property, plant and equipment, net; goodwill; intangible assets, net; and certain other non-current assets.
Year Ended December 31, | |||||||||
(In millions) | 2007 | 2006 | 2005 | ||||||
Revenue (by location of customer): |
|||||||||
United States |
$ | 477.3 | $ | 418.6 | $ | 419.5 | |||
All other countries |
500.7 | 425.7 | 403.8 | ||||||
Total revenue |
$ | 978.0 | $ | 844.3 | $ | 823.3 | |||
December 31, | |||||||||
(In millions) | 2007 | 2006 | 2005 | ||||||
Long-lived assets: |
|||||||||
United States |
$ | 101.5 | $ | 105.8 | $ | 105.6 | |||
Sweden |
23.8 | 23.0 | 21.1 | ||||||
Brazil |
21.9 | 18.4 | 17.1 | ||||||
All other countries |
37.4 | 32.4 | 27.2 | ||||||
Total long-lived assets |
$ | 184.6 | $ | 179.6 | $ | 171.0 | |||
Other business segment information
Capital expenditures
Year Ended December 31, |
Depreciation and
amortization Year Ended December 31, |
Research and
development expense Year Ended December 31, |
|||||||||||||||||||||||||
(In millions) | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | ||||||||||||||||||
JBT FoodTech |
$ | 21.3 | $ | 21.1 | $ | 19.3 | $ | 22.1 | $ | 20.2 | $ | 19.6 | $ | 12.0 | $ | 10.6 | $ | 12.1 | |||||||||
JBT AeroTech |
1.2 | 1.3 | 1.9 | 2.6 | 2.6 | 2.3 | 6.7 | 5.6 | 5.9 | ||||||||||||||||||
Corporate |
0.5 | 0.3 | 0.4 | 0.4 | 0.4 | 0.3 | | | | ||||||||||||||||||
Total |
$ | 23.0 | $ | 22.7 | $ | 21.6 | $ | 25.1 | $ | 23.2 | $ | 22.2 | $ | 18.7 | $ | 16.2 | $ | 18.0 | |||||||||
NOTE 14. QUARTERLY INFORMATION (UNAUDITED)
2007 | 2006 | |||||||||||||||||||||||
(In millions) | 4th Qtr. | 3rd Qtr. | 2nd Qtr. | 1st Qtr. | 4th Qtr. | 3rd Qtr. | 2nd Qtr. | 1st Qtr. | ||||||||||||||||
Revenue |
$ | 290.5 | $ | 254.7 | $ | 238.0 | $ | 194.8 | $ | 247.0 | $ | 198.4 | $ | 212.1 | $ | 186.8 | ||||||||
Cost of sales |
220.4 | 190.8 | 183.1 | 146.5 | 184.9 | 143.8 | 160.5 | 141.9 | ||||||||||||||||
Net income |
12.7 | 12.7 | 7.8 | 3.2 | 14.4 | 10.9 | 6.7 | 2.6 |
F-28
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of FMC Technologies, Inc.:
Under date of April 30, 2008, we reported on the combined balance sheets of John Bean Technologies Corporation (formerly known as FMC FoodTech Inc., and consisting of the FoodTech and Airport Systems businesses of FMC Technologies, Inc.) as of December 31, 2007 and 2006, and the related combined statements of income, changes in owners equity, and cash flows for each of the years in the three-year period ended December 31, 2007, which are included in the registration statement on Form 10. In connection with our audits of the aforementioned combined financial statements, we also audited the related financial statement schedule, Schedule IIValuation and Qualifying Accounts. This financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic combined financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Chicago, Illinois
April 30, 2008
F-29
Schedule IIValuation and Qualifying Accounts
(In thousands) | Additions | |||||||||||||||
Description |
Balance at
beginning of period |
charged to costs
and expenses |
charged to
other accounts (a) |
Deductions
and other (b) |
Balance at
end of period |
|||||||||||
Year ended December 31, 2005: |
||||||||||||||||
Allowance for doubtful accounts |
$ | 7,046 | $ | 518 | $ | (327 | ) | $ | 1,199 | $ | 6,038 | |||||
Year ended December 31, 2006: |
||||||||||||||||
Allowance for doubtful accounts |
$ | 6,038 | $ | 194 | $ | 293 | $ | 600 | $ | 5,925 | ||||||
Year ended December 31, 2007: |
||||||||||||||||
Allowance for doubtful accounts |
$ | 5,925 | $ | 396 | $ | 613 | $ | 734 | $ | 6,200 |
(a) | Additions charged to other accounts includes translation adjustments and allowances acquired through business combinations. |
(b) | Deductions and other includes write-offs, net of recoveries, and reductions in the allowances credited to expense. |
See accompanying Report of Independent Registered Public Accounting Firm.
F-30
JOHN BEAN TECHNOLOGIES CORPORATION
COMBINED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31, |
|||||||
(In millions) | 2008 | 2007 | |||||
Revenue: |
|||||||
Product revenue |
$ | 233.7 | $ | 170.5 | |||
Service revenue |
26.5 | 24.3 | |||||
Total revenue |
260.2 | 194.8 | |||||
Costs and expenses: |
|||||||
Cost of products |
178.3 | 129.4 | |||||
Cost of services |
20.0 | 17.1 | |||||
Selling, general and administrative expense |
39.2 | 36.3 | |||||
Research and development expense |
5.5 | 4.5 | |||||
Total costs and expenses |
243.0 | 187.3 | |||||
Other income (expense), net |
2.1 | (0.7 | ) | ||||
Income before interest income, net and income taxes |
19.3 | 6.8 | |||||
Interest income, net |
0.1 | 0.1 | |||||
Income from continuing operations before income taxes |
19.4 | 6.9 | |||||
Provision for income taxes |
7.4 | 2.9 | |||||
Income from continuing operations |
12.0 | 4.0 | |||||
Income (loss) from discontinued operations, net of income taxes |
0.3 | (0.8 | ) | ||||
Net income |
$ | 12.3 | $ | 3.2 | |||
The accompanying notes are an integral part of the condensed combined financial statements.
F-31
JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED COMBINED BALANCE SHEETS
March 31,
2008 |
December 31,
2007 |
||||||
(In millions) | (Unaudited) | ||||||
Assets: |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ | 11.7 | $ | 9.5 | |||
Trade receivables, net of allowances of $6.7 in 2008 and $6.2 in 2007 |
176.1 | 179.2 | |||||
Inventories |
168.3 | 147.2 | |||||
Prepaid expenses |
6.1 | 4.1 | |||||
Deferred income taxes |
5.9 | 6.1 | |||||
Other current assets |
20.9 | 21.3 | |||||
Assets of discontinued operations |
3.1 | 2.4 | |||||
Total current assets |
392.1 | 369.8 | |||||
Investments |
7.1 | 7.2 | |||||
Property, plant and equipment, net of accumulated depreciation of $215.6 in 2008 and $207.9 in 2007 |
128.1 | 126.8 | |||||
Goodwill |
24.3 | 23.8 | |||||
Intangible assets, net |
21.1 | 21.2 | |||||
Deferred income taxes |
15.6 | 15.9 | |||||
Other assets |
9.0 | 9.2 | |||||
Total assets |
$ | 597.3 | $ | 573.9 | |||
Liabilities and owners equity: |
|||||||
Current liabilities: |
|||||||
Accounts payable, trade and other |
$ | 103.0 | $ | 101.3 | |||
Advance payments and progress billings |
113.1 | 105.3 | |||||
Other current liabilities |
95.6 | 97.6 | |||||
Liabilities of discontinued operations |
2.9 | 2.0 | |||||
Total current liabilities |
314.6 | 306.2 | |||||
Accrued pension benefits, less current portion |
21.6 | 19.2 | |||||
Other liabilities |
34.6 | 34.3 | |||||
Commitments and contingent liabilities |
|||||||
Owners equity: |
|||||||
Owners net investment |
226.0 | 218.3 | |||||
Accumulated other comprehensive income (loss) |
0.5 | (4.1 | ) | ||||
Total owners equity |
226.5 | 214.2 | |||||
Total liabilities and owners equity |
$ | 597.3 | $ | 573.9 | |||
The accompanying notes are an integral part of the condensed combined financial statements.
F-32
JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31, |
||||||||
(In millions) | 2008 | 2007 | ||||||
Cash provided (required) by operating activities of continuing operations: |
||||||||
Net income |
$ | 12.3 | $ | 3.2 | ||||
(Income) loss from discontinued operations, net of tax |
(0.3 | ) | 0.8 | |||||
Income from continuing operations |
12.0 | 4.0 | ||||||
Adjustments to reconcile income to cash provided (required) by operating activities of continuing operations: |
||||||||
Depreciation |
5.0 | 4.7 | ||||||
Amortization |
1.1 | 1.3 | ||||||
Stock based compensation |
2.0 | 1.8 | ||||||
Other |
(1.4 | ) | 0.1 | |||||
Changes in operating assets and liabilities: |
||||||||
Trade receivables, net |
9.5 | 9.0 | ||||||
Inventories |
(18.2 | ) | (15.6 | ) | ||||
Accounts payable, trade and other |
(1.4 | ) | 1.5 | |||||
Advance payments and progress billings |
2.2 | 14.5 | ||||||
Other assets and liabilities, net |
0.9 | (11.0 | ) | |||||
Income taxes payable |
(0.2 | ) | (0.9 | ) | ||||
Cash provided by operating activities of continuing operations |
11.5 | 9.4 | ||||||
Net cash provided (required) by discontinued operationsoperating |
| (2.2 | ) | |||||
Cash provided by operating activities |
11.5 | 7.2 | ||||||
Cash provided (required) by investing activities: |
||||||||
Capital expenditures |
(4.1 | ) | (4.0 | ) | ||||
Proceeds from disposal of assets |
0.3 | 0.4 | ||||||
Cash required by investing activities of continuing operations |
(3.8 | ) | (3.6 | ) | ||||
Net cash provided by discontinued operationsinvesting |
0.7 | | ||||||
Cash required by investing activities |
(3.1 | ) | (3.6 | ) | ||||
Cash provided (required) by financing activities: |
||||||||
Transfers to parent, net |
(6.5 | ) | (8.9 | ) | ||||
Other |
(0.1 | ) | | |||||
Cash required by financing activities |
(6.6 | ) | (8.9 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
0.4 | 0.1 | ||||||
Increase (decrease) in cash and cash equivalents |
2.2 | (5.2 | ) | |||||
Cash and cash equivalents, beginning of period |
9.5 | 10.3 | ||||||
Cash and cash equivalents, end of period |
$ | 11.7 | $ | 5.1 | ||||
The accompanying notes are an integral part of the condensed combined financial statements.
F-33
JOHN BEAN TECHNOLOGIES CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: BACKGROUND AND BASIS OF PRESENTATION
Background On October 29, 2007, FMC Technologies, Inc. (FMC Technologies or Owner) announced an intention to separate into two independent publicly-traded companies through the spin-off and distribution of 100% of the FoodTech and Airport Systems businesses. In order to effect the separation, the common stock of John Bean Technologies Corporation (JBT Corporation or we), a Delaware corporation wholly-owned by FMC Technologies, will be distributed to the shareholders of FMC Technologies.
JBT Corporation designs, manufactures and services sophisticated machinery and systems for, and provides services to, customers in the food processing and air transportation industries. We have manufacturing operations worldwide and are strategically located to facilitate delivery of our products and services to our customers. We report our results through two business segmentsJBT FoodTech and JBT AeroTech.
Basis of Presentation The following (a) condensed balance sheet as of December 31, 2007, which has been derived from audited financial statements, and (b) unaudited interim condensed financial statements, and notes thereto (the statements), of JBT Corporation have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. As permitted under those rules, certain footnotes or other financial information that are normally required by United States generally accepted accounting principles can be condensed or omitted. Therefore, these statements should be read in conjunction with our annual combined financial statements and notes thereto, which are included in this Form 10.
In the opinion of management, the statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our financial condition and operating results as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these statements may not be representative of those for the full year or any future period.
Our combined financial statements have been prepared in United States dollars and in accordance with United States generally accepted accounting principles (GAAP) on a carve-out basis from the consolidated financial statements of FMC Technologies using the historical results of operations and bases of the assets and liabilities of the transferred businesses and including allocations from FMC Technologies. This presentation incorporates the same principles used when preparing consolidated financial statements, including elimination of intercompany transactions. Allocated expenses include general and administrative services such as accounting, treasury, tax, legal, human resources, information technology and other corporate and infrastructure services. Many assets, liabilities and expenses could be specifically identified with JBT Corporation businesses or personnel and were directly allocated. To the extent amounts could not be specifically identified and allocated, we primarily used JBT Corporations proportion of total FMC Technologies revenue as a reasonable allocation method. Allocations have been determined on the basis of assumptions and estimates that management believes to be a reasonable reflection of JBT Corporations utilization of those services. These allocations and estimates, however, are not necessarily indicative of the assets, liabilities and expenses that would have resulted if JBT Corporation had operated as a separate entity in the past, or that may result in the future.
The combined financial statements do not reflect the debt or interest expense JBT Corporation might have incurred if it were a stand-alone entity. In addition, the combined financial statements may not be indicative of the our combined financial position, operating results or cash flows in the future or what our financial position, operating results and cash flows would have been had JBT Corporation been a separate, stand-alone entity during the periods presented. The combined financial statements do not reflect any changes that will occur in our funding or operations as a result of separation and JBT Corporation becoming a stand-alone entity.
Recently issued accounting pronouncements In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a
F-34
framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective in fiscal years beginning after November 15, 2007. Delayed application is permitted for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008. We adopted SFAS No. 157 on January 1, 2008 for financial assets and financial liabilities and have chosen to delay the adoption for nonfinancial assets and nonfinancial liabilities until January 1, 2009. The adoption of this pronouncement did not have a material effect on our results of operations or financial position.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure certain financial instruments and other items at fair value. Under SFAS No. 159, the decision to measure items at fair value is made at specified election dates on an irrevocable instrument-by-instrument basis. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. We did not elect this option of measurement on any of our financial instruments, and therefore, the adoption of SFAS No. 159 on January 1, 2008 did not have an impact on our financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, replacing SFAS No. 141. SFAS No. 141R changes or clarifies the acquisition method of accounting for acquired contingencies, transaction costs, step acquisitions, restructuring costs and other major areas affecting how the acquirer recognizes and measures the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. In addition, this pronouncement amends previous interpretations of intangible asset accounting by requiring the capitalization of in-process research and development and proscribing impacts to current income tax expense (rather than a reduction to goodwill) for changes in deferred tax benefits related to a business combination. SFAS No. 141R will be applied prospectively for business combinations occurring after December 31, 2008.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS No. 160 will standardize the accounting for and reporting of minority interests in the financial statements, which will be presented as noncontrolling interests and classified as a component of equity. In addition, statements of operations will report consolidated net income before an allocation to both the parent and the noncontrolling interest. This new presentation will have an impact on the basic financial statements as well as the disclosures to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling interests. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. We have not yet determined the impact, if any, that the adoption of SFAS No. 160 will have on our results of operations or financial position.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures about derivative instruments and hedging activities. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, and is effective for us beginning January 1, 2009.
NOTE 2: FINANCIAL STATEMENT INFORMATION
Inventories
Inventories consisted of the following:
(In millions) |
March 31,
2008 |
December 31,
2007 |
||||||
Raw materials |
$ | 75.7 | $ | 63.9 | ||||
Work in process |
70.6 | 59.1 | ||||||
Finished goods |
75.7 | 76.5 | ||||||
Gross inventories before LIFO reserves and valuation adjustments |
222.0 | 199.5 | ||||||
LIFO reserves and valuation adjustments |
(53.7 | ) | (52.3 | ) | ||||
Net inventories |
$ | 168.3 | $ | 147.2 | ||||
F-35
Pension and postretirement benefits
JBT Corporation employees are eligible to participate in pension and postretirement benefit plans sponsored by FMC Technologies. As JBT Corporation participated in FMC Technologies plans, we accounted for our pension and postretirement benefit costs under the multiemployer plan approach and have recognized the pension and postretirement benefit costs allocated to us by FMC Technologies as expense, with a corresponding contribution in owners net investment. The expense has been allocated to us based on the service cost from JBT Corporation employees and a proportion of other FMC Technologies corporate staff service cost. We allocated the FMC Technologies corporate staff service cost primarily using JBT Corporations proportion of FMC Technologies consolidated revenue. In addition, we maintain certain foreign pension plans covering only JBT Corporation employees. For the three months ended March 31, 2008 and 2007, we incurred $1.5 million and $2.1 million, respectively, in pension and postretirement benefit expense.
FMC Technologies is expected to perform a valuation of its U.S. pension plan and other postretirement benefit plan obligations in order to transfer a portion of the obligations and plan assets to JBT Corporation upon spin-off. While the amounts are not currently determinable, we estimate that net liabilities ranging between $5 million and $10 million will be transferred.
Stock-based compensation
Stock-based compensation expense was $2.0 million and $1.8 million for the three months ended March 31, 2008 and 2007, respectively, and includes expense for FMC Technologies awards granted to employees of JBT Corporation businesses as well as an allocation of expense for awards granted to FMC Technologies corporate employees. We allocated the FMC Technologies corporate staff stock-based compensation primarily using JBT Corporations proportion of FMC Technologies consolidated revenue.
Warranty Obligations
We provide warranties of various lengths and terms to certain of our customers based on standard terms and conditions and negotiated agreements. We provide for the estimated cost of warranties at the time revenue is recognized for products where reliable, historical experience of warranty claims and costs exists. We also provide warranty liability when additional specific obligations are identified. The obligation reflected in other current liabilities in the combined balance sheets is based on historical experience by product and considers failure rates and the related costs in correcting a product failure. Warranty cost and accrual information is as follows:
Three Months Ended
March 31, |
||||||||
(In millions) | 2008 | 2007 | ||||||
Balance at beginning of period |
$ | 12.3 | $ | 8.7 | ||||
Expense for new warranties |
3.2 | 2.0 | ||||||
Adjustments to existing accruals |
0.6 | 0.1 | ||||||
Claims paid |
(3.5 | ) | (2.4 | ) | ||||
Balance at end of period |
$ | 12.6 | $ | 8.4 | ||||
Owners Equity
Comprehensive income consisted of the following:
Three Months Ended
March 31, |
|||||||
(In millions) | 2008 | 2007 | |||||
Net income |
$ | 12.3 | $ | 3.2 | |||
Foreign currency translation adjustments |
4.1 | | |||||
Net deferral of hedging gains (losses), net of tax of $0.2 and $(0.4), respectively |
0.5 | (0.7 | ) | ||||
Comprehensive income |
$ | 16.9 | $ | 2.5 | |||
F-36
Accumulated other comprehensive loss consisted of the following:
(In millions) |
March 31,
2008 |
December 31,
2007 |
||||||
Cumulative foreign currency translation adjustments |
$ | 2.0 | $ | (2.1 | ) | |||
Cumulative deferral of hedging gains (losses), net of tax of $(0.1) and $0.1, respectively |
0.3 | (0.2 | ) | |||||
Cumulative deferral of pension benefit losses, net of tax of $0.7 |
(1.8 | ) | (1.8 | ) | ||||
Accumulated other comprehensive income (loss) |
$ | 0.5 | $ | (4.1 | ) | |||
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities measured at fair value on a recurring basis are as follows:
(In millions) |
Fair Value Measurements at March 31, 2008 |
|||||||||||
Description |
March 31,
2008 |
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
||||||||
Assets: |
||||||||||||
Investments |
$ | 7.1 | $ | 7.1 | $ | | $ | | ||||
Derivatives |
7.6 | | 7.6 | | ||||||||
Total |
$ | 14.7 | $ | 7.1 | $ | 7.6 | $ | | ||||
Liabilities: |
||||||||||||
Derivatives |
$ | 8.5 | $ | | $ | 8.5 | $ | |
Investments are valued based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. We use the income approach as the valuation technique to measure the fair value of foreign currency derivative instruments on a recurring basis. This approach calculates the present value of the future cash flow by measuring the change from the derivative contract rate and the published market indicative currency and interest rates, multiplied by the contract notional values.
F-37
NOTE 4: BUSINESS SEGMENT INFORMATION
Segment revenue and segment operating profit
(In millions) |
Three Months Ended
March 31, |
|||||||
2008 | 2007 | |||||||
Revenue |
||||||||
JBT FoodTech |
$ | 148.7 | $ | 123.0 | ||||
JBT AeroTech |
111.7 | 71.9 | ||||||
Intercompany eliminations |
(0.2 | ) | (0.1 | ) | ||||
Total revenue |
$ | 260.2 | $ | 194.8 | ||||
Income before income taxes |
||||||||
Segment operating profit: |
||||||||
JBT FoodTech |
$ | 13.3 | $ | 9.2 | ||||
JBT AeroTech |
9.1 | 2.1 | ||||||
Total segment operating profit |
22.4 | 11.3 | ||||||
Corporate items: |
||||||||
Corporate expense (1) |
(2.8 | ) | (2.6 | ) | ||||
Other expense, net (2) |
(0.3 | ) | (1.9 | ) | ||||
Net interest income |
0.1 | 0.1 | ||||||
Total corporate items |
(3.0 | ) | (4.4 | ) | ||||
Income before income taxes |
$ | 19.4 | $ | 6.9 | ||||
(1) | Corporate expense primarily includes corporate staff expenses. |
(2) | Other expense, net, generally includes stock-based compensation, other employee benefits, LIFO adjustments, certain foreign exchange gains and losses, and the impact of unusual or strategic transactions not representative of segment operations. |
Segment operating capital employed
(In millions) |
March 31,
2008 |
December 31,
2007 |
||||
Segment operating capital employed (1): |
||||||
JBT FoodTech |
$ | 172.2 | $ | 164.6 | ||
JBT AeroTech |
115.6 | 112.1 | ||||
Total segment operating capital employed |
287.8 | 276.7 | ||||
Segment liabilities included in total segment operating capital employed (2) |
295.5 | 286.4 | ||||
Corporate (3) |
10.9 | 8.4 | ||||
Assets of discontinued operations |
3.1 | 2.4 | ||||
Total assets |
$ | 597.3 | $ | 573.9 | ||
(1) | Management views segment operating capital employed, which consists of assets, net of its liabilities, as the primary measure of segment capital. Segment operating capital employed excludes debt, pension liabilities, income taxes and LIFO inventory reserves. |
(2) | Segment liabilities included in total segment operating capital employed consist of trade and other accounts payable, advance payments and progress billings, accrued payroll and other liabilities. |
(3) | Corporate includes cash, LIFO inventory reserves, deferred income tax balances, property, plant and equipment not associated with a specific segment and the fair value of derivatives. |
F-38