<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
Commission file number 0-18797
CHEMI-TROL CHEMICAL CO.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-4439286
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2776 C.R. 69 Gibsonburg, Ohio 43431
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419)665-2367
-------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities pursuant to Section 12(g) of the Act:
Common stock, without par value
- - --------------------------------------------------------------------------------
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
----- -----
The aggregate market value (based upon the closing price) of the voting
stock held by non-affiliates of the registrant as of Febuary 28, 1997:
Common Stock, without par value - $13,111,482
The number of shares outstanding of the issuer's classes of common stock as of
March 1, 1997:
Common Stock, Without Par Value - 2,004,930 shares
DOCUMENTS INCORPORATED BY REFERENCE: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ].
The Exhibit Index is located at page 50 of this filing. This document
contains 120 pages.
<PAGE> 2
PART I
ITEM 1. BUSINESS
--------
(a) General Development of Business
-------------------------------
Chemi-Trol Chemical Co. ("the Company") was incorporated under the laws
of the State of Ohio in 1952.
(b) Financial Information About Industry Segments
---------------------------------------------
The sales and operating profit of each industry segment and the
identifiable assets attributable to each industry segment for the three years
ended December 31, 1996 are set forth in Note 11 (Information pertaining to
industry segments) of the Notes to Financial Statements, which note is
incorporated herein by reference.
(c) Narrative Description of Business
---------------------------------
Present Organization
- - --------------------
The Company is organized on an operational basis into four divisions:
Tank Division, located in Fremont, Ohio; Cal-Van Tools Division, located in
Fremont, Ohio; Chemical Group, located in Gibsonburg, Ohio; and Cory Orchard &
Turf Division, located in Indianapolis, Indiana and Louisville, Kentucky. Each
division is headed by a General Manager who reports directly to the Company's
executive officers in Gibsonburg, Ohio. In addition the Company has a Leasing
and Finance Division for the purpose of offering to its qualified customers two
alternate methods of financing the purchase of its products. In 1996, consistent
with the Company's prior practice, income and expense of the Leasing and Finance
Division are recorded either in the Tank Division or in unallocated corporate
income and expense. However in 1996, no interest expense has been recorded in
the Tank Division and all interest expense is recorded as corporate expense. All
prior year amounts have been reclassified to conform to the presentation used in
1996.
The Company announced on December 6, 1996 it had retained McDonald &
Company to advise it in connection with the possible sale of two of its non-core
businesses, the Cal-Van Tools and the Cory Orchard & Turf Divisions. After a
strategic review of the Company's business segments Chemi-Trol's Board of
Directors determined that to maximize future growth and profitability it should
concentrate on its Chemical and Tank Segments, which offer the best opportunity
for sustained earnings growth for the Company.
TANK DIVISION
Products
- - --------
Through its Tank Division, the Company manufactures steel pressure
tanks for above ground and underground storage of liquified petroleum gas
("LPG") and anhydrous ammonia ("NH3") at its plant located in Fremont, Ohio. The
steel tanks are manufactured in sizes ranging from 124 gallon water capacity to
1990 gallon water capacity for LPG tanks and from 124 gallon water capacity to
2050 gallon water capacity for NH3 tanks. Approximately 95% of the tanks
manufactured by the Company are for the storage of LPG. The Tank Division
accounted for 48%, 49%, and 50% of the Company's total revenues for 1996, 1995
and 1994, respectively.
-2-
<PAGE> 3
Marketing and Distribution
- - --------------------------
Sales of the Company's tanks are made directly by the Company
to either regional independent dealers or major multi-state marketers within a
marketing radius of approximately 1,000 miles from Fremont, Ohio. The 20 largest
industrial customers of the Company accounted for approximately one third of the
net sales of this division for its fiscal year ended December 31, 1996.
The Company stimulates sales through the efforts of its own sales
personnel, personal telephone calls to existing and potential customers, direct
mail advertising, publication and distribution of catalogues, advertisements in
trade journals and attendance at various trade shows. Sales of the Company's
tanks to major multi-state marketers are made by the Tank Division's sales
manager from its principal office located in Fremont, Ohio. Sales to independent
dealers are made through Company salesmen and independent sales representative
organizations. Each of the independent sales organizations is assigned an
exclusive territory and are compensated by commissions based upon sales in their
respective territory under agreements terminated with notice by either party.
The Company transports its steel tanks to its customers by means of its
own truck fleet.
Financing of Customer Accounts
- - ------------------------------
Sales of this division's products are normally made on a net basis. The
Company does, however, offer to its qualified customers two alternate methods of
financing the purchase of its steel tanks, which are explained under "Leasing
and Finance Division," on page 9.
Raw Materials and Supplies
- - --------------------------
Steel plate is the major raw material used by the Company in the
manufacture of steel pressure tanks. The Company purchases steel plate from a
variety of domestic and foreign sources. Although the Company believes that it
will be able to obtain its steel plate requirements from multiple sources on a
competitive basis, the inability of the Company to obtain a satisfactory supply
of steel plate could have a materially adverse effect on its tank manufacturing
operations.
Backlog
- - -------
The dollar amounts of backlog of the Tank Division believed to be firm
as of March 1, 1997, and 1996 were $4,514,000 and $4,010,000, respectively. All
of the 1997 backlog is expected to be filled during 1997.
-3-
<PAGE> 4
Competition
- - -----------
The markets for the Company's steel tanks are highly competitive and
the Company competes with other companies having a higher total sales volume and
greater financial resources than the Company. The competition in these markets
is based primarily on service and price. Two of the Company's largest
competitors are Trinity Industries, Inc. of Dallas, Texas and American Welding
and Tank Co. of Harrisburg, Pennsylvania.
Regulations
- - -----------
The manufacture of steel pressure tanks by the Company is subject to
close regulation. The American Society of Mechanical Engineers ("ASME")
prescribes minimum standards and specifications relating to (i) the size and
chemical properties of steel plate, (ii) the manufacturing process (including
welding procedures and testing) and (iii) the pressure capacity of steel tanks
and valves. These standards are enforced by the National Board of Boiler and
Pressure Vessels Inspectors, which commissions inspectors who perform
independent inspection through insurance companies. These inspectors inspect all
phases of the manufacturing process as well as the finished product. Steel tanks
manufactured by the Company must be certified by these inspectors to be in
compliance with the regulations prescribed by the ASME, and all propane vessels
are registered with the National Board of Boiler and Pressure Vessels Inspectors
prior to their sales to the customers of the Company. Although the manufacture
of steel pressure tanks is subject to close regulation, the Company may be held
liable, by warranty or otherwise, for damages resulting from tank failure,
including damages to the environment.
CAL-VAN TOOLS DIVISION
Products
- - --------
The Company, through its Cal-Van Tools Division, located in Fremont,
Ohio, is engaged in the manufacture and sale of specialty automotive hand tools
used primarily in repairing and servicing cars and trucks. Cal-Van presently
manufactures approximately 35% of its total annual sales volume and
approximately 65% thereof is purchased from other domestic tool manufacturers on
an open-account basis and resold under the Cal-Van trade name, co-logoed or
private labeled. Tools presently manufactured or sold by this division include
wrenches, pliers, drivers, testers, gauges, engine service tools and other
specialty automotive hand tools.
In addition to the manufacture and sale of specialty automotive hand
tools, Cal-Van also manufactures and sells bronze and aluminum grave markers.
The Cal-Van Tools Division accounted for 25%, 22%, and 21% of the Company's
revenues for 1996, 1995, and 1994, respectively.
-4-
<PAGE> 5
Marketing and Distribution
- - --------------------------
Sales of specialty automotive hand tools are made by the Company
throughout the United States, Canada and many other foreign countries directly
to (i) warehouse distributors, (ii) automotive retail chains, and (iii) other
tool manufacturers. The Division's two largest customers accounted for
approximately 37% and 14% of net sales, respectively. No other single customer
accounts for more than 10% of the annual net sales of this division.
The Company generates sales through the publication and distribution of
catalogues, the sale and distribution of tool rental and display boards, and the
efforts of its sales personnel. In addition, this division's products are sold
by independent sales representatives.
The Company transports the products manufactured by this division by
the use of common carriers and package delivery services.
Raw Materials and Supplies
- - --------------------------
The principal raw materials used by the Company in the manufacture of
specialty automotive hand tools are steel, aluminum, brass, bronze and plastic.
The Company purchases its requirements of these materials from a variety of
sources and it is not dependent upon any single supplier. The Company does not
believe that the loss of any one supplier would have an adverse effect upon the
Company.
The Company's products in this division which are manufactured by other
companies and resold by the Company are purchased from many independent
manufacturers. The Company believes that such suppliers will be able to meet the
needs of this division for the foreseeable future.
Trademark
- - ---------
This division markets a large portion of its products under the
federally registered Cal-Van Tools trademark.
Backlog
- - -------
The dollar amounts of backlog of the Cal-Van Tools Division believed to
be firm as of March 1, 1997 and 1996 were approximately $356,000 and $247,000,
respectively. All of the 1997 backlog is expected to be filled during 1997.
There is no significant seasonal aspect to the business of this division.
Competition
- - -----------
The market for Cal-Van's products is highly competitive and the Company
competes on the basis of service, quality and price. There are five major
manufacturers competing in the specialty automotive hand tool market, together
with approximately ten manufacturers of general hand tools who manufacture
and/or supply certain specialty tools as an adjunct to their regular tool line.
Based upon total annual sales volume, the Comany believes that Cal-Van ranks
third among manufacturers of specialty automotive hand tools located in the
United States, having approximately one-third of the total sales volume of the
largest manufacturer.
-5-
<PAGE> 6
An additional competitive element in the specialty tool market is the
increased interest in this market of mass merchandising chains.
CHEMICAL GROUP
Products and Services
- - ---------------------
The Chemical Group's operations are divided into two divisions: the
Contracting Division and CADCO, the material distribution division.
The Contracting Division is comprised of the pavement marking and the
vegetation management departments. The pavement marking department provides
under contract various forms of pavement marking. These services include fast
dry alkyd, fast dry water-borne, and polyester paint striping, the installation
of preformed plastic and the measurement, determination and marking of
"no-passing" zones on highways. The vegetation management department applies
under contract various types of vegetation control materials including
selective herbicides for weed, brush and grass control, as well as nonselective
herbicides for total vegetation control.
The CADCO division sells herbicides, adjuvants, plant growth
regulators, sprayers, pavement marking products and other related equipment and
products.
The Chemical Group accounted for 19%, 20% and 21% of the Company's
revenues for 1996, 1995 and 1994, respectively.
Marketing and Distribution
- - --------------------------
Sales of the products and services offered by the Chemical Group are
made throughout 21 states in the midwestern, eastern and southern parts of the
United States. Approximately 95% of the total net sales of the Chemical Group
are to various state, county, municipal and township highway departments and
drainage commissions and toll road authorities. The balance of the net sales of
this division are derived primarily from public utilities, pipeline companies,
railroads, general contractors and other industrial, commercial and
noncommercial users. During the past three years, approximately 90% of the net
sales of this division were derived from contracts entered into with various
governmental authorities located in the states of Ohio, West Virginia, Michigan,
Indiana, New York, Kentucky and Tennessee.
The work performed by the Chemical Group is seasonal inasmuch as warm
dry weather is needed to apply pavement marking and vegetation control
materials. The season in the Company's general area of operations is from April
1 through November 30. This season is extended on occasions when the Company is
able to obtain contracts in Southern states where the more favorable weather
conditions allow work to be performed December through March.
-6-
<PAGE> 7
The Chemical Group's highway operations with various governmental
authorities are generally conducted under fixed price contracts awarded by the
governmental authorities for a fixed period of time ranging from a few months to
two years. These contracts generally require the Company to comply with
standards and specifications relating to (i) the type and amount of chemicals,
paints and polyesters used by the Company, (ii) the type, size and number of
applicating units used by the Company, (iii) the training, work experience and
licensing of the personnel used by the Company and (iv) the method of
application of chemicals, paints, polyesters and plastics used by the Company.
The Company owns the equipment it uses in its operation of the Chemical
Group.
Supplies
- - --------
The principal supplies used by the pavement marking department are
paint, polyester, glass beads, and preformed plastic materials. The Company
obtains these materials from a wide range of suppliers. Herbicides used in
vegetation management and CADCO material sales are obtained from a wide range of
suppliers. The Company does not believe that the loss of any one source of
supply would have a material effect on its business.
Backlog
- - -------
The dollar amounts of backlog of the Chemical Group believed to be firm
as of March 1, 1997 and 1996 were approximately $2,909,000 and $3,494,000,
respectively. Dollar amounts of backlog can vary significantly based upon the
timing of bid lettings and the division's success in obtaining contracts and are
not necessarily indicative of the results for the year. All of the contracts
comprising the 1997 backlog are expected to be completed during 1997.
Competition
- - -----------
The business done by the Chemical Group is highly competitive. Most
contracts are awarded on the basis of price, reputation, experience and ability
to perform. The number of competitors is greatly reduced as the size of the job
and the complexity of tasks to be performed are increased. Generally, the
competitors of the Company are local companies operating in a particular
geographical area. Although reliable statistics are not available, the Company
believes that based on annual net sales of the Chemical Group, it is one of the
larger contractors in the states in which it operates in the application of
highway vegetation control materials and of highway pavement marking and
striping materials.
-7-
<PAGE> 8
Since the Company obtains all of its public contracts through
competitive bidding, there can be no assurance that the Company will retain all
of its present contracts after their respective dates of expiration nor is there
any assurance that the Company's record of obtaining additional contracts will
continue. Although the Company believes that its relationship with its customers
is good, loss of existing contracts due to expiration or cancellation could have
a materially adverse effect on the Company's net sales and net income.
Regulations
- - -----------
Much of the Chemical Group's business is oriented to highway safety
considerations. Regulations applicable to the various public authorities with
whom the Company contracts affect the demand and specifications for highway
striping and vegetation control performed by the Company.
CORY ORCHARD & TURF DIVISION
Products
- - --------
The Cory Orchard & Turf Division, located in Indianapolis, Indiana, and
Louisville, Kentucky, is engaged in the wholesale and retail sale and
distribution of a broad range of agricultural chemicals and equipment including
insecticides, fungicides, herbicides, rodenticides, fertilizers, growth
regulators, power and hand sprayers, mowing and aerification equipment, washing
and grading equipment, hydraulic tools, air tools and safety equipment. The Cory
Orchard & Turf Division accounted for 8%, 9% and 9% of the Company's revenues
for 1996, 1995 and 1994, respectively.
Marketing and Distribution
- - --------------------------
Sales of the Company's products carried by this division are primarily
made directly to farmers, orchardists, landscapers, golf courses, lawn care
companies and pesticide operators in a marketing area which includes the states
of Indiana, Kentucky, Michigan, Ohio and Illinois. The Company does not have any
single customer which accounts for more than 10% of the net sales of this
division. Since a majority of the sales of this division's products are directly
related to agricultural production, approximately 80% of its net sales occurs in
the early Spring, late Summer and early Fall.
The Company's retail sales are made directly from its warehouse and
sales office in Indianapolis, Indiana and Louisville, Kentucky. Sales to the
Company's wholesale customers are made through Company sales staff.
The Company transports the products sold by this division by means of
its own truck fleet.
-8-
<PAGE> 9
Supplies
- - --------
The products sold by this division are available from many suppliers.
The Company does not believe that the loss of any one source of supply would
have a material effect on the business.
Backlog
- - -------
The dollar amounts of backlog of the Cory Orchard & Turf Division
believed to be firm as of March 3, 1997 and 1996, were approximately $103,000
and $141,000, respectively. The timing of orders and backlog can vary from year
to year due to weather conditions, etc. and is not necessarily indicative of the
sales results for the period. All of the 1997 backlog is expected to be filled
during 1997.
Competition
- - -----------
The markets for the products sold by this division are highly
competitive and the Company competes with many companies having a higher total
sales volume and greater financial resources than the Company. This division
competes with a wide variety of other suppliers on the basis of service and
price. Competition is particularly intense with respect to large quantity orders
placed by customers early in the growing season. To combat the intense
competition, the Cory sales staff spends the winter months working with
individual customers toward improving their next season's chemical programs as
well as conducting seminars in various product categories.
LEASING AND FINANCE DIVISION
- - ----------------------------
Through the Company's Leasing and Finance Division, its qualified
customers are offered two alternate methods of financing the purchase of the
Company's steel tanks (the "Tank Finance Plan" and the "Tank Lease Plan").
Under the Tank Finance Plan, the Company finances 90% of the sales
price over a 24 to 48 month period at an effective annual interest rate which
during 1996 was approximately 10.25% to 11.0%. The Company retains a security
interest in the tanks as additional security for the payment of the financed
amount. The installment paper evidencing the customer's obligation is either
held by the Company as an investment, sold with recourse for the principal
amount thereof to the Company's profit sharing plan or pledged as collateral for
borrowings over a like period. In 1996, the Company borrowed $3,275,000 under
the latter arrangement and sold with recourse $2,001,692 to the Company's profit
sharing plan. For the fiscal year ended December 31, 1996, approximately 15% of
the total net sales of the Tank Division were sold to customers under the Tank
Finance Plan.
-9-
<PAGE> 10
Under the Tank Lease Plan, leases of liquid propane gas tanks to
customers for noncancellable terms of five or ten years are recorded as sales
at inception. The present value of the minimum payments is included in net
sales and the cost of the tanks is charged to cost of sales. Estimated residual
values of the leased tanks are not significant. During the fiscal year ended
December 31, 1996, the Leasing and Finance Division invested in approximately
$279,234 in customer sales type leases of which it pledged $104,808 as
collateral for borrowings. Approximately 1% of the total net sales of the Tank
Division for the fiscal year ended December 31, 1996 were made under the Tank
Lease Plan.
In 1996, consistent with the Company's prior practice, income and
expense of the Leasing and Finance Division are recorded in the Tank Division
and in unallocated corporate income and expense.
PATENTS, LICENSES, FRANCHISES AND CONCESSIONS
The Company has a design patent on Cal-Van's #825 spark plug ramp gauge
which was issued in 1992 for a period of 14 years. The Company does not own any
other patents nor is it licensed under any patent licenses. It does not hold any
franchises or concessions from any governmental body.
EMPLOYEES
The following table sets forth information with respect to the
Company's 447 employees:
<TABLE>
<CAPTION>
Division Permanent Seasonal
-------- --------- --------
<S> <C> <C>
Corporate Staff ---------------------------------- 22 0
Tank Division ------------------------------------ 153 0
Cal-Van Tools Division --------------------------- 90 9
Chemical Group ----------------------------------- 47 112
Cory Orchard & Turf Division --------------------- 14 0
------------------------
Total ---------------------- 326 121
=== ===
</TABLE>
Employees at the Company's Tank Division Plant in Fremont, Ohio are
subject to a collective bargaining agreement between the Company and the United
Steelworkers of America, AFL-CIO-CLC, Local 1915. The current agreement will
expire April 30, 1999.
-10-
<PAGE> 11
Seasonal employees in the Company's Chemical Group are subject to a
collective bargaining agreement between the Company and Laborers International
Union Local 480, which will expire March 1, 1998.
The Company believes that its relations with its Union and other
employees is good, and does not anticipate problems in negotiating new
collective bargaining agreements.
ENERGY AND ENVIRONMENT
The Company consumes electricity, propane gas, natural gas and
various fuels in manufacturing, in selling its products and services and in
lighting and heating the facilities it operates. Although the Company has never
experienced any significant interruptions of its operations due to shortages of
energy, there can be no assurance that a serious curtailment of the availability
of such fuels or acceptable substitutes would not adversely affect the Company's
operations.
Federal, state and local authorities are considering various
legislation and regulations related to environmental and energy matters. The
Company is not aware of any presently existing legislation relating to such
matters which has or will have a materially adverse effect upon the Company's
operations or which will require material capital expenditures in the next two
years; however, the Company cannot predict the effect of future legislation or
regulations.
ITEM 2. PROPERTIES
----------
The following table lists the materially important physical properties
used in its operations together with certain information regarding such
properties:
<TABLE>
<CAPTION>
Description Land Building
and Location (1) (acres) (sq. ft.) Use
- - ---------------- ------- --------- ---
<S> <C> <C> <C>
Land and buildings 80 30,400 Administrative offices
2776 & 2780 CR 69 of the Company;
Gibsonburg, Ohio 43431 Chemical Group
offices; maintenance
and storage for
spraying, striping and
traffic survey
equipment (2)
Land and buildings 6.28 45,000 Former Tank Division
2098 W. State Street facility; currently
Fremont, Ohio 43420 being held for lease
or sale
Land and buildings 10.76 91,050 Cal-Van Tools Division
1500 Walter Avenue offices; manufacture
Fremont, Ohio 43420 and resale of automotive
specialty tools (3)
</TABLE>
-11-
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
Land and buildings 4.85 28,840 Cory Orchard & Turf
6739 Guion Road Division offices;
Indianapolis, Indiana 46268 warehouse space for
spraying equipment and
supplies; repair
center for sprayers;
retail and wholesale
sale of chemicals,
equipment and
supplies. (2)
Leased warehouse N/A 6,660 Cory Orchard & Turf
13000 Middleton Industrial Blvd. Branch office; ware-
Louisville, Kentucky 40223 house space for
spraying equipment and
supplies; retail and
wholesale sale of
chemicals, equipment
and supplies. One
year lease expires
February of 1998.(2)
Land and building 16.10 68,800 Tank Division offices;
721 Graham Drive manufacture of propane
Fremont, Ohio 43420 and anhydrous ammonia
tanks. Operations
commenced during the
second quarter of
1993 (See note 5 to
the financial state-
ments for mortgage
information)(2)
<FN>
(1) The Company believes that its properties are adequately maintained, are
in good condition and are suitable and adequate for its business as
presently conducted.
(2) The Company believes these facilities are being used to approximately
75 to 100 percent of their capacity.
(3) The Company believes that this facility is being used to approximately
50% of capacity based upon 24 hour utilization.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company, along with fourteen other parties, has been designated in a
letter dated July 13, 1995, as a potentially responsible party by the United
States Environmental Protection Agency (the "EPA") at the County Line Landfill,
Fremont, Ohio under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended. The EPA is requesting that the
potentially responsible parties initiate an Engineering Evaluation and Cost
Analysis (EECA) to evaluate what future response activities may be necessary at
the site, which was licensed and operated as a landfill from 1969 to 1984. The
potentially responsible parties have commenced participation in an engineering
evaluation at the site. There is no volumetric ranking of the parties available.
Although the EPA takes a position that any potentially responsible party is
liable jointly and severally for response costs, the Company is only one of many
parties believed to have used the site. There is also no information as to the
extent and nature of any necessary future response action to the site. During
the period in question the Company maintained various insurance policies and
management is exploring the availability of coverage of claims which may arise.
Because of the preliminary state of this matter and lack of information, it is
not possible to estimate the financial impact or range of probable financial
impact on the Company. During the year ended December 31, 1995, the Company
expensed $9,132, its portion of the expenses of the current engineering
evaluation.
-12-
<PAGE> 13
Since 1995 the Company has not reflected any amount or accrued expenses to
cover any future cost of additional evaluation or remediation relating to the
site. While the ultimate outcome of this matter cannot now be predicted, the
Company believes, based on the facts now known to it, that costs arising out of
this matter will not have a material adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of the Company's shareholders
during the last quarter of the period covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
----------------------------------------------------------------
MATTERS
-------
(a) Market Information.
-------------------
The Company's common stock trades on the NASDAQ Small Cap Market under
the symbol CTRL. The Company believes the range of high and low sales prices for
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
<S> <C> <C> <C>
$12.0625-$10.50 $11.625-$9.375 $11.75-$9.25 $13.125-$10.00
<CAPTION>
1995
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
<S> <C> <C> <C>
$10.45-$9.50 $11.00-$9.125 $11.50-$10.25 $12.00-$11.00
</TABLE>
Prices have been adjusted to reflect the 10% stock dividends of March 1995.
(b) Numbers of Holders of Common Stock
----------------------------------
There were 359 shareholders of record on March 5, 1997. Management
believes the number of holders of Chemi-Trol's Common Shares at March 5, 1997,
including persons holding through a nominee holder, was 774.
-13-
<PAGE> 14
(c) Dividends Paid per Common Share
-------------------------------
<TABLE>
<CAPTION>
1996 1995
------------------------- ------------------------
Quarter Ended Quarter Ended
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends declared
were $.36 per common
share in 1996 and 1995,
respectively.
Dividends have been $.090 $.090 $.090 $.090 $.082 $.090 $.090 $.090
adjusted to reflect
the 10% stock
dividends of March
1995.
</TABLE>
The Company has paid a cash dividend on its Common Shares each year
since its incorporation in 1952.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Results:
Revenues $70,452,126 $71,048,476 $67,823,972 $62,099,805 $58,905,134
Net Income 1,258,283 1,474,705 1,609,719 896,731 1,488,410
Net Income
Per Common Share .63 .74 .80 .45 .74
At Year-end:
Total
Assets 47,423,367 48,592,539 45,917,360 41,186,807 36,589,365
Long-Term
Debt 3,329,267 9,789,973 7,235,827 8,761,989 5,964,152
Working
Capital 11,151,188 14,430,716 12,218,263 12,174,075 12,180,603
Cash Dividends
Declared Per Common
Share $ .360 $ .360 $ .327 $ .298 $ .260
</TABLE>
Share data has been computed on the basis of the weighted average number of
common shares outstanding during each period and restated for the 6 for 5 stock
split in November of 1992 and the 10% stock dividends in March 1995 and 1994.
-14-
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
- - -------------------------------
Liquidity is the measure of a company's ability to generate adequate
funds to meet its needs. Funds can be generated internally from operations or
externally by borrowing. Primary measures of liquidity include the amount of
working capital, the working capital ratio and the ability to borrow funds. As
shown in the following chart, the Company's ability to borrow funds remains
strong as evidenced by the unused commitment for term financing and the
unpledged notes and leases at December 31, 1996.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Working capital $11,151,188 $14,430,716 $11,218,263
Working capital
ratio 1.5 to 1 1.9 to 1 1.7 to 1
Unused commitment for
term financing of
customer notes and
leases $ 4,780,500 $ 2,076,500 $7,500,000
Unpledged notes and
leases $ 1,407,022 $ 1,310,185 $5,274,000
</TABLE>
The decreases in working capital and working capital ratio in 1996
were largely the result of the ballon payment on the mortgage note, which is
secured by the Tank Production facility and is due in October 1997. The Company
may elect to refinance this note on a long-term basis if additional working
capital is needed.
A substantial amount of the Company's working capital over the past
three years has been provided from operations. Long-term borrowings of
$3,379,808 in 1996 and $8,300,500 in 1995 were used to finance customer sales
type leases or notes receivable for the purchase of steel tanks produced by the
Company's Tank Division, pursuant to the arrangements described under ITEM 1
BUSINESS Leasing and Finance Division. This financing has been arranged through
area banks. The Company has a commitment to provide term financing for tank
notes and leases extended to customers for amounts up to $7,000,000, of which
$4,780,500 was available at year end. The total amounts borrowed with collateral
under the lease and finance plans at December 31, 1996 were $1,437,833 and
$5,757,108, respectively.
Due to the seasonal nature of the operations of the Company's Chemical
Group and extension of fall payment terms in certain other divisions, the
Company has an uneven cash flow pattern. Operations of the Chemical Group begin
approximately mid-April and run through November. There are substantial cash
requirements in the second quarter for this division associated with inventory
build up and the purchase of equipment and supplies. Since the majority of the
contracts performed by this division are for political subdivisions and the
contracts stretch over the entire summer season, a fair percentage of the
payments are not received until mid-September and October. This creates a cash
shortage from June to October which has made it necessary for the Company to
borrow short-term funds. For this reason, the Company has arranged a short-term
borrowing line of $15,750,000 through local banks. In 1996 the Company used
amounts ranging from month-end amounts of $2,965,000 to $11,238,000 of its
short-term credit line.
-15-
<PAGE> 16
Capital expenditures during 1996 decreased to a more normal level
of $925,920 from the previous year expenditures of $2,171,262. Expenditures
during 1995 included the addition of a 31,750 square foot warehouse to provide
Cal-Van with better storage of its inventory and a more efficient production
layout.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Capital expenditures $ 925,920 $2,171,262 $1,298,677
</TABLE>
Capital expenditures are budgeted at $782,000 for 1997. The Company
intends to make these expenditures with funds provided from operations.
Results of Operations
- - ---------------------
(a) 1996 versus 1995
Despite the fact that the Company's revenues for the first half were
down, record sales in both the third and fourth quarters resulted in total
revenues decreasing only slightly, less than 1%, from last year's record levels.
Net income decreased by 14.7% to $.63 per share.
Revenues of the Tank Division, which accounted for 48.5% of the total
Company revenues, decreased by 1.2% from the prior year record level, while
operating profit increased by 1.2%. The decline in revenues was comprised of a
.9% decrease in net sales to $33,291,086 and a 13.3% decrease in interest and
financing income. Cost of sales decreased at the higher rate of 2.0% and
resulted in an increase of 7.1% in gross profit. Increases of 9.0% in selling
expense and 15.9% in general and administrative expenses combined to result in
operating profit increasing at the lesser rate of 1.2%.
For the year the Cal-Van Tools Division's sales increased by 11.7% to
record levels of $17.3 million, while operating profit increased by 19.3%.
Selling expenses decreased by 1.9% from 1995 levels while general and
administrative expenses increased by 25.7%. The increase in general and
administrative expenses was largely the result of increased bad debt expense.
Net sales of the Chemical Group decreased by 6.7%, while operating
profit increased by 17.4%. The increase in operating profit was largely the
result of increased gross profits of 22.0% in the Contract Division, which
accounted for 80.2% of the Groups's sales during the year. Selling and general
administrative increased by 3.3% over the prior year levels.
Cory Orchard & Turf revenues for the period were down 15.0%, while
operating profit decreased by 88.3%. A very cold March, a very wet April and
May, followed by a very dry and mild summer in the Cory sales area had a
negative effect on the year's results. Cost of sales decreased by the lesser
rate of 14.5% causing margins to tighten. The decrease in sales and reduced
margins coupled with an increase of 2.2% in the largely fixed selling, general
and administrative expenses resulted in the reduction in operating profit.
-16-
<PAGE> 17
For the Company as a whole net sales decreased by .6%, while cost of
sales decreased by 1.4% bettering margins and resulting in an increase in gross
profit of 4.5%. Selling expenses were almost unchanged, decreasing by less than
.1% during the year. General and administrative expenses increased by 15.6%
largely as a result of increased bad debt exenses. Interest and financing income
decreased by 14.0% largely as a result of reductions in the average balances of
notes and lease receivable outstanding during the year. Interest expense
increased by 13.4% as average borrowings to fund working capital needs increased
over the prior year levels. The effective income tax rate increased from 39.7%
in 1995 to 40.0% in 1996. For the year, net income decreased by 14.7% to
$1,258,283, or $.63 per share.
(b) 1995 versus 1994
Total revenues of the Company increased by 4.8% to a record
$71,048,476, while net income decreased by 8.4% to 74 cents per share.
The Tank Division, which accounted for approximately 48.7% of total
corporate revenue during 1995, increased revenues by approximately 4.3% over
1994 levels, a new record. The increase in revenues was the result of a 4 .4%
increase in sales and a slight decrease of less than 1% (.8) in interest and
financing income. Actual units shipped during the year increased by 1.4% over
the prior year levels. Operating profit increased by 3.3%, slightly less than
the increase in revenues, as a result of a slight decrease in gross profit
margins.
Net sales of the Cal-Van Tools Division increased by 11.3% to record
levels of $15,527,740, while operating profits decreased by 50.7% for the year
ended December 31, 1995. The disproportionate increase of 14.4% in cost of sales
coupled with a 22.8% increase in selling expenses were largely responsible for
the decrease in operating profits. Continued competitive pressure in a changing
marketplace with fewer and larger customers was responsible for the profit
decrease.
The Chemical Group revenues were static, down by 1.4%, while operating
profits increased by 11.0%. Gross profit increases of 19.3% in CADCO, the
material distribution division, were offset by decreases of 8.7% in the
Contracting Division and resulted in a slight decrease in the Group's gross
profit of 3.9%. The increase in operating profit was attributable to decreases
in divisional selling and general and administrative expenses of 15.5% and
21.0%, respectively.
Revenues of the Cory Orchard & Turf Division increased by 7.2%, while
operating profits increased over 19 times the depressed 1994 level. Higher
margins, the result of cost of goods sold increasing at a lesser rate of 4.6%
coupled with the volume increase, served to increase gross profits by 24.1%.
Selling and general administrative expenses were stable, decreasing by less than
1%.
-17-
<PAGE> 18
For the Company as a whole, the increase in net sales of 4.9% was
slightly less than the 5.0% increase in cost of sales, forcing margins to
tighten. Selling expense increases of 12.5% were largely attributable to
Cal-Van's aggressive marketing. The 5.7% decrease in general and administrative
expenses was largely the result of decreased profit sharing allocations due to
lower profits, particularly in the second half of the year. Interest and
financing income decreased by 1.8% from 1994 levels. Interest expense increased
by 21.5% as borrowings to fund working capital and capital addition expenditures
increased during the year. Net income decreased by 8.4% to $1,474,705 or 74
cents per share.
Changes effective in state and local tax rates were largely responsible
for the increase in the effective tax rate from 38.4% in 1994 to 39.7% in 1995.
Impact of Inflation and Changing Prices on Sales and Income From
- - ----------------------------------------------------------------
Operations
- - ----------
The rate of inflation during recent years has again become a
consideration and the Company uses the following procedures to help offset its
detrimental effects. First, selling prices of the Company's products are
carefully and constantly scrutinized so that selling prices reflect current
costs. Price increases can only be instituted, of course, to the extent that the
Company's prices remain competitive within the business segments in which the
Company operates. As a result, the Company constantly monitors alternative
suppliers to assure the lowest possible costs. The Chemical Group can reasonably
account for inflation in bidding on fixed price contracts because a majority of
the contracts are bid early in the year with completion dates during the current
year. Labor rates are generally established prior to the bid and these are
generally fixed for the duration of the contract. Materials necessary to perform
a contract can be price protected by purchasing under early order programs or by
purchasing sufficient quantities of the materials necessary to complete the
contract at the time it is awarded. This allows these costs to be considered at
the time a bid is prepared. The Company uses the LIFO method of accounting for
the cost of goods sold for the majority of its products. This charges current
costs to the results of operations for both financial reporting and income tax
purposes and during periods of inflation results in improved cash flow due to
lower income taxes paid by providing a closer matching of revenues and expenses.
Finally, increasing of productivity levels in all of the Company's operating
divisions has helped to lessen the effects of inflation in the past and will
continue to be part of the Company's objective for controlling the effects of
inflation in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See ITEM 14 for an index to financial statements and financial
statement schedule.
-18-
<PAGE> 19
Report of Independent Auditors
The Board of Directors and Shareholders
Chemi-Trol Chemical Co.
We have audited the accompanying balance sheets of Chemi-Trol Chemical Co. as of
December 31, 1996 and 1995, and the related statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chemi-Trol Chemical Co. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Toledo, Ohio
February 28, 1997
-19-
<PAGE> 20
Chemi-Trol Chemical Co.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
--------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 112,506 $ 80,991
Trade receivables, less allowance of $380,000
in 1996 and $310,000 in 1995:
Accounts 15,961,847 11,960,645
Notes (Note 5) 3,498,027 4,568,313
--------------------------------------------
19,459,874 16,528,958
Net investment in sales-type leases
(Notes 2 and 5) 684,120 1,005,265
Inventories (Notes 1 and 3) 10,712,677 11,799,651
Prepaid expenses and deferred income taxes (Note 7) 1,140,873 1,201,688
--------------------------------------------
Total current assets 32,110,050 30,616,553
Property and equipment, at cost (Notes 4 and 5) 21,161,344 20,501,534
Less accumulated depreciation 10,509,619 9,459,443
--------------------------------------------
Net property and equipment 10,651,725 11,042,091
Other assets (Notes 2 and 5):
Notes receivable 3,165,486 4,366,432
Net investment in sales-type leases 1,254,330 2,254,722
Other 241,776 312,741
--------------------------------------------
Total other assets 4,661,592 6,933,895
--------------------------------------------
$47,423,367 $48,592,539
============================================
</TABLE>
-20-
<PAGE> 21
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
--------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 5) $ 2,964,916 $ 1,507,831
Accounts payable 7,359,161 7,102,503
Dividends payable 180,444 180,444
Income taxes 230,485 148,629
Accrued liabilities:
Insurance 1,331,966 1,027,531
Compensation 919,350 818,703
Profit-sharing 292,289 304,019
Other 379,572 392,871
Long-term debt due within one year (Note 5) 7,300,679 4,703,306
--------------------------------------------
Total current liabilities 20,958,862 16,185,837
Long-term debt (Note 5) 3,329,267 9,789,973
Deferred income taxes (Note 7) 876,000 894,000
Shareholders' equity:
Common stock, without par value; 6,000,000 shares
authorized, 2,004,930 shares issued
and outstanding (Note 6) 4,590,767 4,590,767
Retained earnings 17,668,471 17,131,962
--------------------------------------------
Total shareholders' equity 22,259,238 21,722,729
============================================
$47,423,367 $48,592,539
============================================
</TABLE>
See accompanying notes.
-21-
<PAGE> 22
Chemi-Trol Chemical Co.
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales $69,556,888 $70,007,608 $66,763,748
Interest and financing income 895,238 1,040,868 1,060,224
-------------------------------------------------------------
70,452,126 71,048,476 67,823,972
Costs and expenses:
Cost of sales 59,744,177 60,622,638 57,712,244
Selling 3,703,169 3,706,662 3,295,078
General and administrative 3,330,847 2,881,262 3,056,648
Interest 1,577,650 1,391,209 1,145,283
-------------------------------------------------------------
68,355,843 68,601,771 65,209,253
-------------------------------------------------------------
Income before income taxes 2,096,283 2,446,705 2,614,719
Income taxes (Note 7):
Federal:
Current 699,000 687,000 666,000
Deferred 3,000 120,000 182,000
State and local 136,000 165,000 157,000
-------------------------------------------------------------
838,000 972,000 1,005,000
-------------------------------------------------------------
Net income $ 1,258,283 $ 1,474,705 $ 1,609,719
=============================================================
Per common share (Note 6) $.63 $.74 $.80
=============================================================
</TABLE>
See accompanying notes.
-22-
<PAGE> 23
Chemi-Trol Chemical Co.
Statements of Shareholders' Equity
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock
--------------------------------- Retained
Shares Amount Earnings Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance - December 31, 1993 1,657,182 $ 991,122 $19,027,715 $20,018,837
Net income 1,609,719 1,609,719
Cash dividends - $.33 per share
(Note 6) (656,207) (656,207)
10% stock dividend issued 165,614 1,801,052 (1,801,052) -
Cash dividend issued for
fractional shares (1,133) (1,133)
--------------------------------------------------------------------
Balance - December 31, 1994 1,822,796 2,792,174 18,179,042 20,971,216
Net income 1,474,705 1,474,705
Cash dividends - $.36 per share
(Note 6) (721,774) (721,774)
10% stock dividend issued 182,134 1,798,593 (1,798,593) -
Cash dividend issued for
fractional shares (1,418) (1,418)
--------------------------------------------------------------------
Balance - December 31, 1995 2,004,930 4,590,767 17,131,962 21,722,729
Net income 1,258,283 1,258,283
Cash dividends - $.36 per share
(Note 6) (721,774) (721,774)
====================================================================
Balance - December 31, 1996 2,004,930 $4,590,767 $17,668,471 $22,259,238
====================================================================
</TABLE>
See accompanying notes.
-23-
<PAGE> 24
Chemi-Trol Chemical Co.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,258,283 $ 1,474,705 $ 1,609,719
Adjustments to reconcile net income to net cash
provided by operating activities:
Notes receivable from product sales (4,916,255) (7,476,136) (7,347,207)
Collections from customers on notes receivable 5,145,795 4,681,181 4,328,688
Notes receivable sold 2,001,692 2,348,145 2,138,527
Proceeds from sales-type leases 1,600,771 2,023,828 1,085,206
Additions to net investment in sales-type
leases (279,234) (1,283,777) (1,106,954)
Depreciation 1,301,257 1,238,437 1,184,800
Provision for deferred income taxes 3,000 120,000 182,000
Gain on sale of property and equipment (14,185) (47,168) (4,825)
Increase in allowance for doubtful accounts 70,000 - -
Changes in operating assets and liabilities:
Accounts receivable (4,031,202) (543,785) (2,414,999)
Inventories 1,086,974 (2,418,981) (897,912)
Prepaid expenses 39,815 101,733 117,827
Other assets 70,965 (9,230) (143,985)
Accounts payable 256,658 388,046 2,601,573
Income taxes payable 81,856 43,132 71,340
Accrued liabilities 380,053 (306,498) (43,026)
-----------------------------------------------------
Net cash provided by operating activities 4,056,243 333,632 1,360,772
INVESTING ACTIVITIES
Additions to property and equipment (925,920) (2,171,262) (1,298,677)
Proceeds from disposals of property and equipment 29,214 110,249 42,568
-----------------------------------------------------
Net cash used in investing activities (896,706) (2,061,013) (1,256,109)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 3,379,808 8,300,500 3,418,178
Payments of long-term debt (7,243,141) (4,791,733) (4,701,801)
Net borrowings under line of credit 1,457,085 (1,992,169) 2,200,000
Cash dividend payments (721,774) (705,386) (641,297)
Payments in lieu of issuing fractional shares - (1,418) (1,133)
-----------------------------------------------------
Net cash provided by (used in) financing activities (3,128,022) 809,794 273,947
-----------------------------------------------------
Increase (decrease) in cash 31,515 (917,587) 378,610
Cash at beginning of year 80,991 998,578 619,968
-----------------------------------------------------
Cash at end of year $ 112,506 $ 80,991 $ 998,578
=====================================================
Supplemental cash flow information:
Cash paid for interest $ 1,574,702 $ 1,389,427 $ 1,144,411
=====================================================
Cash paid for income taxes $ 753,143 $ 748,868 $ 615,483
=====================================================
</TABLE>
See accompanying notes
-24-
<PAGE> 25
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CREDIT PRACTICES
Credit terms are granted and periodically revised based on general industry
practices and evaluations of the customers' credit reports, payment history and
financial condition. The Company retains a security interest in products sold on
the installment basis. Credit losses are provided for in the financial
statements and consistently have been within management's expectations.
INVENTORY VALUATION
Substantially all inventories are valued at the lower of cost, determined by the
last-in, first-out (LIFO) method, or market.
NOTES RECEIVABLE
Notes receivable are due in installments from customers for sales of liquid
propane gas tanks. The notes are issued for three or four year terms and bear
interest based on the prevailing interest rate. At December 31, 1996, the
carrying value of notes receivable approximates their fair value based on the
Company's current incremental lending rates.
LEASES
Leases of liquid propane gas tanks to customers for noncancellable terms of five
or ten years are recorded as sales at inception. The present value of the
minimum payments is included in net sales and the cost of the tanks is charged
to cost of sales. Estimated residual values of the leased tanks are not
significant. The leases are financed through notes payable to banks with terms
similar to the leases. The obligations to the banks are included in long-term
debt. Interest income computed at the rates implicit in the leases is recognized
on the interest method.
-25-
<PAGE> 26
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenues for product sales are recognized when goods are shipped to customers in
accordance with their purchase orders. Contracts within the Chemical segment are
typically completed by December 31 of each year. On an interim basis, these
contracts are accounted for based on percentage completion.
DEPRECIATION
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets.
NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of shares
outstanding of 2,004,930, after giving retroactive effect to the 10% stock
dividends issued in March 1994 and 1995. Shareholders' rights, which have a
potentially dilutive effect, have been excluded from the weighted average shares
computation as conditions to the exercisability of such rights have not been
satisfied (see Note 6).
2. NET INVESTMENT IN SALES-TYPE LEASES
The components of the net investment in sales-type leases at December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------
<S> <C> <C>
Minimum lease payments receivable $2,309,775 $3,944,355
Unearned financing income 371,325 684,368
----------------------------------------
Net investment 1,938,450 3,259,987
Current portion 684,120 1,005,265
----------------------------------------
Noncurrent portion $1,254,330 $2,254,722
========================================
</TABLE>
At December 31, 1996 minimum lease payments receivable for each of the five
subsequent years are as follows: 1997 - $869,000; 1998 - $665,000; 1999 -
$477,000; 2000 - $251,000 and 2001 - $49,000.
At December 31, 1996 the carrying value of sales-type leases approximates fair
value based on the Company's current incremental lending rates.
-26-
<PAGE> 27
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
3. INVENTORIES
Inventories are comprised of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------
<S> <C> <C>
Manufacturing inventories:
Raw materials and supplies $ 2,584,509 $ 3,304,000
Work in process 438,662 465,290
Finished goods 1,188,521 2,061,184
Purchased inventory held for resale 6,148,461 5,694,549
Materials used in contracting 352,524 274,628
============================================
$10,712,677 $11,799,651
============================================
</TABLE>
Under the LIFO method, inventories have been reduced by approximately $1,544,000
and $1,766,000 at December 31, 1996 and 1995, respectively, from amounts which
would have been reported under the first-in, first-out method.
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------
<S> <C> <C>
Land and land improvements $ 1,253,866 $ 1,253,421
Buildings 4,898,066 4,897,303
Machinery and equipment 10,130,938 9,194,219
Automobiles and trucks 4,857,556 4,764,544
Construction in process 20,918 392,047
============================================
$21,161,344 $20,501,534
============================================
</TABLE>
-27-
<PAGE> 28
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
5. DEBT
The Company has a $15,000,000 bank line of credit available for revolving loans
with interest payable at the bank's prime rate less 1/2% (7.75% and 8.00% at
December 31, 1996 and 1995, respectively); revolving loans of $2,964,916 and
$1,507,831 were outstanding at December 31, 1996 and 1995, respectively. Under
this credit arrangement, the Company may convert, on or before May 2, 1997, up
to $7,000,000 of revolving loans to term loans, payable over thirty-six or sixty
months with interest at an annual rate equal to the yield for U. S. Treasury
obligations of similar maturity plus a specified number of basis points.
Converted term loans ($2,219,500 at December 31, 1996) reduce the line of credit
available for revolving loans. Revolving loans are secured by accounts
receivable and inventory; term loans are secured as described below.
The credit agreement, amended as of February 28, 1997, contains provisions which
require the Company to, among other things, maintain minimum debt to net worth
and current ratios, minimum tangible net worth and certain working capital
levels. The Company was in compliance with these amended covenants at December
31, 1996.
The Company also has a $750,000 unused line of credit available for short-term
borrowings with interest payable at a rate to be determined.
Long-term debt outstanding at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------
<S> <C> <C>
6.63% - 9.35% (6.08% - 9.35% in 1995), term
loans due in varying monthly amounts with a
final maturity in December, 2001, secured by
certain sales-type leases and notes receivable of
approximately $7,195,000 at December 31, 1996 $ 7,194,941 $10,884,547
7 3/4% mortgage note with a final maturity in October, 1997,
secured by tank production facility with a net book value
of $4,169,000 at December 31, 1996
3,435,005 3,608,732
----------------------------------------
10,629,946 14,493,279
Amount due within one year 7,300,679 4,703,306
----------------------------------------
$ 3,329,267 $ 9,789,973
========================================
</TABLE>
-28-
<PAGE> 29
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
5. DEBT (CONTINUED)
Annual maturities of long-term debt for the five years subsequent to December
31, 1996 are as follows: 1997 - $7,301,000; 1998 - $2,070,000; 1999 -
$1,050,000; 2000 - $190,000 and 2001 - $19,000.
At December 31, 1996, the carrying value of long-term debt approximates fair
value based on the Company's current incremental borrowing rates.
6. COMMON STOCK
In March 1994 and 1995, the Company issued 10% stock dividends. Income and cash
dividends per common share amounts for all years presented in the statements of
income and shareholders' equity have been adjusted to reflect these stock
dividends.
The Company has adopted a Shareholders' Rights Plan designed to ensure that all
of the Company's shareholders receive fair and equal treatment in the event of
any proposal to acquire control of the Company. Under the Rights Plan, each
right will entitle shareholders to buy one one-hundredth of a share of common
stock of the Company at an exercise price of $42.97 (as adjusted for the 10%
stock dividends issued in March 1994 and 1995). The rights will be exercisable
only if a person or group acquires beneficial ownership of 20 percent or more of
the Company's common stock or announces a tender or exchange offer after which
such person or group would beneficially own 30 percent or more of the common
stock without the prior approval of the Company's Board of Directors, or if they
determine that any person is an "Adverse Person." Under certain circumstances,
the rights will become exercisable for common stock or other assets or
securities of the Company or common stock of the surviving corporation in a
merger involving the Company. In such event, the rights would entitle the
holders thereof to purchase such stock at 50% of the then-current market value
of the stock.
The Board of Directors of Chemi-Trol Chemical Co., except as otherwise provided
in the Rights Plan, will generally be able to redeem the rights at one cent per
right at any time during a 10-day period following any of the events which
result in the rights becoming exercisable. During this 10-day period, the Board
may also extend the time during which it may redeem the rights. The rights are
not exercisable until the expiration of the redemption period and will expire
upon the earlier to occur of May 27, 2003 or their redemption in accordance with
provisions of the plan.
-29-
<PAGE> 30
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment $1,054,000 $ 953,000
Prepaid expenses 54,000 89,000
Sales-type leases 10,000 38,000
----------------------------------------
Total deferred tax liabilities 1,118,000 1,080,000
Deferred tax assets:
Accrued insurance 270,000 256,000
Inventories 156,000 156,000
Accrued compensation 149,000 152,000
Allowance for doubtful accounts 129,000 105,000
Other 71,000 71,000
----------------------------------------
Total deferred tax assets 775,000 740,000
----------------------------------------
Net deferred tax liabilities $ 343,000 $ 340,000
========================================
</TABLE>
Net deferred tax liabilities are included in the balance sheets at December 31
as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------
<S> <C> <C>
Current assets $ 533,000 $ 554,000
Noncurrent liabilities 876,000 894,000
----------------------------------------
Net deferred tax liabilities $ 343,000 $ 340,000
========================================
</TABLE>
-30-
<PAGE> 31
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
7. INCOME TAXES (CONTINUED)
The effective income tax rate differs from the statutory U. S. federal income
tax rate for the following reasons and by the following percentages:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Statutory U. S. federal income tax rate 34.0% 34.0% 34.0%
Increase in taxes resulting from:
State and local income taxes, net of federal tax
effect 4.3 4.5 4.0
Non-deductible expenses 1.7 1.6 1.1
Other - (.4) (.7)
----------------------------------------
Effective income tax rate 40.0% 39.7% 38.4%
========================================
</TABLE>
8. EMPLOYEES' RETIREMENT PLAN
The Company has a profit-sharing plan which provides retirement benefits for
full-time employees. The plan provides for Company contributions at the
discretion of the Board of Directors of an amount not to exceed that deductible
for federal income tax purposes. Costs charged to operations amounted to
$292,000 in 1996, $305,000 in 1995 and $527,000 in 1994.
9. SALE OF NOTES WITH RECOURSE
The Company has a contingent liability of approximately $3,087,000 at December
31, 1996 for customers' installment notes sold with recourse to the Chemi-Trol
Chemical Company Profit Sharing Plan. The credit risk associated with these
notes is minimal as the Company retains a security interest in the product sold
on the installment basis.
10. ENVIRONMENTAL
In 1995, the Company was named a potentially responsible party (PRP) for site
investigation and cleanup costs under the Comprehensive Environmental Response,
Compensation, and Liability Act (Superfund) or similar state laws with respect
to a certain site. The Company has notified third party insurers about this
matter. While the ultimate outcome of this matter cannot now be predicted, the
Company believes, based on the facts now known to it, that costs arising out of
this matter will not have a material adverse effect on the Company's financial
position.
-31-
<PAGE> 32
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
11. INFORMATION PERTAINING TO INDUSTRY SEGMENTS
The Company has four operating segments which are in separate industries. The
Tank division produces and sells steel pressure tanks for the storage of liquid
propane gas and anhydrous ammonia to customers in the U.S. and Canada;
operations of the Chemical division involve the sale and application of highway
pavement marking and vegetation control materials in the U.S.; the Cal-Van Tools
division purchases for resale and manufactures automotive specialty hand tools
for the U.S. and foreign automotive aftermarket; the Cory Orchard & Turf
division sells agricultural chemicals, products and equipment to U. S.
customers. Total revenues by segment include sales to unaffiliated customers, as
reported in the Company's income statement, and intersegment sales, which are on
substantially the same terms as sales to unaffiliated customers. No customer
exceeds 10% of total revenues; however, one customer of Cal-Van Tools consisted
of 22%, 14%, and 11% of total Company accounts receivable at December 31, 1996,
1995 and 1994, respectively. Operating profit (total revenues less operating
expenses) excludes general corporate expenses, interest expense, corporate
interest income, corporate other income and income taxes. Corporate assets
include cash investments and the administrative offices.
The following summarizes the Company's operations and identifiable assets:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Tank $34,171,719 $34,599,551 $33,185,903
Cal-Van Tools 17,673,442 15,903,979 14,263,708
Chemical 13,376,509 14,452,831 14,720,536
Cory Orchard & Turf 5,701,208 6,715,684 6,268,846
Corporate interest 2,575 24,707 35,806
Eliminations - inter-segment (473,327) (648,276) (650,827)
=============================================================
Total revenues $70,452,126 $71,048,476 $67,823,972
=============================================================
</TABLE>
-32-
<PAGE> 33
11. INFORMATION PERTAINING TO INDUSTRY SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Operating profit:
Tank $ 4,221,715 $ 4,172,778 $ 4,039,036
Cal-Van Tools 460,409 384,359 779,825
Chemical 674,526 574,587 517,557
Cory Orchard & Turf 26,085 222,345 16,944
-------------------------------------------------------------
Total operating profit 5,382,735 5,354,069 5,353,362
General corporate expenses (1,711,377) (1,540,862) (1,629,166)
Corporate interest expense (1,577,650) (1,391,209) (1,145,283)
Corporate interest income 2,575 24,707 35,806
-------------------------------------------------------------
Income before income taxes $ 2,096,283 $ 2,446,705 $ 2,614,719
=============================================================
Identifiable assets:
Tank $25,346,790 $28,449,834 $26,928,426
Cal-Van Tools 14,076,619 11,676,495 9,304,139
Chemical 3,058,300 3,346,820 3,927,242
Cory Orchard & Turf 3,332,322 3,324,853 3,240,630
Corporate assets 1,609,336 1,794,537 2,516,923
-------------------------------------------------------------
Total assets $47,423,367 $48,592,539 $45,917,360
=============================================================
Depreciation:
Tank $ 576,549 $ 565,766 $ 542,420
Cal-Van Tools 263,689 222,842 191,297
Chemical 324,944 296,107 304,731
Cory Orchard & Turf 87,298 93,455 91,050
Corporate assets 48,777 60,267 55,302
-------------------------------------------------------------
Total depreciation $ 1,301,257 $ 1,238,437 $ 1,184,800
=============================================================
</TABLE>
-33-
<PAGE> 34
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
11. INFORMATION PERTAINING TO INDUSTRY SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Capital expenditures:
Tank $256,145 $ 596,230 $ 383,928
Cal-Van Tools 283,997 1,034,017 404,376
Chemical 341,093 404,624 336,732
Cory Orchard & Turf 8,430 115,349 95,357
Corporate assets 36,255 21,042 78,284
-------------------------------------------------------------
Total capital expenditures $925,920 $2,171,262 $1,298,677
=============================================================
</TABLE>
-34-
<PAGE> 35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The following information as of March 1, 1997 is furnished with respect
to each director, each executive officer and certain significant employees:
<TABLE>
<CAPTION>
Director
Offices and Positions Continuously Current term
Name Age Held with the Company Since through July
---- --- --------------------- ----- ------------
<S> <C> <C> <C> <C>
Arthur F. Doust 73 Director, Chairman of 1952 1999
the Board and Chief
Executive Officer
Robert W. Woolf 54 Director and President 1987 1997
John P. Simcox 47 Director, Vice President 1990 1998
and General Manager - Tank
Division
Kevin D. Lauck 46 Director, Secretary and 1990 1999
Controller
Robert F. Veh 67 Director 1975 1998
W. Burton Lloyd 58 Director 1986 1999
Robert H. Moyer 68 Director 1992 1997
Fred J. Roynon 64 Director 1993 1998
Richard J. Dudley 66 Director 1993 1997
Gerald J. Porczak 62 Treasurer, General Manager -- --
Lease and Finance
Division
James C. Herl 50 General Manager, Chemical -- --
Group
James R. LaBenne 51 General Manager - Cal-Van
Tools Division -- --
Jon M. Cravens 44 General Manager - Cory
Orchard & Turf Division -- --
</TABLE>
-35-
<PAGE> 36
Arthur F. Doust joined the Company in 1952. He has served as Chairman
of the Board (1985 to date), Chief Executive Officer (1987 to date), President
(1969 to 1988) and as First Vice President and General Manager (1952 to 1969) of
the Company.
Robert W. Woolf joined the Company in 1972. He has served as Assistant
Controller (1972 to 1977), Executive Administrator and Assistant Secretary (1977
to 1985), Vice President (1985 to 1988) and as President (1988 to date) of the
Company.
John P. Simcox joined the Company in 1972. He has served as Vice
President (1991 to date) and General Manager of the Tank Division (1990 to
date), Director of Sales for the Company (1987 to 1989), Sales Manager for
Chemical Group and Assistant Sales Manager for Tank Division (1977 to 1987), and
as a salesman for the Chemical Group and Tank Division in both Indiana and Ohio
(1972 to 1977).
Kevin D. Lauck joined the Company in 1977. He has served as Secretary
and Controller (1988 to date), Assistant Secretary and Assistant Controller
(1985 to 1987) and Assistant Controller (1977 to 1985).
Robert F. Veh is the retired President of Veh & Son, Inc., a
corporation located in Gibsonburg, Ohio, which operated a retail furniture store
and funeral home. He retired in 1989. He is a Director of Fifth Third Bank of
Northwest Ohio National Association.
W. Burton Lloyd has been the President for more than the past five
years of Advanced Insulation Concepts, Inc. formerly American Isowall
Corporation, located in Florence, Kentucky, which manufactures various insulated
panels for use in the construction of cold storage units.
Robert H. Moyer is the President of The Mosser Group, located in
Fremont, Ohio, a holding company of: Mosser Construction, Inc. of which he is
Chairman; Contractors Equipment, Inc.; WMOG Investment, Inc.; and Telamon
Construction, Inc. Mosser Construction, a commercial construction and
contracting company, is located in Fremont, Ohio. He is also a Director of
Croghan Bancshares, Inc., the publicly owned holding company of Croghan Colonial
Bank.
Fred J. Roynon is a retired bank executive with twenty-four years
experience in community bank management, including Chairman, President and CEO
of Society Bank Northwest Ohio (1980-1985).
Richard J. Dudley retired as Chairman of the Board, President and CEO
of S.E. Hyman Co., a manufacturing company located in Fremont, Ohio, and served
as Assistant to the President of Terra Technical College, Fremont, Ohio
(1987-1990).
Gerald J. Porczak joined the Company in 1966. He has served as
Treasurer (1993 until his retirement on March 7, 1997), General Manager of the
Lease and Finance Division (1978 until his retirment on March 7, 1997) and as
Corporate Credit Manager (1966 until his retirement March 7, 1997).
-36-
<PAGE> 37
James C. Herl joined the Company in 1974. He has served as Engineer in
the Chemical Group, with primary responsibility in the Pavement Marking
Division. (1974-1994) and as General Manager of the Chemical Group (1995 to
date).
James R. LaBenne joined the Company in 1970. He has served as salesman
covering one half the State of Michigan for the Chemical Group and Tank Division
(1970 to 1987), Assistant General Manager for the Cal-Van Tools Division (1987
to 1988), and as General Manager - Cal-Van Tools Division (1988 to date).
Jon M. Cravens joined the Company in 1975. He has served as salesman in
the State of Indiana for the Chemical Group and the Tank Division (1975 to
1988). Mr. Cravens has also been Assistant General Manager of the Cory Orchard &
Turf Division (1985 to 1988), and General Manager of the Cory Orchard & Turf
Division (1988 to date).
Messrs. Doust, Woolf, and Veh are members of the Executive Committee of
the Company. Messrs. Doust, Veh and Lloyd are members of the Governance
Committee. Messrs. Doust, Veh, Lloyd and Woolf are members of the Compensation
Committee and the Audit Committee is comprised of the following independent
directors, Messrs. Moyer, Roynon and Dudley.
The Company has no standing nominating committee or committee
performing similar tasks.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Jon M.
Cravens, General Manager at the Cory Orchard & Turf Division, was delinquent in
filing a Form 4 Statement of Changes in Beneficial Ownership, to report the
sale of 1000 shares of stock in March of 1996, but timely filed form 5 to
rectify the delinquency. The Company believes that all other Directors and
Officers have timely filed all reports required by Section 16(a) of the Act.
Directors of the Company are elected at the Company's annual meeting of
shareholders for a term of three years and until their successors are elected
and qualified. The executive officers of the Company are elected by and serve at
the pleasure of the Board of Directors of the Company.
-37-
<PAGE> 38
ITEM 11. EXECUTIVE COMPENSATION
Summary Information
The following table summarizes the total compensation for each of
the last three years of (i) the Company's Chief Executive Officer and (ii) any
of its other four most highly compensated executive officers who received salary
and bonus in 1996 in excess of $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------
Name and Other All Other
Principal Annual Compen-
Position Year Salary $ Bonus $ Compensation sation $
- - -------- ---- -------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Arthur F. Doust 1996 55,996 24,000 3,000(a) 2,480(b)
Chairman and 1995 53,225 17,000 3,000(a) 2,177(b)
CEO 1994 40,379 24,000 3,000(a) 3,863(b)
Robert W. Woolf 1996 106,814 20,000 3,000(a) 3,931(b)
President and 1995 102,086 18,125 3,000(a) 3,726(b)
COO 1994 87,899 25,500 3,000(a) 6,804(b)
<FN>
(a) Director Fees paid for service on Board of Directors.
(b) Company's profit sharing plan account contribution.
</TABLE>
During the year ended December 31, 1996, each Director of the Company
was compensated for services as a Director by the total payment of $3000 for the
four regularly scheduled meetings. Outside or independent Directors are
compensated $400 for attending special meetings that are scheduled on days other
than the regular quarterly meetings.
Executive Employment Agreements
In August 1996, the Company entered into agreements to employ Mr.
Robert Woolf as the President and Chief Operating Officer, Mr. John P. Simcox
as Vice President and General Manager of the Tank Division, and Mr. Kevin D.
Lauck, as Secretary and Controller for terms of three-years. The employment
agreements provide for annual base compensation equal to an amount which is not
less than the officer's annual base compensation on the date of the agreement
and for an annual bonus which is not less than the greater of 15% annual base
compensation or the bonus paid in the preceding fiscal year. In addition the
employment agreements provide that during the term of the agreement and for one
year thereafter, the officers shall not compete with any business carried on by
the Company (provided that no change of control shall have occurred). The
agreements further provide that if the officer's employment is terminated
following a change of control, other than for cause, disability or retirement,
the officer shall be entitled to receive, in lieu of any salary or bonuses
payable under the agreement, an amount equal to three times the present
value of his annual base compensation and bonus plus the cash surrender value
of all life insurance maintained by the Company on the officer's life.
Compensation Committee Interlocks and Insider Participation
- - -----------------------------------------------------------
The Compensation Committee consists of Arthur F. Doust and Robert W.
Woolf, each of whom is an executive officer of the Company, and Robert F. Veh
and W. Burton Lloyd, independent directors.
Compensation Committee Report on Executive Compensation
- - -------------------------------------------------------
This report sets forth the compensation policies of the Compensation
Committee applicable to the Company's executive officers and the relationship of
corporate performance to executive compensation.
The Company's compensation package for its executive officers consists
of base salary, annual performance-based bonus and participation in the
Company's Profit Sharing Plan. These particular elements are further explained
below.
-38-
<PAGE> 39
Base salaries are determined primarily on the basis of salaries being
paid in the competitive marketplace, Company-wide performance and each executive
officer's responsibilities, individual performance, knowledge, ability, time in
position and prior experience. Salaries are adjusted annually as determined by
individual performance, the competitive marketplace, Company-wide performance
and changes in the cost of living. In general, base salaries are set at levels
believed by the Committee to be sufficient to attract and retain qualified
individuals when considered with the other components of the Company's
compensation structure.
Annual performance-based bonuses are determined at year end by the
Committee for each executive officer, with the amount for each depending upon
individual accomplishments and the overall performance of the Company, as
weighted and applied on an individual basis by the Compensation Committee.
Performance bonuses for executive officers have historically not exceeded 30% of
base compensation.
The Company's Profit Sharing Plan is qualified under Section 401(a) of
the Internal Revenue Code and is for the benefit of all employees who complete a
specified number of hours of service to the Company each Plan year and are
employees through year-end. The Board of Directors of the Company determines the
amount to be contributed from income to the Plan for each year based upon
Company performance, historical contribution levels and other factors deemed
appropriate by the Board. Company contributions to the Plan are allocated to the
accounts of eligible employees pro rata according to each employee's annual
compensation, without any variance of such formula for executive officers.
Retirement, disability or death benefits under the Plan commence on the earlier
of retirement, disability or death of an eligible employee, based upon the
employee's Plan account balance. Upon termination of employment for reasons
other than retirement, disability or death, rights of eligible employees depend
upon their number of years of service to the Company. All executive officers of
the Company are currently participating in the Profit Sharing Plan.
The foregoing report has been furnished by Arthur F. Doust, W. Burton
Lloyd, Robert F. Veh, and Robert W. Woolf, members of the compensation committee
of the Board of Directors.
-39-
<PAGE> 40
Stock Performance Graph
- - -----------------------
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S & P 500 Stock Index and the Diversified
Mfg. Group for the period commencing December 31, 1991, and ending December 31,
1996.
[GRAPH]
Assumes that the value of the investment in Chemi-Trol Chemical Common
Stock and each index was $100 on December 31, 1991, and that all dividends were
reinvested monthly.
Source: S&P Compustat Base Year = 100: 12/31/91
<TABLE>
<CAPTION>
Company Name Dec.-91 Dec.-92 Dec.-93 Dec.-94 Dec.-95 Dec.-96
<S> <C> <C> <C> <C> <C> <C>
Chemi-Trol Chemical Co. 100.00 128.06 146.33 151.30 179.66 166.48
S&P 500 COMP-LTD 100.00 107.61 118.41 120.01 164.95 202.72
Manufacturing (Div.INDLS) 100.00 108.38 131.55 136.19 191.71 264.15
</TABLE>
-40-
<PAGE> 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
Set forth below is certain information concerning persons who are known
by the Company to own beneficially more than 5% of any class of the Company's
voting shares on December 31, 1996.
<TABLE>
<CAPTION>
Amount and
Nature of
Title of Name and Address Beneficial Percent
Class of Beneficial Owner Ownership (1) of class
- - ----- ------------------- ------------- ----------
<S> <C> <C> <C>
Common Shares Trilon Dominion Partners, 241,351(2) 12.03%
L.L.C.
F/K/A Venture Capital,
Equities, L.L.C.
250 Park Avenue, Suite 2020
New York, NY 10017
Common Shares Arthur F. Doust 252,515(3) 12.59%
2690 C.R. 69
Gibsonburg, OH 43431
Common Shares David Meredith Hudson, 100,346(4) 5.00%
President
Hudson Capital Management
239 NW 13th Ave., Ste. 207
Portland, OR 97209
<FN>
- - -------------
(1) All shares are held of record with sole voting and investment power unless
otherwise indicated.
(2) Based upon most recent Schedule 13D filing dated September 27, 1996. VC
Holdings, Inc., the sole manager and the holder of 100% of the voting interests
of Trilon Dominion Partners, L.L.C. ("the L.L.C."), is the indirect beneficial
owner of the 241,351 shares of common stock of the issuer owned by L.L.C.
Ronald W. Cantwell ("Mr. Cantwell") is the holder of 100% of the capital stock
of VC Holdings, Inc., which is the sole manager and the holder of 100% of the
voting interests of L.L.C. Consequently, Mr. Cantwell is the indirect
beneficial owner of the 241,351 shares of common stock of the issuer owned by
the L.L.C. Dominion Capital, Inc. holds a 50% non-voting preferred interest in
the L.L.C. Dominion Capital, Inc. has disclaimed beneficial ownership of these
securities.
(3) Includes (a) 157,014 shares held in trust by Arthur F. Doust and Anna K.
Doust, Co-Trustees, of which 78,507 shares are held for their own benefit; (b)
44,765 shares owned by Anna K. Doust, wife of Arthur F. Doust; and and (c)
12,743 shares owned by the children of Arthur F. Doust.
</TABLE>
-41-
<PAGE> 42
(4) Based upon the most recent Schedule 13 G dated December 21, 1995.
Includes (a) 15,890 shares held by Hudson Capital Management, Inc., Registered
Investment Advisor, whose President David Meredith Hudson has sole voting power
over these shares; (b) 80,826 shares held by Hudson Capital Management, Inc.,
General Partner for Portland Partners, an Oregon Limited Partnership, whose
President David Meredith Hudson has sole voting power over these shares; (c)
1,452 shares held as joint tenants with rights of survivorship by David
Meredith and Roseanna Hudson; and 2,178 shares held by David Meredith Hudson.
(b) Security Ownership of Management
--------------------------------
The following table sets forth information as to the beneficial
ownership of the Common Shares of the Company, as of December 31, 1996, by each
Director of the Company and by all directors and officers of the Company as a
group:
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Beneficial Owner Title of Class Ownership(1) Percent
- - ---------------- -------------- ------------ -------
<S> <C> <C> <C>
Arthur F. Doust Common Shares 252,515(2) 12.59%
Robert W. Woolf Common Shares 4,070 .20%
John P. Simcox Common Shares 1,500 .07%
Kevin D. Lauck Common Shares 2,852 .14%
Robert F. Veh Common Shares 19,665(3) .98%
W. Burton Lloyd Common Shares 61,463(4) 3.07%
Robert H. Moyer Common Shares 2,452 .12%
Fred J. Roynon Common Shares 500 .02%
Richard J. Dudley Common Shares 242 .01%
All directors and Common Shares 384,064 19.16%
officers as a group
(13 persons)
<FN>
- - ------------
(1) All shares are held of record with sole voting and investment power unless
otherwise indicated.
(2) Includes (a) 157,014 shares held in trust by Arthur F. Doust and Anna K.
Doust, Co-Trustees, of which 78,507 shares are held for their own benefit; (b)
44,765 shares owned by Anna K. Doust, wife of Arthur F. Doust; and (c) 12,743
shares owned by the children of Arthur F. Doust.
(3) Includes (a) 1,016 shares owned by Wanda Veh, wife of Robert F. Veh.
(4) Includes (a) 58,269 shares owned by Roselyn Lloyd, wife of W. Burton Lloyd.
</TABLE>
- 42-
<PAGE> 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
No disclosure required.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) 1. and 2. Financial Statements and Financial Statement
--------------------------------------------
Schedule
--------
<TABLE>
<CAPTION>
Page
<S> <C>
Balance sheets at December 31, 1996 and 1995 20 & 21
Statements of income for each of the three
years in the period ended December 31, 1996 22
Statements of shareholders' equity for each
of the three years in the period ended
December 31, 1996 23
Statements of cash flows for each of the three
years in the period ended December 31, 1996 24
Notes to financial statements 25
Schedule for each of the three years in the period ended December 31, 1996:
VIII - Reserves 47
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
-43-
<PAGE> 44
(a) 3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C>
3(i) Amended Articles of Incorporation of the Registrant
(Incorporated herein by reference to Exhibit 3.1 to
Form 10-K annual report for year ended December 31, 1993).
3(ii) Amended and Restated Code of Regulations of the
Registrant. (Incorporated herein by reference to
Exhibit 3.2 to Form 10-K annual report for year
ended December 31, 1993).
4.1 Articles Fourth and Fifth of the Amended Articles
of Incorporation of the Registrant (Incorporated
herein by reference to Exhibit 3.1 to Form 10-K
annual report for year ended December 31, 1993).
4.2 Articles II, III, VIII and XIII of the Amended and
Restated Code of Regulations of the Registrant
(Incorporated herein by reference to Exhibit 3.2 to
Form 10-K annual report for year ended December 31, 1993).
4.3 Specimen Common Share Certificate (Incorporated
herein by reference to Exhibit 4(d) to Form S-1
Registration Statement No. 2-59959 of the
Registrant filed on September 27, 1977 (the
"Registration Statement")).
4.4 Shareholder rights plan of the Registrant dated
May 27, 1993 (Incorporated herein by reference to
Exhibit 5(a) to Form 8-K Current Report of the
Registrant dated May 27, 1993).
4.5 Amended and Restated Credit Agreement between the Registrant
and Fifth Third Bank authorizing borrowing by the
Registrant of up to $15,000,000.
4.6 Amendment to credit agreement between the Registrant
and Fifth Third Bank dated as of February 28, 1997 (see
Exhibit 4.5 above) amending the terms of the credit
agreement.
</TABLE>
-44-
<PAGE> 45
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C>
No other instruments defining the rights of holders of
long-term debt of the Registrant have been included as an
exhibit because the total amount of indebtedness authorized by
any such instrument does not exceed 10% of the total assets of
the Registrant. The Registrant hereby agrees to furnish
supplementally a copy of any omitted long-term debt instrument
to the Commission upon request.
10.1 Agreement between the Registrant and Sumitomo Shoji America,
Inc. dated September 14, 1976 granting Sumitomo a right of
first refusal to supply steel plate to the Tank Division
(Incorporated herein by reference to Exhibit 13(b)(2) to the
Registration Statement).
10.2 Lease between the Registrant and the Toledo Trust
Company (now KeyBank N.A.) dated December 9, 1980 and a
representative schedule of leased equipment dated
December 29, 1980 (Incorporated herein by reference to
Exhibit 10 (i) to the Registrant's Form 10-K Annual Report
for the year ended December 31, 1980).
10.3 Equipment Lease Agreement between the Registrant and
Society National Bank of Northwest Ohio (now KeyBank N.A.)
dated September 23, 1983 and a Representative schedule of
leased equipment dated December 29, 1983 (Incorporated herein
by reference to Exhibit 10(m) to Registrant's Form 10-K
Annual Report for the year ended December 31, 1983).
10.4 Collective Bargaining Agreement between the Registrant
and the United Steelworkers of America, AFL-CIO-CLC, Local
Union No. 1915, dated May 1, 1996.
10.5 Agreement between the Registrant and Laborers Inter-
National Union, Local No. 480, effective March 1, 1997.
10.6 Form of Employment Agreements dated August 1, 1996 between the
Registrant and Robert A. Woolf, President, John P. Simcox,
Vice President and Kevin D. Lauck, Secretary.
</TABLE>
-45-
<PAGE> 46
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C>
22 Subsidiaries of the Registrant (No Exhibit is
included because the Registrant has no subsidiaries).
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
-------------------
On December 6, 1996 the Registrant filed a From 8-K reporting under
Item 5, other events, the announcement that it had retained McDonald & Co. to
advise it in connection with the potential sale of two of its non-core
businesses; the Cal-Van Tools and Cory Orchard & Turf Divisions. The filing
included as an exhibit the press release dated December 6, 1996.
-46-
<PAGE> 47
CHEMI-TROL CHEMICAL CO.
SCHEDULE VIII - RESERVES
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Additions Balance
Balance at charged to Deductions at end
Beginning costs and from of
Description of period expenses Reserves period
----------- --------- -------- -------- ------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful
accounts $310,000 $403,218 $333,218(a) $380,000
Year ended December 31, 1995:
Allowance for doubtful
accounts 310,000 95,848 95,848(a) $310,000
Year ended December 31, 1994:
Allowance for doubtful
accounts 310,000 44,389 44,389(a) $310.000
<FN>
(a) Doubtful accounts written off.
</TABLE>
-47-
<PAGE> 48
SIGNATURE
---------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHEMI-TROL CHEMICAL CO.
Registrant
/S/ Arthur F. Doust
-----------------------------------
By: Arthur F. Doust, Chairman of
the Board, Chief Executive
Officer (Principal Executive
Officer)
/S/ Robert W. Woolf
-----------------------------------
By: Robert W. Woolf, President
(Chief Operating Officer)
/S/ Kevin D. Lauck
-----------------------------------
By: Kevin D. Lauck, Secretary and
Controller (Principal Accounting
Officer and Principal Financial
Officer)
Gibsonburg, Ohio
March 21, 1997
-48-
<PAGE> 49
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/S/ ARTHUR F. DOUST /S/ ROBERT W. WOOLF
- - ------------------------------- -------------------------------
Arthur F. Doust, March 21, 1997 Robert W. Woolf, March 21, 1997
(Director and Principal Executive (Director and President)
Officer)
/S/ RICHARD J. DUDLEY /S/ JOHN P. SIMCOX
- - ------------------------------- -------------------------------
Richard J. Dudley, March 21, 1997 John P. Simcox, March 21, 1997
(Director) (Director and Vice President)
/S/ ROBERT H. MOYER /S/ ROBERT F. VEH
- - ------------------------------- -------------------------------
Robert H. Moyer, March 21, 1997 Robert F. Veh, March 21, 1997
(Director) (Director)
/S/ FRED J. ROYNON /S/ W. BURTON LLOYD
- - ------------------------------- -------------------------------
Fred J. Roynon, March 21, 1997 W. Burton Lloyd, March 21, 1997
(Director) (Director)
/S/ KEVIN D. LAUCK
- - -------------------------------
Kevin D. Lauck, March 21, 1997
(Director and Secretary)
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
- - --------------------------------------------------------------------------------
No Annual Report covering the Registrant's last fiscal year or proxy
soliciting material for any meeting of security holders since the 1996 Annual
Meeting has been sent to the Registrant's security holders. Such report and
proxy material for the Registrant's 1997 Annual Meeting will be furnished to
security holders subsequent to the filing of this Annual Report.
-49-
<PAGE> 50
FORM 10-K EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Document Number
------ ----------------------- ------
<S> <C> <C>
3(i) Amended Articles of Incorporation of the Registrant ---
(Incorporated herein by reference to Exhibit 3.1 to
Form 10-K annual report for year ended December 31, 1993).
3(ii) Amended and Restated Code of Regulations of the ---
Registrant. (Incorporated herein by reference to
Exhibit 3.2 to Form 10-K annual report for year ended
December 31, 1993).
4.1 Articles Fourth and Fifth of the Amended Articles ---
of Incorporation of the Registrant (Incorporated
herein by reference to Exhibit 3.1 to Form 10-K
annual report for year ended December 31, 1993).
4.2 Articles II, III, VIII and XIII of the Amended and ---
Restated Code of Regulations of the Registrant
(Incorporated herein by reference to Exhibit 3.2 to
Form 10-K annual report for year ended December 31, 1993).
4.3 Specimen Common Share Certificate (Incorporated ---
herein by reference to Exhibit 4(d) to Form S-1
Registration Statement No. 2-59959 of the
Registrant filed on September 27, 1977 (the
"Registration Statement")).
4.4 Shareholder rights plan of the Registrant dated ---
May 27, 1993 (Incorporated herein by reference to
Exhibit 5(a) to Form 8-K Current Report of the
Registrant dated May 27, 1993).
4.5 Amended and Restated Credit Agreement between the 53
Registrant and Fifth Third Bank authorizing borrowing
by the Registrant of up to $15,000,000.
4.6 Amendment to credit agreement between the Registrant 64
and Fifth Third Bank dated as of February 28, 1997
(See Exhibit 4.5 above) amending the terms of the
credit agreement.
</TABLE>
-50-
<PAGE> 51
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Document Number
------ ----------------------- ------
<S> <C> <C>
No other instruments defining the rights of holders of
long-term debt of the Registrant have been included as an
exhibit because the total amount of indebtedness authorized by
any such instrument does not exceed 10% of the total assets of
the Registrant. The Registrant hereby agrees to furnish
supplementally a copy of any omitted long-term debt instrument
to the Commission upon request.
10.1 Agreement between the Registrant and Sumitomo Shoji ---
America, Inc. dated September 14, 1976 granting
Sumitomo a right of first refusal to supply steel
plate to the Tank Division (Incorporated herein by reference
to Exhibit 13(b) (2) to the Registration Statement).
10.2 Lease between the Registrant and the Toledo Trust ---
Company (now KeyBank N.A.) dated December 9, 1980
and a representative schedule of leased equipment
dated December 29, 1980 (Incorporated herein by
reference to Exhibit 10 (i) to the Registrant's Form
10-K Annual Report for the year ended December 31, 1980).
10.3 Equipment Lease Agreement between the Registrant and ---
Society National Bank of Northwest Ohio (now KeyBank
N.A.) dated September 23, 1983 and a Representative
schedule of leased equipment dated December 29, 1983
(Incorporated herein by reference to Exhibit 10(m)
to Registrant's Form 10-K Annual Report for the year
ended December 31, 1983).
10.4 Collective Bargaining Agreement between the Registrant 66
and the United Steelworkers of America, AFL-CIO-CLC,
Local Union No. 1915, dated May 1, 1996.
10.5 Agreement between the Registrant and Laborers Inter- 104
National Union, Local No. 480, effective March 1, 1997.
10.6 Form of Employment Agreements dated August 1, 1996 108
between the Registrant and Robert W. Woolf, President,
John P. Simcox, Vice President, and Kevin D. Lauck,
Secretary.
</TABLE>
-51-
<PAGE> 52
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Document Number
------ ----------------------- ------
<S> <C> <C>
22 Subsidiaries of the Registrant (No Exhibit is ---
included because the Registrant has no subsidies).
27 Financial Data Schedule
</TABLE>
-52-
<PAGE> 1
Exhibit 4.5
-53-
<PAGE> 2
AMENDED AND RESTATED
--------------------
CREDIT AGREEMENT
----------------
THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into
as of this 2nd day of May, 1996, between Chemi-Trol Chemical Co., an Ohio
corporation ("Borrower"), and The Fifth Third Bank of Northwestern Ohio, N.A.
("Bank").
ARTICLE I. DEFINITIONS
-----------
For purposes of this Agreement, the following capitalized
terms shall have the following meanings:
1.1 AGREEMENT shall mean this Loan Agreement as originally
executed and as the same may from time to time be amended or supplemented.
1.2 BUSINESS DAY shall mean a day when commercial banks are
open for business in Findlay, Ohio.
1.3 CLOSING Date shall mean the date of the making of the
Loan.
1.4 COLLATERAL shall mean all accounts, accounts receivable,
contract rights, lease rights, instruments, documents, chattel paper, and all
obligations in any form arising out of the sale or lease of propane tanks or
other goods or inventory of Borrower or the rendition of services by Borrower;
all general intangibles, choses in action, obligations or indebtedness owed to
Borrower in connection with the foregoing; guaranties, letters of credit and
other security for any of the above; all merchandise returned to or reclaimed by
Borrower in connection with the foregoing; and all of Borrower's inventory and
work-in-process, now owned or hereafter acquired; all books and records
(including computer programs, tapes and data processing software) evidencing an
interest in or relating to the above; and all proceeds and products thereof and
all rents, revenues, issues and profits arising therefrom.
1.5 COLLATERAL DOCUMENTS shall mean the Notes, Security
Agreement and Financing Statements.
1.6 DOLLARS AND $ shall mean United States dollars or such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts in the United
States.
-54-
<PAGE> 3
1.7 FINANCING STATEMENTS shall have the meaning provided in
Section 4.1(c) hereof.
1.8 Loans shall have the meaning provided in Section 2.4
hereof.
1.9 Notes shall have the meaning set forth in Section 2.4
hereof.
1.10 SECURITY AGREEMENT shall have the meaning set forth in
Section 4.1(b) hereof.
ARTICLE II. LOAN
2.1 THE LOAN. Subject to the terms and conditions of this
Agreement, Bank agrees to make loans ("Revolving Loans") to Borrower from the
date of this Agreement to, but not including May 2, 1997 ("Termination Date"),
at such times as Borrower may request, which Revolving Loans may be borrowed,
repaid and reborrowed; provided, however, that the aggregate unpaid principal
amount of the Revolving Loans shall at no time exceed Fifteen Million Dollars
($15,000,000.00). All outstanding Revolving Loans shall be secured by the
Collateral and shall be evidenced by a promissory note substantially in the form
of Exhibit A attached hereto. All notes evidencing revolving credit loans shall
be collectively referred to herein as the "Revolving Notes." Each of the
Revolving Notes shall be dated as of the date of each particular Revolving Loan.
2.2 INTEREST ON REVOLVING LOANS. The outstanding principal
amount of the Revolving Loans shall bear interest from the date thereof until
due and payable at an annual rate equal to the Bank's Prime Rate as in effect
from time to time less one-half percent (.50%). Interest shall be calculated on
the basis of a year of 360 days and charged for the actual number of days
elapsed.
2.3 PAYMENT OF REVOLVING LOANS. Interest on the Revolving
Loans shall be payable on demand, and if no demand has been made, in arrears
monthly on the second day of each month, commencing on June 2, 1996 and ending
on May 2, 1997. The aggregate unpaid principal amount of, and accrued and unpaid
interest on, all Revolving Loans shall be paid in full by Borrower on or before
May 2, 1997.
2.4 CONVERSION TO TERM LOANS. On or before May 2, 1997,
Borrower shall have the right to convert up to a maximum principal amount of
Seven Million Dollars ($7,000,000.00) of the Revolving Loans to Term Loans (the
"Term Loans"). Revolving Loans may only be converted to Term Loans in the event
that sufficient Collateral, as determined in the Bank's discretion, is provided
to secure each Term Loan. The principal amount of each Term Loan shall be repaid
in 36 to 60 equal installments due on the first day of each
-55-
<PAGE> 4
calendar month with the first such payment being due on the first day of the
month following the month the particular election is made to convert the
Revolving Loan into a Term Loan. The number of payments on each Term Loan shall
match the term of the account, note or lease given as Collateral at the time of
conversion. Borrower shall duly issue and deliver to Bank a note in the form of
Exhibit B (each a "Term Note" and collectively "Term Notes") in the principal
amount of the particular Term Loan. For purposes of this Agreement, the
Revolving Loans and the Term Loans shall be collectively referred to as the
"Loans", and the Revolving Notes and the Term Notes shall be collectively
referred to as the "Notes". The credit line available through the Revolving
Loans shall decrease dollar for dollar with the amount of the Term Loans.
2.5 INTEREST ON TERM Loans. The outstanding principal amount
of each Term Loan shall bear interest from the date thereof until due and
payable at an annual rate equal to the yield for United States Treasury
obligations having a maturity date equal to the maturity date of the Term Loans
(or the next closest maturity date thereafter) plus two hundred (200) basis
points. Interest shall be calculated on the basis of a year of 360 days and
charged for the actual number of days elapsed.
2.6 LATE CHARGE. Any payment on any of the Notes which is
more than ten (10) days overdue will be assessed a late charge equal to five
percent (5%) of the overdue payment.
2.7 DEFAULT RATE OF INTEREST. If any payment on any of the
Notes is more than thirty (30) days overdue, or in the event any other default
occurs under this Agreement or any of the Collateral Documents, Bank shall have
the right, without notice, to increase the annual rate of interest on the entire
unpaid principal balance to four percent (4%) above the interest rate that would
otherwise be in effect until the entire amount of principal and/or interest then
due has been paid in full or the default is cured.
2.8 SECURITY. The Revolving Loans and the Term Loans shall
be secured by a first security interest in the Collateral, which shall be
evidenced by the Security Agreement and Financing Statements. In addition, as
the granting of the Loans is an amendment and restatement of the Loans granted
in the Credit Agreement between the parties dated April 1, 1994, as the same has
been amended by an Amendment to Credit Agreement dated as of May 1, 1995, and a
Second Amendment to Credit Agreement dated as of June 12, 1995, the financing
statements executed in connection with the Security Agreement dated May 1, 1995
between the parties also secure the Revolving Loans and the Term Loans.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby warrants and represents to Bank the
following:
-56-
<PAGE> 5
3.1 ORGANIZATION AND QUALIFICATION. The Borrower is duly
organized and validly existing under the laws of the State of Ohio, has the
power and authority to carry on its business and to enter into and perform this
Agreement and is qualified and licensed to do business in each jurisdiction in
which such qualification or licensing is required and where failure to qualify
would have a material adverse effect on the financial condition or operations of
Borrower.
3.2 DUE AUTHORIZATION. The execution, delivery and
performance by Borrower of this Agreement, the Security Agreement, Financing
Statements and the Notes have been duly authorized by all necessary corporate
action, and to the best of Borrower's knowledge will not contravene any law or
any governmental rule or order binding on Borrower, or the articles of
incorporation or bylaws of Borrower, nor violate any agreement or instrument by
which Borrower is bound nor result in the creation of a Lien on any assets of
Borrower except the Lien to Bank granted in the Security Agreement.
3.3 LITIGATION. There are no material suits or proceedings
pending or threatened (to the best of Borrower's knowledge) against or affecting
Borrower, and no proceedings before any governmental body pending or threatened
(to the best of Borrower's knowledge) against Borrower not previously disclosed
to Bank.
3.4 LAWS AND TAXES. To the best of Borrower's knowledge,
Borrower is in material compliance with all laws applicable to it, has filed all
required tax returns and has paid all taxes shown to be due and payable on those
returns.
3.5 FINANCIAL CONDITION. All financial information relating
to Borrower which has been or may hereafter be delivered to Bank is true and
correct in all material respects and all audited financial statements have been
prepared in accordance with generally accepted accounting principles (where
applicable to such financial information) consistently applied. Borrower does
not have any material obligations or liabilities of any kind not disclosed in
that financial information, and there has been no material adverse change in the
financial condition of Borrower since the submission of the most recent
financial information to Bank.
ARTICLE IV. CONDITIONS PRECEDENT
4.1 EXTENSION OF CREDIT. The obligation of Bank to make any
Loan hereunder is subject to the fulfillment to Bank's satisfaction of each of
the following conditions prior to the making of such Loan:
(a) PROMISSORY NOTES. Bank shall have received the Notes,
duly executed and delivered by Borrower;
-57-
<PAGE> 6
(b) SECURITY AGREEMENT. Bank shall have received an Amended
and Restated Security Agreement ("Security Agreement"),
duly executed and delivered by Borrower, in a form approved
by Bank;
(c) FINANCING STATEMENTS. Bank shall have received executed
copies of proper financing statements (Form UCC-1), in form
and substance satisfactory to Bank, to be duly filed under
the Uniform Commercial Code in all jurisdictions as may be
necessary, or in Bank's opinion, desirable to perfect Bank's
security interests created under the Security Agreement, and
all filings, recordings and other actions that are necessary
or advisable, in the opinion of Bank, in order to establish,
protect, preserve and perfect Bank's security interests and
liens as legal, valid and enforceable first security
interests and liens in such collateral, and Bank shall have
received evidence thereof in form and substance satisfactory
to it;
(d) UCC SEARCH RESULTS. Bank shall have received certified
copies of Requests for Information (Form UCC-11) from the
appropriate governmental entities listing all other
effective financing statements which name Borrower as debtor
and which are filed in the jurisdictions referred to in
paragraph (c), together with copies of all such other
financing statements (none of which shall cover the
Collateral purported to be covered by the Security
Agreement);
(e) ORGANIZATIONAL DOCUMENTS. Bank shall have received a
certificate of good standing from the Ohio Secretary of
State, dated within thirty (30) days of closing.
(f) CORPORATE RESOLUTION. The Borrower shall have furnished
to Bank a statement of the Borrower's Secretary, certifying
the resolutions of Borrower's board of directors authorizing
and approving the borrowing provided for herein, and setting
forth the officers authorized to execute this Agreement and
all documents connected herewith.
(g) ADDITIONAL DOCUMENTS. Bank shall have received from the
Borrower such additional documents as reasonably deemed
necessary by Bank in order for Bank to deem itself secure.
ARTICLE V. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants that until the payment in full of the
Loans and fulfillment of all of its obligations hereunder, Borrower shall comply
with the following covenants, any of which may be waived by Bank at any time:
-58-
<PAGE> 7
5.1 ACCOUNTING RECORDS. Borrower shall maintain adequate
books and accounts in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
time, upon reasonable notice, to inspect, audit and examine such books and
inspect any of its properties and shall furnish Bank with all information
regarding the business and its finances promptly upon Bank's request.
5.2 PROCEEDS. Borrower will use the proceeds of the Loans
for general corporate purposes, and will furnish Bank such evidence as it may
reasonably require with respect to such use.
5.3 FINANCIAL STATEMENTS. As long as any portion of the
Loans remains outstanding, Borrower will furnish Bank:
(a) Within forty-five (45) days after the end of each
quarter, a copy of its financial statements for that quarter
and for the year to date in a form reasonably acceptable to
Bank, prepared and certified as complete and correct,
subject to changes resulting from year-end adjustments, by
the principal financial officer of Borrower.
(b) Within ninety (90) days after the end of each fiscal
year, a copy of its financial statements for that year
audited by a firm of independent certified public
accountants acceptable to Bank (which acceptance will not be
unreasonably withheld), and accompanied by a standard audit
opinion of such accountants without significant
qualification.
(c) Upon request, copies of all federal, state and local
income tax returns and such other information as Bank may
reasonably request.
5.4 FILINGS. Borrower shall from time to time record,
register and file all such notices, statements and other documents and take such
other steps, including, but not limited to, the amendment of the financing
statements prepared under the Security Agreement, as may be necessary or
advisable to render fully valid and enforceable under all applicable laws the
rights, liens and priorities of Bank with respect to all security from time to
time furnished under this Agreement or the Security Agreement or intended to be
so furnished, in each case in such form and at such times as shall be
satisfactory to Bank.
5.5 REORGANIZATION. Borrower shall notify Bank in advance of
any change in its name and shall not participate in any merger, consolidation or
reorganization without prior written approval of Bank, which approval shall not
be unreasonably withheld.
-59-
<PAGE> 8
5.6 ADVANCES; GUARANTIES. Borrower shall not advance any
monies to, guaranty any obligation of or make any payment for the benefit of
any other person or entity other than in the ordinary course of business.
5.7 DEPOSITS. Borrower shall maintain its primary deposit
accounts with Bank during the term hereof.
5.8 PLEDGE OR ENCUMBRANCE OF ASSETS. Borrower will not
create, incur, assume or permit to exist any further lien in any of the
Collateral.
5.9 DELIVERY OF NOTES AND LEASES. Borrower shall deliver to
Bank and Bank shall hold all notes received from Borrower's customers for
products sold or services rendered which are pledged as Collateral. In addition,
Borrower shall provide Bank with copies of all customer leases which are pledged
as Collateral.
5.10 QUARTERLY REVIEW. Bank shall have the right to review
the Collateral on a quarterly basis to be assured of its adequacy. Borrower
shall give Bank access to all Collateral and associated records in order to
allow Bank to conduct its review. In the event that Bank determines, upon any
quarterly review, that the Collateral is insufficient to support its
corresponding Term Loan, Borrower shall be required to pay down the Term Loan
until the value of the collateral is equal to or greater than the Loan balance,
or give additional Collateral to Bank which is sufficient to assure that the
Collateral value equals or is greater than the corresponding Term Loan balance.
5.11 FINANCIAL LEVELS AND RATIOS. Borrower shall maintain
and end each fiscal year with the following financial levels and ratios: (a)
Debt to Worth not to exceed 1.8:1; Minimum Tangible Net Worth of not less than
$18,500,000.00; Working Capital of not less than $13,000,000.00; Current Ratio
of not less than 1.5:1.
ARTICLE VI. DEFAULT
6.1 DEFAULT. If Borrower fails to comply with any of the
covenants made by Borrower in this Agreement or any of the Collateral
Documents, or if any of the conditions of Article IV fail to be satisfied, or
if at any time any representation or warranty made by Borrower herein or in any
other instrument or document delivered to Bank in connection herewith shall be
incorrect, then in any such event, all obligations of Bank to make any further
Loan advances shall cease (if Bank so elects) and the Notes, at Bank's option,
shall become immediately due and payable.
-60-
<PAGE> 9
6.2 REMEDIES. Upon Borrower's default, Bank may avail itself
of any and all remedies available to it at law or in equity, and all such
remedies shall be cumulative and none shall be deemed exclusive of any other;
further, and not in limitation of the foregoing, Bank may terminate this
Agreement and demand full payment of the Borrower's indebtedness to it; and may
utilize any remedy available to it under the terms and provisions of the
Collateral Documents.
ARTICLE VII. MISCELLANEOUS
7.1 WAIVERS. Any waiver, permit, consent or approval by Bank
of any breach of any provision, condition or covenant of this Agreement or the
Collateral Documents must be in writing and shall be effective only to the
extent it is set forth in writing. No waiver of a specific breach shall operate
as a waiver of any other or future breach.
7.2 FAILURE OR DELAY. No failure or delay on the part of
Bank in the exercise of any power, right or privilege under this Agreement or
the Collateral Documents shall operate as a wavier thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise of any other power, right or privilege.
7.3 CUMULATIVE RIGHTS. All rights and remedies existing
under this Agreement and the Collateral Documents are cumulative to, and not
exclusive of, any rights or remedies otherwise available under applicable law.
7.4 SEVERABILITY. Any provision of this Agreement or the
Collateral Documents which is prohibited or unenforceable in any jurisdiction
shall be, only as to such jurisdiction, ineffective to the extent of such
prohibition or unenforceable, but all the remaining provisions of this
Agreement and the Collateral Documents shall remain valid.
7.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of Bank and Borrower and their respective
successors and assigns; provided, however, that Borrower may not assign or
transfer its rights or obligations under this Agreement without the prior
written consent of Bank.
7.6 NOTICES. Any notice which either party may be required
or may desire to give to the other party under any provision of this Agreement
or the Collateral Documents shall be in writing and shall be deemed to have been
given or made when deposited in the mail, postage prepaid, and addressed as
follows:
-61-
<PAGE> 10
To Borrower: Chemi-Trol Chemical Co.
2776 C.R. 69
Gibsonburg, Ohio 43431
Attention: Robert W. Woolf, President
To Bank: The Fifth Third Bank of Northwestern Ohio, N.A.
337 South Main Street
Findlay, Ohio 45840
Attention: Commercial Lending Department
Bank and Borrower may change the addresses to which all notices, requests and
other communications are to be sent by giving written notice of such address
change to the other party in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other party.
7.7 COSTS, EXPENSES AND ATTORNEYS' Fees. Borrower shall be
responsible and reimburse Bank for all costs and expenses, including, but not
limited to, reasonable attorneys' fees and expenses (which counsel may be Bank
employees) expended or incurred by Bank in the preparation, negotiation,
enforcement and/or amendment of this Agreement or the Collateral Documents, in
collecting any sum which becomes due Bank on the Notes, or under this Agreement
or the Collateral Documents, or in the protection, preservation or enforcement
of any rights of Bank in connection with this Agreement or the Collateral
Documents. Borrower also shall be responsible for all other reasonable costs and
expenses incurred in connection with the Loans, including but not limited to:
loan fees; insurance premiums; UCC, judgment and lien search costs; and
recording costs. Borrower shall promptly reimburse Bank for all such costs and
expenses paid by Bank.
7.8 GOVERNING LAW. The validity, construction and effect of
this Agreement and the Collateral Documents shall be governed by the laws of the
State of Ohio.
7.9 COMPLETE AGREEMENT. This written Agreement, together
with the exhibits to this Agreement and the Collateral Documents, is intended by
the parties as a final expression of their agreement and is intended as a
complete statement of the terms and conditions of their agreement. This
Agreement can only be amended in a writing executed by both parties.
-62-
<PAGE> 11
IN WITNESS WHEREOF, Bank and Borrower have caused this
Agreement to be duly executed on the day and year first written above.
THE FIFTH THIRD BANK OF
NORTHWESTERN OHIO, N.A.
By: /s/ Jeffrey C. Shrader
---------------------------
Title: Vice President
------------------------
CHEMI-TROL CHEMICAL CO.
By: /s/ Arthur F. Doust
---------------------------
Title: C.E.O.
------------------------
By: /s/ Robert W. Woolf
---------------------------
Title: President
------------------------
-63-
<PAGE> 1
Exhibit 4.6
-64-
<PAGE> 2
AMENDMENT TO CREDIT AGREEMENT
-----------------------------
This Amendment to the Credit Agreement is executed as of this 28th day
of February, between Chemi-Trol Chemical Co., an Ohio Corporation ("Borrower")
and The Fifth Third Bank of Northwestern Ohio, N.A. ("Bank").
The parties executed an Amended and Restated Credit Agreement dated
as of May 2, 1996, ("the Credit Agreement") whereby Bank agreed to make
Revolving Loans to Borrower up to an amount of fifteen million dollars
($15,000,000) through May 1, 1997.
NOW THEREFORE, in consideration of the parties agreement to amend the
Credit Agreement, the premises and covenants herein, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties agree to amend the Credit Agreement as follows:
1. Section 5.11, FINANCIAL LEVELS AND RATIOS, of the credit
agreement is hereby amended to read, Borrower shall maintain
and end each fiscal year with the following financial levels
and ratios; (a) Debt to Worth not to exceed 1.8:1; Minimum
Tangible Net Worth of not less than $18,500,000, Working
Capital of not less than $13,000,000 after reducing current
liabilities by the balloon payment, associated with Mortgage
Note #756086-52019 due October 1, 1997; and a Current Ratio
adjusted for the balloon payment associated with Mortgage Note
#756086-52019 due October 1, 1997, of not less than 1.5:1.
Except as specifically amended herein, all the terms and provisions of
the Credit Agreement shall remain in full force and in effect through the
termination date.
Executed as of the date first written above.
CHEMI-TROL CHEMICALS CO. FIFTH THIRD BANK OF
NORTHWESTERN OHIO, N.A.
By: /s/ Robert W. Woolf, President By: /s/ Jeffrey C. Shrader, Vice President
------------------------------ --------------------------------------
By: /s/ Kevin D. Lauck, Secretary
------------------------------
-65-
<PAGE> 1
Exhibit 10.4
-66-
<PAGE> 2
EXHIBIT 10.4
CHEMI-TROL CHEMICAL CO.
TANK DIVISION
Agreement Dated May 1, 1996
INDEX
ARTICLE Page Number
I Recognition
II Conditions of Employment
III Union Security and Checkoff
IV Prohibition of Strikes and Lockouts
V Grievance and Arbitration Procedure
VI Seniority
VII Safety and Health
VIII Leave of Absence
IX Supervisors
X Holidays
XI Vacations, Bereavement, Jury Duty
XII Hours, Wages and Working Conditions
XIII Group Insurance, Retirement Plan
XIV Cost-of-Living Allowance
XV Separability/Absenteeism, Tardiness
XVI Termination
XVII Successor or Assigns
Appendix A - Wage Schedule
Appendix B - Letter of Understanding
Appendix C - Dental Expense Insurance
Appendix D - Hospitalization Insurance Improvements
Appendix E - Absenteeism/Tardiness Policy
Appendix F - Letter of Understanding
Appendix G - Letter of Understanding
Appendix H - Letters of Understanding
Appendix I - Letter of Understanding
-67-
<PAGE> 3
AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of May, 1996, by and
between CHEMI-TROL CHEMICAL CO., hereinafter referred to as the "Employer", and
the UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC, hereinafter referred to as the
"Union" on behalf of Local Union No. 1915.
ARTICLE I
RECOGNITION
In accordance with the Decision and Certification of Representative, dated
May 11, 1971, of the National Labor Relations Board in Case No. 8-RC-7786 (190
N.L.R.B. No. 56), the Employer recognizes the Union as the exclusive bargaining
representative for all production and maintenance employees, including truck
drivers employed at the Employer's Tank Division located at 721 Graham Drive,
Fremont, Ohio, excluding all office clerical employees, professional employees,
guards and supervisors as defined in the Act and all employees at the Employer's
Chemical Group, Gibsonburg, Ohio and Tool Division, 1500 Walter Avenue, Fremont,
Ohio.
ARTICLE II
CONDITIONS OF EMPLOYMENT
1. The Management of the business in all its phases and details shall
remain vested in the Employer, except as explicitly limited by some express term
of this Agreement.
2. In the exercise of its management prerogatives, the Employer shall
observe applicable provisions of this Agreement.
3. Neither the Employer nor the Union shall discriminate against any
employee because of age, sex, race, religion, nationality, nor because of his
exercising his rights guaranteed by the Labor Management Relations Act provided
that such rights are exercised in a manner consistent and in accordance with the
provisions of this Agreement. Both the Employer and the Union shall abide by the
letter of the law to be in compliance with the American's With Disabilities Act.
4. The Company and the Union agree that there is concern for the expression
of civil rights. Therefore, management and the chairman of the grievance
committee will function to effectively process such concerns.
5. The Rights of the Employer, of the Union, and of the employees as
conferred by this Agreement, shall be respected, and the provisions of this
Agreement for the orderly settlement of all questions regarding such rights
shall at all times be observed.
-68-
<PAGE> 4
ARTICLE III
UNION SECURITY AND CHECKOFF
1. All Employees in the bargaining unit who are members of the Union on the
effective date of this Agreement, must, as a condition of employment in the
bargaining unit, maintain their membership in the Union to the extent of paying
the periodic dues uniformly required of all Union members.
2. All Employees in the bargaining unit who are not members of the Union on
the effective date of this Agreement shall be required, as a condition of
employment in the bargaining unit, beginning thirty-one (31) days following the
effective date of this Agreement, to pay to the Union a service charge as a
contribution toward the administration of this Agreement in an amount equal to
the periodic dues uniformly required of all union members.
3. All new employees upon the expiration of thirty (30) calendar days after
the date of their employment, or beginning thirty-one (31) days following the
effective date of this Agreement, whichever is later, shall, as a condition of
employment in the bargaining unit, become members of the Union and shall remain
a member of the Union to the extent of paying the initiation fees and periodic
dues uniformly required of all Union members.
4. Upon written request of the Union the Employer will, within five (5)
calendar days of its receipt of such request, discharge any employee who in
accordance with the above fails to tender the initiation fees and periodic dues
uniformly required to obtain and maintain membership in the Union or the service
charge whichever is applicable.
5. In accordance with and upon receipt of signed individual checkoff
authorization forms from employees, the employer shall deduct from the pay of
each such employee, who is then in the employ of the Employer and covered by
this Agreement, his Union dues and initiation fees or service charge whichever
is applicable. After such deductions have been made, remittance shall be made by
the Employer to the Union at the address designated by the International
Treasurer of the Union, together with a list of the employees for whom
deductions have been made. The amount to be deducted shall be determined by the
Union and the Employer shall be timely notified of any contemplated change in
such amounts. The Employer shall arrange to have the employees sign such
authorization forms as provided by the Union. The Employer shall transmit to the
Financial Secretary of the Local Union a written report of initiation fees, dues
and service charges deducted each month, address changes and of all terminations
of employment including quits and retirees within the bargaining unit each
month.
-69-
<PAGE> 5
6. In accordance with and upon receipt of signed individual PoliticalAction
Committee check-off authorization forms from employees, the Employer shall
deduct from the first pay of the year of each such employee, who is then in the
employ of the Employer, the amount so designated by the employee. After such
deductions have been made, remittance shall be made by the Employer to the
Treasurer of the United Steelworkers of America, Political Action Fund, Five
Gateway Center, Pittsburgh, Pennsylvania 15222.
7. The Union shall indemnify and save the Employer harmless from and
against any and all claims, demands, suits, or other forms of liability arising
out of any action taken or not taken by the Employer for the purpose of
complying with the provisions of this Article or in reliance on any
authorization or notification furnished under any of such provisions.
8. An International Representative of the Union and/or the President of the
Local Union accompanied by a representative of the Employer, may visit the plant
during regular working hours and at other reasonable times, and within
reasonable limits and in a reasonable manner, to observe operations in
connection with the administration of this Agreement.
9. The Employer will furnish the Union with bulletin boards in the plants.
The bulletin boards will be near the time clock and in the dispatch room. The
Union will use this space only for posting official Union notices and official
papers. Notices and papers will be posted only by officially named Union
representatives and will be keeping with the spirit and intent of this
Agreement. During grievance meetings conducted in the Company's offices, the
Company will provide a table for use by the grievance committee.
10. As soon as is practicable after the signing of this Agreement, the
Employer will provide one printed copy to each employee and one copy to a Union
committee person for distribution to each new employee upon completion of his
probationary period.
ARTICLE IV
PROHIBITION OF STRIKES AND LOCKOUTS
1. During the term of this Agreement and any extension or renewal thereof,
the grievance and arbitration procedure set forth in this Agreement, and the
administrative and judicial remedies and procedures provided by statute, shall
be the sole and exclusive means of settling any employee or Union grievance with
the Employer or any other type of dispute whatsoever.
-70-
<PAGE> 6
Accordingly, the Employer will not cause, permit or engage in any lockout of its
employees. Likewise, neither the union nor any employee or employees will either
instigate, promote, sponsor, engage or participate in, or condone any strike.
For purposes of this Agreement a strike is defined as any intentional slowdown
or curtailment in or interference with or picketing of or suspension or
interruption of any or all of the Employer's operations and/or the work of any
employee or employees. Any employee who participates in, advances, leads or
promotes a strike shall be subject to disciplinary action up to and including
discharge.
2. In the event that any breach of the no-strike clause in paragraph one
(1) above occurs, the Union's officers shall publicly declare that the strike is
unauthorized, shall promptly make reasonable, earnest efforts to bring about a
prompt termination of the strike, and shall continue such efforts until the
employees return to work. If the Union officers make such public declaration and
such reasonable efforts, the Union shall not be responsible in damages for the
strike.
ARTICLE V
GRIEVANCE AND ARBITRATION PROCEDURE
1. A Grievance shall be defined as any dispute regarding the meaning,
interpretation or application of the terms and provisions of this Agreement.
2. Should any grievance arise, the dispute shall first be taken up for
adjustment between the aggrieved employee, and/or his grievance
committee-person, and his immediate supervisor, within seventy-two (72) hours,
non-working days excluded, after the occurrence or non-occurrence of the event
upon which the grievance is based, or if such employee had no knowledge of such
occurrence or non-occurrence within said period, within seventy-two (72) hours
after the employee reasonably should have known of such occurrence or
non-occurrence.
3. In the event the grievance is not settled as provided in paragraph two
(2) above, the Union shall reduce the grievance to writing, stating the alleged
facts on which the grievance is based, the date on which the claimed act or
omission occurred, and the provision of this Agreement which allegedly has been
violated. The written grievance shall be signed by the employee who is filing
the grievance and by the appropriate Union representative and must be submitted
to the employee's immediate supervisor within three (3) regularly scheduled
working days after the occurrence or non-occurrence of the event upon which it
is based, or if such employee had no knowledge of such occurrence or
non-occurrence within said period, within three (3) regularly scheduled working
days after the employee reasonably
-71-
<PAGE> 7
should have known of such occurrence or non-occurrence. The immediate supervisor
shall give a written answer to the aggrieved employee within five (5) regularly
scheduled working days after receipt of the written grievance.
4. If the Employer's answer is not accepted under the procedure prescribed
in paragraph three (3) above, the Union shall within five (5) regularly
scheduled working days notify the Employer of its intention to submit the
written grievance to the next meeting between the Union's grievance committee,
Local Union President, and/or International Representative of of the Union, and
representatives of the Employer, which meetings shall be held once each calendar
month unless the parties otherwise agree, that takes place at least forty-eight
(48) hours after the Union has provided such notification of its intention to
discuss the grievance at such meeting. Grievances alleging discharge without
just cause will take precedence over other grievances, and the grievance meeting
concerning a discharge grievance will be held within one (1) week after receipt
of timely notice from the Union that the Employer's answer provided under the
procedure prescribed in paragraph three (3) above has not been accepted. A
grievance submitted and discussed at such meeting in accordance with this
paragraph four (4) shall be answered in writing by the Employer within five (5)
regularly scheduled working days from the date of the meeting.
5. If the Employer's answer is not accepted under the procedures prescribed
in paragraph four (4) above, then the matter shall be referred to arbitration,
provided that the Union serves written notice upon the Employer of its intention
to arbitrate the grievance within thirty-five (35) calendar days (ten (10)
calendar days in discharge cases) after the Employer has answered the grievance
under the procedures prescribed in paragraph four (4) above. Failure to serve
such written notice of intent to arbitrate such grievance as required herein
shall constitute a waiver of the right to arbitrate and the grievance shall be
wholly abandoned.
6. Within twenty (20) calendar days following the Employer's receipt of the
Union's written notice of intent to arbitrate, the Employer and the Union shall
jointly request in writing the Federal Mediation and Conciliation Service to
submit a list of seven (7) proposed arbitrators. The Employer and the Union
shall select an arbitrator by alternately striking one (1) name from such list
(the order of striking having been determined by lot) until only one (1) name
remains and that named person shall be the arbitrator to hear the case. After an
arbitrator has been selected, but prior to the arbitration hearing, a pre-
screening conference will be held if requested by an International
Representative of the Union or by a representative of the Employer.
-72-
<PAGE> 8
7. The arbitrator at all time shall be governed wholly by the terms of this
Agreement in reaching his decision and shall have no power or authority to
modify or change this Agreement in any respect or to add to or to take away from
its terms. The decision of the arbitrator shall be final and binding on the
Employer, the Union and the employees.
8. The Employer and the Union shall share equally the fees and expenses of
the arbitrator. Any additional expenses of arbitration shall be paid by the
party incurring such expenses.
9. Any grievance not timely presented for disposition at any step of the
grievance procedure shall be considered as wholly abandoned. All time limits
provided for in this Article may be extended by mutual agreement.
10. A nonprobationary employee who is to be disciplined, discharged or
suspended while working in the plant will be notified by the Employer in the
presence of a grievance committeeperson. In the event a grievance
committeeperson is not in the plant, the Employer will notify a committeeperson
or other union representative of the discharge or suspension as soon as is
practicable, and the time within which a grievance may be filed will run from
the time the notice is given.
11. Grievance processing on Employer time will be kept to a minimum.
Consistent with the foregoing, a grievance committeeperson may leave his work
station for time reasonably and necessarily required to assist an employee in
processing a grievance as called for in paragraphs 2 and 3 of this Article
provided that permission is first secured from the supervisor of the grievance
committeeperson whose assistance has been requested by an employee. If the
supervisor cannot permit the grievance committeeperson to leave his work station
to perform this function at the requested time, the supervisor will designate
when the grievance committeeperson may leave his work station to provide the
requested assistance. Grievance committeepersons not to exceed three (3) in
number will be paid at straight-time for time lost from scheduled work spent in
monthly grievance meetings with management as called for in paragraph 4 of the
Article.
12. When ten (10) or more employees work a third shift operation, a union
representative will be provided.
ARTICLE VI
SENIORITY
1. Seniority shall be defined as an employee's length of continuous service
with the Employer dating from the date of his last employment by the Employer.
-73-
<PAGE> 9
2. An employee shall have no seniority until he has successfully completed
a probationary period of sixty (60) days from the date of his last employment by
the Employer, after which his seniority shall be dated from the date of his last
employment by the Employer. During such period of probationary employment by the
Employer, probationary employees may be dismissed in the Employer's sole
discretion and such dismissal shall not be subject to the grievance and
arbitration procedure provided for in this Agreement.
3. If a former employee is rehired, such employee shall again be a
probationary employee for a period of sixty (60) days from the date of his last
employment by the Employer. However, if an employee who has been laid off prior
to the completion of his probationary period is recalled to work within sixty
(60) calendar days after such layoff, his original period of service shall be
counted toward the completion of his probationary period.
4. The Employer shall post a new seniority list every three (3) months,
during the term of this Agreement, bringing it up-to-date by the addition of the
names of those employees who acquired seniority since the preceding posting and
deleting therefrom the names of those whose seniority has since terminated. The
names of all employees in the bargaining unit who have seniority shall be listed
in order of their seniority dates starting with the senior employee at the top
of the list. If two (2) or more employees have the same seniority dates, their
names shall appear on the seniority list alphabetically by the first letter or
letters of their last names. If two (2) or more of such employees have the same
last names, the same procedure shall be followed with respect to their first
names.
5. Seniority terminates when an employee:
(a) voluntarily quits.
(b) retires.
(c) is discharged for just cause.
(d) fails to return to work within
ten (10) working days after written notice recalling him from a
layoff is sent by certified mail to his last address on record
with the Employer.
(e) is absent five (5) consecutive working days for any cause without
notifying the Employer within the five (5) day period.
(f) is laid off for a period of two (2) years or for a period of time
equal to the amount of seniority, not to exceed three (3) years,
that the employee had at the start of his most recent layoff.
-74-
<PAGE> 10
6. It is understood and agreed that in all cases of promotion, within the
bargaining unit, the following factors shall be considered and, where relatively
equal, seniority shall govern: seniority and ability to perform the work. In all
cases of layoffs or recalls, within the bargaining unit, the following factors
shall be considered and, where relatively equal,seniority shall govern:
seniority and ability to perform the work. Subject to the foregoing, when the
work force is decreased by layoff, all probationary employees shall be laid off.
Subject to the foregoing, after all probationary employees are laid off,
employees shall be laid off in accordance with seniority. In a layoff situation,
the employee or employees who are displaced by said layoff causing a reduction
in the number of employees in said employee's job classification shall have the
right to displace less senior employees, provided the senior employee has the
qualifications and ability to perform the work. An employee must exercise this
option by the third work day following the effective date of the layoff. All
classification changes will be effective on the fifth work day following the
effective date of the layoff. An employee may not exercise this option again
until all employees have been recalled. An employee exercising this option has
the right to return to the employee's previously held permanent job
classification when there is a vacancy in that classification.
7. In a classification in a layoff situation, the senior employee in the
classification shall have the option of accepting a voluntary layoff. If the
senior employee refuses, then the next senior employee in the classification
shall have the option of accepting a voluntary layoff in lieu of his right to
move into another classification, in accordance with the layoff procedure.
Should such a senior employee choose to take a voluntary layoff, it shall be
subject to the following:
(a) The Company is in a layoff situation in that classification.
(b) He can be replaced by a current employee.
(c) He must take a layoff of at least one (1) month unless called
back by the Company.
(d) After one (1) month, he may return to the classification he
occupied prior to his layoff. If his position in this
classification is unavailable, he may exercise his rights of
seniority and ability or he may further extend his layoff in
increments of one (1) month, subject to earlier recall by the
Employer. An employee returning to work under this option will
not be eligible for a further voluntary layoff until all
employees have been recalled.
-75-
<PAGE> 11
(e) For layoffs occurring on and after May 1, 1996, the Company shall
post a voluntary layoff sign-up sheet within two (2) weeks of
giving a notice of intent to layoff. Any employee wanting a
voluntary layoff must sign the sheet to be eligible for
consideration. Any employee not signing the sheet, will not be
able to take a voluntary layoff, after the sign-up period
expires, and will not be eligible for voluntary layoff, unless an
additional layoff occurs. This sub-part E does not apply to the
layoff rotation which was in effect prior to May 1, 1996.
8. Job vacancies, within the bargaining unit, or new jobs created, within
the bargaining unit, shall be posted on the Employer's bulletin board in the
plant for five (5) working days before being permanently, but not temporarily,
filled from the seniority list or from new hires. Said notice shall contain the
job title and the rate of pay. Any employee desiring to bid shall turn in a bid
card. At the end of the posting period, the notice shall be removed and the
advertising period closed. Employees bidding into a classification may have up
to seven (7) days, on the job into which he has bid, to withdraw his bid.
Employees bidding into the classifications of Utilityman, Maintenance and Truck
Driver have up to fifteen (15) days, on the job into which he has bid to
withdraw his bid. The employer has up to thirty (30) days, or more if mutually
agreeable, in which to determine that the employee has the necessary
capabilities to satisfactorily perform the duties of Utilityman, Maintenance and
Truck Driver. For the Utilityman bid only, when the employee has the ability to
do the following jobs of burner, painter, roll operator, welder; automatic
machine and Category A welder, the employee will then hold the classification of
Utilityman. Employees in all classifications may exercise their seniority, on
their shift, within their classification, but not more than once per month, per
classification. If the senior employee in his classification, chooses not to
exercise his seniority option, the next senior employee may then exercise his
seniority, and this will continue until all seniority movement can be
accomplished within a classification. Notice must be given to management two (2)
days prior to any bump. The employer will make every effort to see that the
senior bidder is placed on the bid job within twenty-one (21) calendar days of
the bid closing. The successful bidder shall be paid, for hours worked, from the
date of the award of the bid, provided he qualifies for the bid job, even if the
qualification date is later than the award date. Temporary bids will be accepted
to cover extended leaves of absence caused by illness or injury, due to non-job
and job
-76-
<PAGE> 12
related causes of at least forty-five (45) days or longer. In this instance,
only lower rated employees may bid on the temporary job vacancy. When the
recovering employee returns to work, he will immediately resume his duties in
his classification. The employee that filled the temporary bid shall return to
his former job. If the temporary bid (vacancy) lasts six (6) months or more the
Employer shall post a regular bid for this vacancy. The returning employee shall
have the right to bump the employee awarded the regular bid providing he has
more seniority. If not, the returning employee can bump the least senior
employee in the affected job class providing he has greater seniority. If all
employees in the affected job class have greater seniority than the returning
employee, he will then use his seniority to bump another employee as cited in
the layoff procedure.
9. The plant grievance committeeperson with the longest seniority with the
Employer will be the last employee laid off in the plant so long as he has the
qualifications and ability to perform the available work. The truck driver
grievance committeeperson will be the last truck driver to be laid off. If
allowable by law, one Executive Board Member, if any, with the longest seniority
with the Employer will be the next to last employee laid off in either the plant
or truck driver category, depending on the individual's classification, so long
as he has the qualifications and ability to perform the available work.
10. All employees who bid a different shift, and meet the criteria, will be
able to exercise his shift preference to return to his original shift, in his
bid-in classification immediately. When an employee bids on a job on a shift
other than the one he is on, he may bump back to his preferred shift
immediately, only if he is already qualified to do the job. If the employee is
not qualified, he must stay on that shift he is on, until he is trained. When
training is completed, and if he has the seniority, he may then bump to his
preferred shift. An employee, who bumps to a different shift, may exercise his
right to bump back to the other shift after four months or 120 calendar days.
11. Any employee displaced from their permanent job class by reasons of a
layoff or bumped by a more senior employee during a layoff mode, shall retain
recall rights to their last permanent job class.
12. LOSS OF RECALL - The employee shall lose recall rights only when the
employee is offered recall to a permanent bid job and refuses recall. The
employee signs a bid and is awarded a new permanent job class.
13. RESTORATION OF FORCES AND VACANCIES - The Employer shall offer recall
rights by seniority to displaced employee(s) when a vacancy(ies) occur in their
permanent bid job class, prior to posting the job vacancy(ies) for a permanent
job.
14. The Company will make every effort to keep the bid employee on his job,
and have the replacement do the work of the missing employee whenever possible
according to his ability and qualifications.
-77-
<PAGE> 13
ARTICLE VII
SAFETY AND HEALTH
1. The Employer and the Union shall cooperate in the continuing objective
to eliminate accidents and health hazards. The Company shall make reasonable
provisions for the safety and health of its employees during the hours of their
employment including the provision of protective devices such as flash goggles,
grinding shields, safety goggles and one arm leathers for burners and other
equipment and safety devices necessary to properly protect employees from injury
or other health hazards, which must be properly used by the employees. One (1)
pair of work gloves (or welder's gloves for welders) per employee will be
provided by the Employer twice each month without cost. The Employer will
provide two (2) changes of coveralls for painters per week without cost on an
exchange basis. The Employer may assess the cost of a new pair of coveralls if
the old coveralls are not turned in at the time of exchange or if the coveralls
are willfully damaged by the employee. The Employer will provide one (1) apron
and one (1) pair of shoe flaps per year at the crimper position.
2. A safety committee consisting of one employee, per shift, one of whom
will be designated as chairperson of the Union Committee and three (3) Employer
representatives shall meet monthly, or more often if mutually agreed to. These
employees will be compensated at staight time, up to a maximum of one (1) hour,
for time spent in safety meetings from plant walk through to the conclusion of
the meeting, to confer and recommend regulations to provide safety and
sanitation in the plant and may make recommendations as to improvements with
respect to such matters as heating and ventilation in the plant. Safety
complaints will be promptly investigated by supervision when brought to the
attention of supervision by members of the bargaining unit. The Company Safety
Officer or his designee, will conduct a plant safety tour once every thirty (30)
days, and one (1) Union safety committeeperson may accompany him without loss of
pay. A truck driver representative can attend monthly meetings whenever he is
available. The truck driver representative will meet with a management
representative at least quarterly to discuss safety related matters.
3. If an employee is injured on the job and is sent by the Employer to a
physician for treatment, he shall be paid at straight-time for the balance of a
regular shift provided the attending physician certifies to the Employer that
the employee is so disabled as to be unable to work for the remainder of the day
by reason of such injury. The Company or its designee, will transport and
retrieve the injured employee, to and from the hospital.
-78-
<PAGE> 14
4. The Company will schedule a safety program by work area or in an area,
where employees can hear, each three (3) months for all employees during working
hours.
5. New employees shall be given a thorough safety orientation by a Company
representative and a Union Safety Committeeperson.
6. The Company shall furnish, to the Union, all safety reports that are
furnished to Federal, State, County and City governments. The Company will also
furnish to the chairperson of the Union safety committee or his designee, a copy
of all C-1 and C-3 Worker's Compensation forms which are filed.
7. The Company will notify the safety committee chairman present on the
shift, or his designee, as soon as practical, of serious accidents within the
plant or yard area and this representative or his designee will be allowed a
reasonable period of time to investigate the accident.
8. The Company will furnish the Safety Committee Chairman a copy of all
plant related accident reports each month.
9. The Company agrees to advance to employees who have been disabled with a
Workers' Compensation claim an amount not to exceed eight (8) weeks of the
weekly sickness and accident benefit currently in effect. The employee must sign
a right of reimbursement agreement in order to receive the advance.
ARTICLE VIII
LEAVE OF ABSENCE
1. Employees may be granted, unpaid leaves of absence, if possible or
practical, for reasons and for a period of time acceptable to the Employer. Such
leaves of absence shall be in writing and written notices of such leaves of
absence, if granted, will be forwarded to the Union. When a request is made at
least two (2) weeks in advance, the Company will give a written response within
five (5) working days of the receipt of the request.
2. The Employer shall grant a leave of absence without pay but with the
accrual of seniority, for a period of not more than one (1) year, to any
employee who is elected to an office in the Union, or for up to one (1) week to
an employee elected as a delegate to a Union convention or official conference,
and who requests such leave. Not more than two (2) employees will be permitted
to be on leave pursuant to this provision at any one time. Application for leave
in accordance with this provision shall be made two (2) weeks in advance if
possible. When an employee requests leave for a Union Convention or official
conference, the Local Union President will certify to the
-79-
<PAGE> 15
Employer that a convention or official conference is in fact scheduled.
3. In the event that an employee is granted a leave of absence, because of
injury or illness not covered by Workers' Compensation, he shall, at the
expiration of his leave of absence be reinstated in the classification he
occupied prior to his leave. If his position in this classification is
unavailable, he may exercise his rights of seniority and ability.
4. Leaves of absence for military service will be granted as required by
applicable law.
ARTICLE IX
SUPERVISORS
1. Supervisory employees, including foremen, will not be used to displace
regular production or maintenance employees in the bargaining unit covered by
this Agreement, but will do such manual work as may be required for the purpose
of instruction, supervision, inspection, experimentation, or in cases of
emergencies, and when the regular employee is not immediately available.
2. Any employee transferred or promoted to a supervisory or other job
outside the bargaining unit shall maintain all accrued seniority for a period of
ninety (90) days after the date of his promotion. If subsequent transfers are
involved within a period of one (1) year starting with the date of promotion,
the ninety (90) days will be computed on an accumulated basis. The employee will
lose all seniority for purposes of reinstatement into the bargaining unit upon
completion of the ninety (90) day period.
ARTICLE X
HOLIDAYS
1. The following days are recognized as holidays: New Year's Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; the day
following Thanksgiving Day; Christmas Eve; Christmas Day; and New Year's Eve.
2. Full-time employees not scheduled to work on such holidays shall receive
a holiday pay allowance of eight (8) hours straight-time for each full day
recognized as a holiday under this Agreement; but this shall not apply to
probationary employees described in Article VI of this Agreement. In order to be
eligible for a holiday pay allowance, a full-time employee must work the day for
which he is scheduled, both immediately before and immediately after the holiday
unless his failure to
-80-
<PAGE> 16
work is for just cause. If an employee is laid off or recalled from a layoff in
a thirty (30) day period prior to or after the holiday, he shall be paid for
that holiday.
3. Employees scheduled to work and working on such holidays shall receive
time and one-half for all hours worked, plus the holiday pay allowance.
4. Any holiday time for which a full-time employee is paid although not
working, shall be taken into account for purposes of computing overtime.
5. A holiday that falls on a Sunday but is generally celebrated on the
following Monday shall be deemed to fall on said Monday and not on Sunday for
the purpose of holiday pay. A holiday that falls on a Saturday but is generally
celebrated on the preceding Friday shall be deemed to fall on said Friday and
not on Saturday for the purpose of holiday pay.
ARTICLE XI
VACATIONS, BEREAVEMENT, JURY DUTY
1. Each full-time employee who has worked a year from the date of his last
employment by the Employer shall be entitled to receive a vacation of five (5)
days with vacation pay at straight- time for forty (40) hours.
2. Each full-time employee who has worked three (3) years from the date of
his last employment by the Employer shall be entitled to receive a vacation of
ten (10) days with vacation pay at straight-time for eighty (80) hours.
3. Each full-time employee who has worked eight (8) years from the date of
his last employment by the Employer shall be entitled to receive a vacation of
fifteen (15) days with vacation pay at straight-time for one hundred twenty
(120) hours.
4. Each full-time employee who has worked fifteen (15) years from the date
of his last employment by the Employer shall be entitled to receive a vacation
of twenty (20) days with vacation pay at straight-time for one hundred sixty
(160) hours.
5. Each full-time employee who has worked thirty (30) years from the date
of his last employment by the Employer shall be entitled to receive a vacation
of twenty-five (25) days with vacation pay at straight-time for two hundred
(200) hours.
6. Vacation pay for truck drivers for each forty (40) hours of earned
vacation will be computed as 1.65% of the driver's previous calendar year's
gross wages as reported by the Company on the driver's form W-2, or forty (40)
hours at the driver's straight-time rate, whichever is greater.
-81-
<PAGE> 17
7. The vacation year for each employee shall be the 365 calendar day period
beginning on the date of the employee's last date of employment by the Employer.
Vacation time and pay shall not be cumulative and shall be forfeited if not
taken within 365 calendar days after an employee has become eligible for such a
vacation. To be eligible for vacation with pay, an employee must have worked at
least 1,000 hours in the year preceding his vacation eligibility date. Time
spent on Worker's Compensation disability shall count toward vacation
eligibility at the rate of forty (40) hours per week.
8. Vacations will, so far as practicable, be granted at times requested by
eligible employees, in line with their seniority. The final right to allot
vacation periods and to change such allotments is reserved to the Employer in
order to insure orderly and efficient operations. The Employer may schedule one
(1), one (1) week plant shutdown per calendar year for vacation purposes. If the
Employer determines that a plant shutdown for vacation purposes is necessary,
the Employer will post notice of said shutdown no later than thirty (30) days
prior to the shutdown. If the Employer fails to post the scheduled vacation
thirty (30) days or more prior to the shutdown, the shutdown will be considered
as a plant shutdown due to the lack of work.
9. Employees with three (3) or more weeks of vacation will be granted an
additional sign-up period during the month of March (commencing in March, 1994),
to schedule one full week of vacation. An employee who already signed up the
prior November, cannot be bumped from his chosen time frame, however. Employees
with three (3) or more weeks not signing up in March, and have not signed up in
November, will have that third week assigned by the Employer. Employees with two
(2) or more weeks of vacation, may use both single days and half-days of
vacation, not to exceed five (5) days total.
10. The Company will allow two (2) production employees, per shift during
any one week period from May 1, 1996 to April 30, 1997; the Company will allow
three (3) production employees per shift during any one week period from May 1,
1997 to April 30, 1998; and the Company will allow four (4) production employees
per shift during any one week period from May 1, 1998 to April 30, 1999 when
running more than three lines of production. If three (3) or more employees are
signed up for vacation in any one week, and shifts revert back to two (2)
employees off in a week; those employees already signed up for vacation, will be
allowed to take their vacation time as previously requested. One (1) maintenance
employee, one (1) yard employee, per shift, and one (1) truck driver to be on
vacation during any one week period.
-82-
<PAGE> 18
11. When a death occurs in the immediate family (mother or stepmother but
not both, father or stepfather but not both, spouse, mother-in-law,
father-in-law, son, daughter, step-children, brother, sister, grandparents,
grandchildren, brother- in-law, sister-in-law, and current spouse's
grandparents) of an employee who has completed his probationary period, the
employee will be given not to exceed three (3) consecutive work days off with
pay, but not to exceed (8) hours straight-time pay, for time actually lost from
work for the purpose of attending the funeral of the deceased. Additional time
off may be granted without pay, if deemed necessary. If an employee is on
vacation during a period of time that would otherwise be considered paid
bereavement time under the conditions of this section, the employee will be
entitled to additional vacation days, to a maximum of three (3) days, to replace
vacation days lost in bereavement. No such funeral leave shall be granted where
the employee does not attend the funeral of the deceased and does not certify or
otherwise establish, as requested by the Employer, that he has in fact attended
such funeral unless the employee submits certification that no funeral or
services were held for the deceased. Falsification of such certification shall
be grounds for discipline up to and including discharge.
12. Employees, other than probationary employees, required to serve as
jurors in any court proceeding shall be paid for each day of service an amount
equal to the difference between their daily pay as jurors and an amount equal to
the pay for time actually lost from work for the purpose of serving as a juror.
13. A union representative will be given a quarterly vacation sheet, to be
posted on the union bulletin board in the plant. The original vacation schedule
will remain in the office of the Human Resources Department, and shall be the
official record in regard to all plant vacations.
ARTICLE XII
HOURS, WAGES AND WORKING CONDITIONS
1. The Employer agrees to pay all employees covered by this Agreement
weekly, in accordance with the wage schedule set forth in Appendix "A" attached
hereto and fully incorporated in this Agreement. It is expressly understood that
the wages set forth in Appendix "A" hereto are in lieu of other compensation
arrangements heretofore in force, except that the Company expressly reserves the
right to continue paying Christmas bonuses to bargaining unit employees when in
the Company's judgment business conditions warrant. The Company will find a
source to furnish prescription safety glasses for our employees and to make
these employee purchases available under our payroll deduction plan.
-83-
<PAGE> 19
2. The normal but not guaranteed work day for full-time employees, and the
work day for purposes of this Article, shall be eight (8) hours. The normal but
not guaranteed work week for full-time employees, and the work week for purposes
of this Article, shall be forty (40) hours consisting of five (5) eight (8) hour
days. Each employee shall be paid at the rate of one and one-half times his
regular straight-time hourly rate for all hours worked in excess of eight (8) in
any one work day or in excess of forty (40) hours in any one work week. With the
exception of truck drivers, each employee shall be paid at the rate of one and
one-half times his regular straight-time rate for all hours worked on Saturday
and twice his regular straight- time rate for all hours worked on Sunday
provided, however, that in no instance will overtime and/or premium rates
provided for under the terms of this Agreement be pyramided or duplicated. It is
understood and agreed that the Employer retains the right to require the
employees to work more than eight (8) hours in any one work day and more than
forty (40) hours in a work week.
3. When an employee is temporarily transferred, such employee shall receive
the rate of the job from which he was transferred or the rate of the job to
which he was transferred, whichever is the greater, except in the case of
displacement due to layoff in which case he will revert to the rate of the job
to which he has been transferred after fifteen (15) calendar days.
4. Any full-time employee scheduled and reporting to work at his scheduled
time and not permitted to work or permitted to work less than four (4) hours
shall receive a minimum of four (4) hours' pay except that the Employer shall
not be liable for such minimum payment in the event that work is not available
due to absenteeism of other employees, fire, explosion, tornado, or destruction
of property and acts of God. Employees scheduled to work, reporting for work and
permitted to work shall not be paid wages for such time as may be voluntarily
taken or requested off by the employee.
5. An employee shall be granted a one-half hour unpaid meal period for each
eight (8) hours of work, but may be instructed to advance or delay his normal
time off for such meal period if the Employer determines that work requirements
warrant such advance or delay. Employees will be granted a ten (10) minute rest
break during the first half of a shift and a ten (10) minute rest break during
the second half of a shift. Employees working overtime will be granted a ten
(10) minute break prior to each two (2) hours of overtime worked.
6. In the event bargaining unit employees other than the Inventory Control
Man are required during the taking of inventory, the additional employees needed
shall be offered the work in accordance with seniority.
-84-
<PAGE> 20
7. The Employer may continue to subcontract work out: (1) which it has been
the normal practice of the Employer to subcontract in the past; (2) work which
the Employer does not have the specialized skill or equipment available to
perform; (3) work where unforeseen circumstances or unusual customer delivery
dates preclude the completion of the work within the allotted time; (4) new
construction work including major installation, major replacement or repair, and
reconstruction of equipment; (5) work which unusual customer requirements or
delivery dates make it economically unreasonable to have performed by employees
on layoff status or where there is less than five (5) days' work involved.
8. When daily overtime is required and less than a full shift of employees
is scheduled for the overtime, the most senior employee or employees doing the
work on which overtime is required will be entitled to work the overtime. If the
offered overtime is not accepted on this basis, the overtime will be offered to
employees in the plant on the basis of seniority and ability to perform the
work. If the overtime offered is not accepted on this basis, the overtime will
be assigned in reverse order of seniority to employees in the plant with the
ability to perform the required work. Employees working on the 1st and 2nd
shifts will be called into work early, strictly by seniority and when asked to
stay over for overtime the employee will be asked by man-on-the-job. For 3rd
shift employees it will be in reverse order. In the case of weekend overtime
when less than a full shift of employees is scheduled, overtime will be offered
by seniority and ability to perform the work starting initially at the top of
the seniority list and thereafter, weekend overtime will be accounted for by
hours worked in three areas; production, maintenance and yard. All employee
overtime hours worked in the areas listed above will be accounted for and put on
a schedule. The employee is responsible for verifying the amount of hours
charged to him are correct. If the employee refuses the weekend overtime, he is
credited with the hours worked, even if he does not work. If the Employer cannot
get a sufficient number of employees to work or needs additional employees in
either the production, maintenance or yard areas, those employees qualified with
the lowest number of overtime hours for the week will be the first asked to
work. The Employer may assign the work to probationary employees whether on
daily or weekend overtime. An employee who accepts offered overtime on a weekend
day and then fails to show up that day will be accountable under the
absence/tardy program now in effect.
9. The Company agrees beginning May 1, 1993 to pay a shift premium for the
duration of the contract of thirty cents ($0.30) per hour for second shift
employees and thirty-five cents ($.035) per hour for third shift employees.
-85-
<PAGE> 21
10. Up to four (4) Union Committee members will be compensated at
straight-time for time lost during their regularly scheduled working hours while
in conference with Management in contract negotiations, and up to five (5) will
be compensated when two (2) lines of production are being operated on the second
shift.
ARTICLE XIII
GROUP INSURANCE, RETIREMENT PLAN
1. The Employer shall maintain in effect for the term of this Agreement the
present group insurance plan for employees with the improvements as set forth in
Appendix D. Comprehensive Dental expense benefits will be maintained in effect
as set forth in Appendix C.
2. All insurance under this plan, except Sickness and Accident, will be
maintained in effect for a period of six (6) months following a layoff, unless
termination of seniority occurs.
3. The Employer shall maintain in effect for the term of this Agreement the
present profit-sharing retirement plan for employees and agrees to make such
changes in the plan as may be necessary to comply with the Employee Retirement
Income Security Act of 1974 and to qualify the plan under Section 401 (a) of the
Internal Revenue Code or any subsequent comparable statute.
ARTICLE XIV
COST-OF-LIVING ALLOWANCE
1. The employees in the bargaining unit shall be paid a cost-of-living
allowance in accordance with the terms of this Article. The cost-of-living
allowance shall be determined on the basis of changes in the Revised Consumer
Price Index for Urban Wage Earners and Clerical Workers, CPI-W (All Items)
published by the Bureau of Labor Statistics, U.S. Department of Labor (1967=100)
and referred to herein as the "Index".
2. The cost-of-living allowance shall become effective and payable in the
following manner. The cost-of-living allowance shall be zero until the first
adjustment is made. The first adjustment of the cost-of-living allowance shall
be effective with the beginning of the first payroll period commencing on or
after June 1, 1996, based on the change in the Index from the Index for January,
1996 (published in February, 1996 as 451.9) to the Index for April 1996
(published in May, 1996), and the adjustments shall be effective quarterly
thereafter, based on changes from the Index for January 1996 based on the
formula of an adjustment of one cent ($.01) or .25 mill per mile for each point
four (.4) increase from the Index for January 1996, through the adjustment
effective with the beginning of the first payroll
-86-
<PAGE> 22
period commencing on or after March 1, 1999, as shown on the following table
(each adjustment to be effective until the next effective date of adjustment):
Cost-of-Living Adjustments
Effective Dates- Based on the change
First Payroll Period from the Index for January
Commencing on or 1996 (451.9) to the Index for
------------------------------------------------------------------
June 1, 1996 April, 1996
September 1, 1996 July, 1996
December 1, 1996 October, 1996
March 1, 1997 January, 1997
June 1, 1997 April, 1997
September 1, 1997 July, 1997
December 1, 1997 October, 1997
March 1, 1998 January, 1998
June 1, 1998 April, 1998
September 1, 1998 July, 1998
December 1, 1998 October, 1998
March 1, 1999 January, 1999
3. For adjustments effective with the first payroll commencing on or after
June 1, 1996, through the adjustment March 1, 1999, the amount paid as
cost-of-living adjustment will not exceed fifty cents ($0.50) or 12.5 mills per
mile, per hour. If the cost-of-living allowance adjustments for payroll periods
commencing on or after June 1, 1996, through the adjustment for March 1, 1999,
have not increased by fifty cents ($0.50) per hour or 12.5 mills per mile, the
adjustment for the first payroll period commencing on or after March 1, 1999,
will be increased by the amount necessary to reflect adjustments totaling fifty
cents ($0.50) per hour or 12.5 mills per mile for the twelve (12) cost-
of-living adjustments made under this contract.
4. At the end of each quarterly cost-of-living allowance payment period,
the amount being paid as cost-of-living allowance will be rolled into the
employees base wage rate.
5. If the Index falls below the Index figure of 451.9, there shall be no
cost-of-living allowance payable and no reduction of the hourly wage rate for
any classification.
6. The cost-of-living allowance shall be payable for hours actually worked
and for holiday and vacation allowances.
-87-
<PAGE> 23
ARTICLE XV
SEPARABILITY/ABSENTEEISM, TARDINESS
1. In the event any of the provisions of this Agreement become invalid or
unenforceable by reason of any Federal or State law, now existing or hereafter
enacted, such invalidity or unenforceability shall not affect the remainder of
the provisions hereof.
2. Where successive violations occur in relation to unexcused absenteeism
and tardiness, the disciplinary schedule in Appendix E will be in effect.
ARTICLE XVI
TERMINATION
The terms and provisions of this Agreement shall remain in full force and
effect until midnight, April 30, 1999, and from year-to-year thereafter unless
either party hereto shall notify the other in writing at least sixty (60)
calendar days prior to the expiration date of this Agreement or sixty (60) days
prior to the expiration of any subsequent automatic renewal period of its
intention to amend, modify or terminate this Agreement.
-88-
<PAGE> 24
Executed by the duly authorized representatives of the parties as of this
1st day of May, 1996.
CHEMI-TROL CHEMICAL CO. UNITED STEELWORKERS OF AMERICA
By: AFL-CIO-CLC
/s/ Arthur F. Doust /s/ Arthur F. Doust
Arthur F. Doust George F. Becker
Chief Executive Officer International President
/s/ Arthur F. Doust /s/ Arthur F. Doust
Robert W. Woolf Leo W. Gerard
President International Secretary/Treasurer
/s/ Arthur F. Doust /s/ Arthur F. Doust
John P. Simcox Richard H. Davis
General Manager International Vice-President
Tank Division Administration
/s/ Arthur F. Doust /s/ Arthur F. Doust
Julie F. Price Leon Lynch
Manager, Human Resources International Vice-President
Human Affairs
/s/ Arthur F. Doust /s/ Arthur F. Doust
Howard W. Mathias Frank Vickers Plant Manager
Director, District 1
Tank Division
/s/ Arthur F. Doust
Fred Cook, Staff Representative
LOCAL UNION COMMITTEE
/s/ Tony R. Robles
/s/ Dennis Cummings
/s/ Patrick Lauer
/s/ Mark A. Hickle
/s/ James A. Albright
/s/ Greg Darr
/s/ John A. Blessing
-89-
<PAGE> 25
ARTICLE XVII
SUCCESSOR OR ASSIGNS
The Company will make binding on any successor or assigns, either through
the sale of the Company or merger, the entire Agreement between Chemi-Trol
Chemical Co., Tank Division, 721 Graham Drive, Fremont, Ohio plant and the
United Steelworkers of America, Local 1915.
APPENDIX A
WAGE SCHEDULE
Classification May 1, 1996
Laborer $ 13.50
Janitor 13.50
Bender Operator 13.60
Sandblast Operator 13.70
Offset Operator 13.70
Yardman 13.75
X-Ray Operator 13.75
Burner 13.80
Painter 13.80
Rolls Operator 14.05
Welder, Automatic Machine 13.85
Inventory Control 14.10
Utilityman 14.30
Maintenance Category A (Electric) 14.25
Category B 14.00
Welder Category A 14.30
Category B (fit-up) 13.70
Truck Driver $ 13.85 or .32845/mi.
Effective May 1, 1997 increase all rates by twenty-five cents ($0.25).
Effective May 1, 1998 increase all rates by twenty cents ($0.20). Truck driver
rates will be increased proportionally. Rates for probationary employees in the
classifications shown on this Appendix A other than Driver are for the first
forty-five (45) days after hire, the employee receives ninety percent (90%) of
rate. For the next forty-five (45) days after hire, the employee receives
ninety-five percent (95%) of rate. On the ninety-first (91st) day after hire,
the employee receives the full rate. Truck drivers will receive Three Dollars
($3.00) per tank when required to set anhydrous ammonia tanks on trailers and an
additional Four Dollars ($4.00) per tank when required to bolt the tank down.
-90-
<PAGE> 26
Truck drivers will receive the rate shown for the Truck Drivers
classification in this Appendix A for breakdown, repair time and delays due to
bad weather conditions.
Truck drivers will receive two (2) hour's pay for each full load of tanks
unloaded with one drop. Each full load, of one drop, with no help, will receive
three (3) hour's pay, and drivers will receive one hour's pay for each location
a drop or pickup is made in accordance with the dispatcher's instructions, where
less than a full load of tanks are involved.
For single driver trips, truck drivers will receive an amount equal to four
(4) times the hourly rate for the Truck Driver classification for trips of one
hundred fifty (150) miles or less and in addition will be paid at the Truck
Driver's rate for authorized delayed unloading time provided that notice of the
delay is first given to the dispatcher or acting dispatcher who shall then
direct the truck driver how to proceed.
For single driver trips in excess of one hundred fifty (150) miles, truck
drivers will receive ($.32845) beginning with the first mile or eight (8) times
the hourly rate for the Truck Driver's classification, whichever is greater. The
rates for double-driver trips shall continue to be two cents ($0.02) per mile
less than the single driver rates shown above, and, for double driver trips, the
rates for setting and bolting tanks and for stops in accordance with the
dispatcher's instructions shall be one-half (1/2) those established for single
driver trips.
Truck drivers will be granted an expense allowance while on the road of
Twelve Dollars ($12.00) per day effective the date of this Agreement. For trips
on a holiday, the truck driver will receive one and one-half (1-1/2) times his
regular rate of pay from the time he begins working during the holiday period
and continuing until midnight of the holiday. After midnight of the holiday, he
will revert to his normal pay basis. It will be the responsibility of the driver
working on a holiday to record his time and mileage accurately at the time he
commences work and his mileage as of midnight of the holiday. If he fails to do
so, he will be compensated on the basis of the lowest permissible rate.
Holiday pay allowances for truck drivers will be calculated on the basis of
the Truck Driver's classification rate.
Load postings for truck drivers will be placed outside, whether loaded or
tentatively scheduled to be loaded, on a nightly basis, between three and six
p.m., and truck drivers will be dispatched as early as possible.
-91-
<PAGE> 27
The Company will furnish rain gear as needed, but no more than one set per
year for each truck driver.
When employees not in the truck driver classification are used temporarily
for truck driver duties they will be used only after all available employees in
the truck driver classification have been utilized.
Temporary drivers will be dispatched with the shortest trip available on a
daily basis and in case of emergencies.
Drivers will be dispatched by seniority and available hours. Drivers
returning to the tank plant will call in for dispatch with hours available at
the approximate call in time: Nitschke (3:00 p.m.); Cummings (3:05 p.m.); Slane
(3:10 p.m.); Scheufler (3:15 p.m.); Everett (3:20 p.m.); Myerholtz (3:25 p.m.);
Kirkpatrick (3: 30 p.m.); Fry (3:35 p.m.); Gschwind (3:40 p.m.); Griffith (3:45
p.m.); Guggisberg (3:50 p.m.); and Lewis (3:55 p.m.).
Drivers are not to pick loads they cannot deliver as scheduled. Drivers not
working due to lack of work will be the first dispatched by seniority when work
is available unless they are out of service, off for illness, on vacation or in
a layoff situation.
The Company and union agree to this section for a 60 day trial period.
APPENDIX B
May 1, 1996
Mr. Fred Cook
Staff Representative
United Steelworkers of America
134 W. South Boundary
Perrysburg, OH 43551
Dear Mr. Cook:
This will confirm understandings reached between the Company and the Union
for the period of the Agreement effective May 1, 1996.
1. A list of employees known to have left the employ of the Company for
military service will be posted in the plant. The list will show the seniority
dates of those employees.
2. X-ray machine reports will be made available for inspection monthly.
3. After all of the necessary signatures have been obtained, the Agreement
will be printed with a Union emblem.
-92-
<PAGE> 28
4. The Company will maintain, for the duration of this contract, the
ventilation systems in both plants.
5. The Union file cabinet will be kept in the lunchroom and the lunchroom
will be made available for necessary grievance processing in accordance with
Article V, Section 11 of our Agreement dated May 4, 1984.
Very truly yours,
John P. Simcox
General Manager
APPENDIX C
DENTAL EXPENSE INSURANCE
__________________________________________________________________
CLASS A CLASS B CLASS C
Preventive Other Basic Crowns and
and Diagnostic Services Prosthodontics
Employee pays $50.00 calendar year deductible
Routine oral Extraction Crowns and gold
examination Oral surgery restorations
Cleaning of teeth Fillings Bridges and dentures Topical applications
General anes-
Replacement of
of flouride thetics aged appliances (for children)
Periodontics Space maintainers Endodontics (for children)
Injection of
Emergency palliative antibiotic drugs treatment
Repairs of
X-rays prosthetic appliances
Plan pays 100% Plan pays 85% Plan pays 50%
MAXIMUM BENEFIT - Up to $1,000 for each insured family member each calendar
year.
*FAMILY DEDUCTIBLE - $100.00 each calendar year. Although the deductible
applies seperately to the employee and to each dependent, the deductible amount
ceases to apply during the remainder of the calendar year after the deductible
amount has been satisfied with respect to the employee and two dependents or
with respect to three dependents.
Charges for the above are covered only to the extent that they do not
exceed the usual charge of the Dentist and the reasonable and customary charges
which are generally made in the same locality under similar conditions.
-93-
<PAGE> 29
This is intended only as a very general outline of the Dental Expense
Insurance Plan. All benefit, eligibility, etc. provisions will be governed by
the terms of the group policy issued to the policyholder.
APPENDIX D
HOSPITALIZATION INSURANCE IMPROVEMENTS
The non-occupational disability benefit shall be increased as follows:
Effective May 1, 1996, from One Hundred Ninety-Five Dollars ($195.00) a
week to Two Hundred Ten Dollars ($210.00) a week.
Effective May 1, 1997, from Two Hundred Ten Dollars ($210.00) a week to Two
Hundred Twenty Dollars ($220.00) a week.
Effective May 1, 1998, from Two Hundred Twenty Dollars ($220.00) a week to
Two Hundred Thirty Dollars ($230.00) a week.
On May 1, 1996, the following improvements will be effective:
Pre-Certification of Hospital Admissions: Each non-emergency hospital
admission is pre-certified for a length of stay based upon your
diagnosis and the judgement of your doctor.
Second Surgical Opinions: For certain surgeries, the employee will be
given the name of a board-certified physician specialist to go and get
a second opinion from.
Out Patient Surgery: The insurance company will review selected
surgical procedures in accordance with prevailing medical practice,
determine if a second opinion is required, and recommend that the
employee's doctor consider out-patient surgery if appropriate. Where
an employee utilizes out-patient surgery the seven day waiting period
for non-occupational disability benefits will be waived.
Pre Admission Testing: The employee's doctor will be asked to consider
having a portion of any testing done on an out-patient basis.
Limited Weekend Admission Review: The coverage may restrict weekend
admissions for non-emergency inpatient hospital admissions on Friday
and/ or Saturday.
-94-
<PAGE> 30
Emergency Admissions: For emergency admissions, the insurance company
must be notified within 48 hours of hospital admission or within 72
hours following weekend admission or a holiday admission.
Psychiatric Admissions: All psychiatric admissions will be reviewed in
accordance with common length of stays for similar mental health
problems.
MAJOR MEDICAL COVERAGE
The plan deductible amount is Two Hundred Dollars ($200.00) per employee or
dependent and Four Hundred Dollars ($400.00) per family except that when the
procedures outlined in this Appendix are not followed the deductible becomes Two
Hundred Fifty Dollars ($250.00) for employees and dependents.
After the deductible is satisfied, the plan will pay 80% of the first Five
Thousand Dollars ($5000.00) of covered expenses per calendar year. The plan will
pay 100% of covered expenses in excess of Five Thousand Dollars ($5000.00) per
calendar year up to the plan maximum. The lifetime maximum benefit will be One
Million Dollars ($1,000,000.00) per covered individual, with One Thousand Five
Hundred Dollars ($1500.00) per person, per year, restoration on major medical
lifetime maximum.
Prescription drug card of Three Dollars ($3.00) for generic drugs and Seven
Dollars ($7.00) for non-generic drugs. Use of the prescription drug card does
not apply to hospitalization plan deductible.
Inpatient mental health services are capped at thirty-one (31) days maximum
per year. Outpatient mental health services are payable at fifty percent (50%)
of the UCR, maximum per year One Thousand Dollars ($1000.00) and Twenty-five
dollars ($25.00) per visit.
Chiropractic visits are limited to ten (10) visits per year at eighty
percent (80%) of the UCR. Any visits beyond ten (10) would be subject to medical
necessity being proven.
Inpatient drug and alcohol limited to one stay per year. Outpatient drug
and alcohol services are payable at fifty percent (50%) of the UCR, maximum per
year of One Thousand Dollars ($1000.00).
The maximum out of pocket expense per year, per individual will be One
Thousand, Two Hundred Dollars ($1200.00).
-95-
<PAGE> 31
Termination of insurance occurs at 11:59 p.m. on the last day of an event
that would terminate eligibility (i.e. termination of employment, divorce, child
reaching the age of 19 or child quitting college).
Probationary employees do not receive insurance benefits until completion
of forty-five (45) calendar days of service.
APPENDIX E
May 1, 1996
CHEMI-TROL CHEMICAL CO.
TANK DIVISION
ABSENTEEISM/TARDINESS POLICY
Regular and prompt attendance on your job is very important. Therefore,
good attendance is a condition of employment. Irregular attendance not only
affects plant production but also causes fellow employees to be placed on jobs
that they prefer not to be working on or worse, are unable to do the job as
proficiently as the absent employee.
Because of the seriousness of the responsibility of each and every employee
at the Tank Division to be at work on a full time basis, and on time, the
following program will be instituted.
I. ABSENCE AND TARDINESS
AUTHORIZED ABSENCE AND TARDINESS:
1. Holidays and Vacations
2. Approved Leave of Absence
3. Military Reserve Duty
4. Death in the Family
5. Worker's Compensation Injury
6. Jury Duty
7. Level III Snow Emergencies in Sandusky County, Ohio
8. Absence or tardiness in which mitigating circumstances are involved or
can be pre-arranged with our supervisor.
9. Doctor's excuse supplied upon return to work from an absence. The first
two (2) doctor's excuses shall be considered an authorized absence or tardiness
in a calendar quarter. Doctor's excuses for the balance of that calendar
quarter, which are more than the two (2) mentioned above, shall be considered
unexcused and shall count as one (1) point. At the end of the calendar quarter
following the calendar quarter in which the amount of two (2) doctor's excuses
were reached, the employee shall then be eligible to have two (2) authorized
absences and tardiness. Any employee that has two (2) doctor's excuses or less
in a calendar quarter shall not be subject to the one (1) point rule.
-96-
<PAGE> 32
10. Leaving working early before completion of scheduled shift with
supervisor's consent.
II. CALL IN PROCEDURE:
It is the responsibility of the employee to notify management of their
intentions to be either absent or tardy. The following will now be in effect:
If you are going to miss the entire day, you must report the absence no
later than the start of the shift. In the case of being tardy or late, you have
one (1) hour after the start of the shift, to call and then have one (1) hour
longer to report to be considered tardy (two (2) hours total). In other words,
you have two hours after starting time to report, to be regarded as tardy. Any
employee reporting for work within two hours of starting time shall be put to
work subject to the limitations of Article XII, Section 4 and the point
schedule. Any employee not calling in and not reporting for work within two (2)
hours of starting time shall be recorded as a "no show" and his discipline will
be described later in this program. He shall remain designated a "no show" even
if he subsequently brings in a doctor's excuse, but at a reduced penalty. The
Company shall provide a system that will issue paper work to an employee when he
is assessed a point or points. The form shall show the last points assessed and
the employee's total number of points.
III. ADMINISTRATION OF DISCIPLINE:
All discipline will be administered by the Manager of Human Resources
working directly with the supervisors of the Tank Division. Absences, tardiness,
"no shows" and early leaves will be addressed by a point system.
The following point values are assigned:
Unexcused absence or unexcused tardiness = 1 point
Excused absence or excused tardiness without phone call or without prior
notice to the Company = 1/2 point
Leaving before the end of scheduled shift and not excused unless
documentation is provided upon return to work. Employees must work at least
four (4) hours or more in order to receive one-half point. If the employee
works less than four (4) hours he will receive one (1) point. = 1/2 point
Unexcused absence with phone call by starting time or unexcused tardiness
with phone call within one hour (1) hour of starting time = 1/2 point
-97-
<PAGE> 33
Unexcused absence or tardiness without a phone call and fails to report to
work within two (2) hours of starting time = 2 points
EXCESSIVE ABSENTEEISM UNDER THE SYSTEM
When an employee is issued more than two (2) points in any one quarter:
1. The employee will not be able to use the point buy back program until he
has returned to the regular absenteeism/tardiness program.
2. For the balance of the quarter and the next quarter the employee shall
be issued double points for any infraction.
3. The employee shall return to the regular program after the quarter.
The following levels must be achieved to receive disciplinary action:
LEVEL 1. Four (4) points within any four (4) month period will
result in a verbal warning.
LEVEL 2. Six (6) points within any six (6) month period will
result in a written warning.
LEVEL 3. Nine (9) points within any ten (10) month period will
result in a final notice before discharge.
LEVEL 4. Thirteen (13) points within any twelve (12) month period
will result in discharge.
IV. POINT REDUCTION:
Every 90 days without an unexcused absence will erase two (2) points,
starting with the most recent points. The points will be deducted if:
1. At least 90 days were as an active employee. (Worker's Compensation and
leave of absence time off, do not count as active employment).
2. Point totals never go below zero (0).
3. During the term of the life of this policy, management will allow for
circumstances beyond the control of the employee, who has maintained an above
average effort toward good and prompt attendance.
-98-
<PAGE> 34
APPENDIX F
May 1, 1996
Mr. Robert Flournoy, Staff Representative
United Steelworkers of America
300 Garrison Street
Fremont, Ohio 43420
Dear Mr. Flournoy:
This letter will confirm understandings reached between the Company and
the Union dealing with group leader language, for the life of this Agreement
effective May 1, 1993.
Five (5) members of the bargaining unit are to be selected, and with their
consent, will be given group leader status when the plant is operating a second
shift. The employees selected will be placed in charge of the yard, maintenance
and production lines. As group leaders, they will not administer disciplinary
action to fellow members of the bargaining unit. As dues paying members, they
will maintain all rights and privileges of the bargaining unit.
Group leaders will be the first employee offered overtime in their
classification. Group leaders will be offered overtime, outside of their
classification, only after all other employees have been offered, and refuse the
overtime. If group leaders are out of rotation, an additional employee will be
utilized. Group leaders shall not have "superseniority", either in plant or
classification.
During the life of this Agreement, these employees selected may return to
their vacated job provided that they give management sufficient notice, and time
to go through the necessary bidding process, that will follow.
During the life of this Agreement, management has the right to reinstate
the employee to his prior job classification at any time, and replace the
employee if necessary, to maintain efficient operations, with the same bidding
process in effect.
In addition to his regular duties a group leader shall be authorized to
instruct employees in the efficient performance of the work to be done in his
area. He shall not have the right to hire, fire, or discipline, or recommend the
same.
The group leader rate will be fifty-five cents ($0.55) higher than the
Welder, Category A rate.
Sincerely,
John P. Simcox
General Manager
-99-
<PAGE> 35
APPENDIX G
May 1, 1996
Mr. Fred Cook, Staff Representative
United Steelworkers of America
134 W. South Boundary
Perrysburg, OH 43551
Dear Mr. Cook:
This letter will confirm understandings reached between the Company and
the Union dealing with vacation language, for the life of this Agreement
effective May 1, 1996.
1. On November 18, 1996 a new sign up sheet for vacation will be posted
allowing production employees to sign up for 1997. This will be for the purpose
of allowing two (2) production employees one maintenance employee, one yard
employee and one truck driver to take vacation during any one week period. The
Company will allow three (3) production employees per shift during any one week
period from May 1, 1997 to April 30, 1998; and the Company will allow four (4)
production employees per shift during any one week period from May 1, 1998 to
April 30, 1999 when running more than three lines of production. If three (3) or
more employees are signed up for vacation in any one week, and shifts revert
back to two (2) employees off in a week; those employees already signed up for
vacation, will be allowed to take their vacation time as previously requested.
2. Any production employee who had signed up during the November, 1996
period, will maintain that week or weeks, through the year 1997. Any subsequent
reduction due to a layoff, with a recall after a sign up period, those
production employees affected, will be accorded the same protection as the
November, 1996 period, throughout the life of this Agreement.
3. In the event of a layoff during the life of this Agreement, the
following will be in effect. When two (2), three (3) or four (4) production
employees are signed up and not affected by the layoff, and are scheduled for
vacation the same week during the layoff period, they will still be permitted to
take their scheduled vacation.
4. If the layoff period extends beyond the next sign up period (into the
next year) and we are maintaining one-line production, only one production
employee will be permitted to have vacation during a particular week.
-100-
<PAGE> 36
5. In case of a recall to two lines of production, the sign up period will
be reopened not later than ten (10) days after completion of the recall. Two (2)
production employees will then be allowed to be on vacation, under the same
conditions established in Item 2.
6. In all cases, except for those cited in Item 2, seniority takes
precedence, and full week's of vacation (5 day period) takes precedence over
single days as previously established.
Sincerely,
John Simcox
General Manager
APPENDIX H
TRUCK DRIVER CLASSIFICATION LAYOFFS
April 22, 1992
Mr. Robert Flournoy, Sub-District Director
United Steelworkers of America
300 Garrison Street
Fremont, OH 43420
Re: Truck driver classification layoffs
Dear Mr. Flournoy,
As discussed during our meeting of April 16, and to eliminate a problem for
both the truck driver employees and the company, we propose the following, which
had been a past practice for many years.
When the Tank Division is in a layoff situation in the truck driver
classification, senior truck driver employees shall have the option of accepting
voluntary layoff as stated in Article VI, Paragraph 7 of the present Agreement.
If no senior truck driver accepts voluntary layoff, truck drivers with the least
amount of seniority will be put on layoff status. Those truck drivers on layoff
will not have the right to displace less senior employees not in the truck
driver classification working in the plant, nor shall a more senior employee in
a classification other than truck driver, displace a lower seniority truck
driver in the truck driver classification. In simplest terms, a truck driver
cannot come into the plant, and a plant employee cannot be a truck driver.
Further, laidoff employees in the truck driver classification have recall rights
to the truck driver classification until they voluntarily quit, bid into another
classification or seniority terminates. In regard to a recall from layoff,
Article VI, Paragraph 5d, will be in effect.
-101-
<PAGE> 37
We trust that this will clear up any problems in this area, until at least
completion of the Agreement.
Sincerely,
Confirmed - Dated April 27, 1992
CHEMI-TROL CHEMICAL CO.
John P. Simcox Robert Flournoy
General Manager Sub-District Director
April 23, 1996
Mr. Fred Cook, Staff Representative
United Steelworkers of America
134 W. South Boundary
Perrysburg, OH 43551
Dear Mr. Cook,
Effective this date, truck drivers will not be required, nor will they have
rights to any job within the plant, other than by bid process or if medically
restricted, or no longer physically able to perform work as a truck driver,
pursuant to ADA qualifications.
Sincerely,
Terry W. Swartz
Personnel Manager
-102-
<PAGE> 38
APPENDIX I
May 1, 1996
Mr. Fred Cook, Staff Representative
United Steelworkers of America
134 W. South Boundary
Perrysburg, OH 43551
Dear Mr. Cook,
This letter will confirm understandings reached between the Company and the
Union dealing with the following items as discussed during the most recent
contract negotiations.
1. The Company will agree to the weekly deduction of union dues for the
employees of the Tank Division.
2. The Company agrees to use larger print for the new contract booklets.
3. The Company and Union representatives agree to meet with the intention
that both parties will enter into meaningful dialouge regarding a drug policy
that both parties can agree to by September 1, 1996.
Sincerely,
CHEMI-TROL CHEMICAL CO.
John P. Simcox
General Manager
-103-
<PAGE> 1
Exhibit 10.5
-104-
<PAGE> 2
AGREEMENT
---------
This agreement made and entered into by and between Chemi-Trol Chemical
Co., The Laborers' District Council of Ohio and Laborers' International Union,
Local 480, 1205 West Perkins Ave., Sandusky, Ohio, hereafter collectively called
the Union.
This agreement takes effect March 1, 1997.
Chemi-Trol Chemical Company recognizes and acknowledges that the Laborers'
District Council of Ohio and Laborers' Local 480, Laborers' International Union
of North America, AFL-CIO, are the sole representatives of all employees in the
classifications of work under their jurisdiction covered by this Agreement, for
the purposes of collective bargaining. The Union recognizes Chemi-Trol Chemical
Company as the sole bargaining agent for those members they represent, in the 88
Counties of Ohio, and the Counties of Boone, Campbell and Kenton in Kentucky.
Subject to the provisions and limitations of the National Labor Relations
Act, as amended, all present employees who are members of the Union on the
effective date of the Agreement shall continue their membership in the Union for
the duration of this Agreement to the extent of paying admission fees and
minimum monthly dues as uniformly required as a condition of acquiring or
retaining membership in the Union. All employees who are not members of the
Union and all persons who hereafter become employees shall become members of the
Union on the eighth (8th) day following the effective date of this agreement, or
the eighth (8th) day following their employment, whichever is later, and shall
remain a member in good standing with the Union to the extent of paying
admission fees and minimum monthly dues uniformly required as a condition of
acquiring or retaining membership in the Union, whenever employed under and for
the duration of this Agreement.
Chemi-Trol Chemical Company will not discriminate in hiring of employees
and will conform to laws with respect to hiring. It is understood Chemi-Trol
Chemical Company shall have the right to reject any employee referred for hire
by the Union for just cause. Any employee referred by the Union to Chemi-Trol
Chemical Company at their request and then not put to work shall be paid
reporting pay unless the employee is not capable or qualified to perform the
work required.
It is a condition of this Agreement, agreed to by both the Union and
Chemi-Trol Chemical Company, to provide equal opportunity in employment for all
qualified persons, and to prohibit discrimination in employment because of race,
creed, color, sex, age or national origin. There shall be full compliance with
all applicable Federal and State statutes, regulations, rules and orders of
appropriate Federal or State agencies having jurisdiction over the subject
matter of discrimination in employment.
The Union may notify Chemi-Trol Chemical Company in writing of any default
on the part of an employee to pay his admission or readmission fee and
membership dues, and if the employee has not paid his admission or readmission
fee and/or membership dues within three (3) days from the
-105-
<PAGE> 3
Page 2 Agreement
receipt of written notice, Chemi-Trol Chemical Company shall discharge such
employee, provided membership was available under the same terms and conditions
generally applicable to other members. Further, all employees who fail to
maintain their Union membership as above provided shall be discharged by
Chemi-Trol Chemical Company.
The Laborers' District Council of Ohio, Laborers' Local 480, and the
Chemi-Trol Chemical Company, recognize the problems that drug and alcohol abuse
have created and agree that the Employer may implement uniformly a drug and
alcohol abuse prevention program that will work toward maintaining a safe
work-place, free of drugs and alcohol.
Possession of or Use of any narcotic drug as defined in Sec. 3719.01 of the
Ohio Revised Code, or any barbiturate or amphetamine as defined in Sec. 3719.23,
or any hallucinogen as defined in Sec. 3719.40, or any harmful intoxicant as
defined in Sec. 3719.50, or any dangerous drug as defined in Sec. 4729.50, or
any alcoholic beverage, especially beer, wine and whiskey, upon or near the
property, real or personal, including trucks or equipment of Chemi-Trol Chemical
Company, by an employee or agent, shall be grounds for immediate dismissal.
A urine drug screen and/or alcohol test shall be administered under the
following circumstances:
1. PRE-HIRE DRUG SCREENING - All potential employees of the Employer will
be required to submit to a urine drug screen. Pre-hire drug screening will test
for the presence of illegal drugs and substances only. This screen will not
include an alcohol test.
2. TESTING FOR CAUSE - All employees may be tested for cause under the
following situations:
A. A reasonable suspicion exists that the employee appears to be under
the influence of illegal drugs or substances and/or alcohol.
B. An employee incurs a work-related injury or illness which requires
medical treatment or following a serious accident or incident in which
safety precautions were violated, unusually careless acts were
performed, or severe property damage was incurred. Continued screening
in these circumstances will include a urine screen for illegal drugs
and substances and may include an alcohol screen.
Chemi-Trol Chemical Company agrees to pay prevailing wage rates and fringe
benefits in areas where the wage rates have been stipulated in the contracts
between Chemi-Trol Chemical Company and their customers. All fringe benefits
will be paid directly to seasonal employees weekly. No time and a half will be
paid on fringe benefits.
-106-
<PAGE> 4
It was further agreed that Chemi-Trol Chemical Company will pay one (1) man
for driving equipment (at drive time rate), either from Gibsonburg, Ohio, to a
job or from a job to Gibsonburg, Ohio, or between jobs, unless equipment is
being used only to furnish transportation for employees. It was further agreed
to pay driving time each work day as follows: EXAMPLE: Each man's prevailing
wage rate time will start in the morning when he starts pavement markings. His
prevailing wage rate time stops in the evening whenever he stops pavement
markings. Driving or other time will be paid from the time he stops pavement
markings. Driving or other time will be paid from the time he stops pavement
markings or spraying and returns the equipment to the base of operation and
completes all filling, either of chemical or paint. This will also apply to
cleanup time for paint crews. The driving time or other time rate allowed will
be $5.15 per hour. Drive time does not include coffee stops, time necessary for
eating meals, etc.
Chemi-Trol Chemical Company further agrees to pay two (2) hours show up
time at the prevailing wage rate per day in the event no work could be
accomplished due to inclement weather or equipment failure. In the case of
equipment failure, if a piece of equipment is broken down for a period of longer
than one (1) day, Chemi-Trol Chemical Company agrees to guarantee at lease four
(4) hours work per day at the prevailing wage rate.
Chemi-Trol Chemical Company further agrees to pay reasonable lodging
expenses and four (4) hours show up time at the prevailing wage rate per day in
the event no work could be accomplished due to inclement weather or equipment
failure from December 1st thru March 1st, except south of the states of
Missouri, Kentucky and Virginia.
Overtime will be paid on the basis of work performed over forty (40) hours
per week, however, show up time will be paid at straight time rate. The overtime
pay will be based on the rate being paid for work time and rate being paid for
drive time. EXAMPLE: A man has worked fifty (50) hours. In this particular week,
the work performed over forty (40) hours constituted seven (7) hours at rate for
which he would be paid at one and one-half (1-1/2) times the prevailing rate.
Three (3) hours of time was comprised of drive time, which he would be paid at
one and one-half (1-1/2) times the rate of $5.15 per hour or $7.73 per hour. So
his overtime paid was seven (7) hours at one and one-half (1-1/2) time the
prevailing rate, the three (3) hours at $7.73 per hour.
All terms and conditions of this agreement, as amended, shall be effective
as of the first (1) day of March, 1997, and shall remain in full force and
effect until the Twenty Eighth (28) day of February, 1998, and shall continue to
remain in full force and effect from year to year thereafter, unless either
party notifies the other party in writing of its intention to amend, notify or
terminate said Agreement at least sixty (60) days prior to expiration of this
agreement.
The above items were mutually agreed upon January 23, 1997.
LABORERS' INTERNATIONAL UNION CHEMI-TROL CHEMICAL COMPANY
LOCAL 480
By: /s/ CARL W. MAINES By: /s/ CHARLES ARDNER
------------------------- ------------------------
Opr. Mgr. Chemical Group
LABORERS' DISTRICT COUNCIL OF OHIO
By: /s/ JACK L. SHAW
------------------------
-107-
<PAGE> 1
Exhibit 10.6
-108-
<PAGE> 2
EMPLOYMENT AGREEMENT
--------------------
1. RECITALS
--------
(a) This Employment Agreement ("Agreement") is between (Name) (the
"Executive") and Chemi-Trol Chemical Company (the "Company") and is effective
as of August 1, 1996.
(b) The address of the Company headquarters is 2776 C.R. 69,
Gibsonburg, Ohio 43441 (the "Headquarters").
(c) The Executive is currently employed by the Company in the capacity
of (Position) of the Company and the Executive is one of the key executives of
the Company.
(d) In consideration of the mutual promises contained herein and other
good and valuable consideration, the Executive and the Company have entered into
this Agreement.
2. TERM OF AGREEMENT; EMPLOYMENT
-----------------------------
(a) The Term of this Agreement shall commence on the date hereof and
continue until July 31, 1999; provided, however, that commencing on January 1,
1997 and each January 1st thereafter, the above-referenced date and the term of
this Agreement shall automatically be extended for one additional year unless at
least thirty (30) days prior to such January 1st date, the Company or the
Executive shall have given notice that it or he does not wish to extend this
Agreement. The phrase "Term of Agreement" shall refer to the period commencing
on the date hereof and ending on July 31, 1999 (or any extension thereof
pursuant to the preceding sentence).
(b) The Company hereby agrees to employ Executive as the Company's
President and Chief Operating Officer upon the terms and conditions herein
contained, and the Executive hereby agrees to accept such employment and to
perform the duties and functions customarily required of such office during the
Term of Agreement. In such capacity, the Executive shall report to the Company's
Headquarters and shall have such powers and responsibilities consistent with his
position as the Board may assign to him. Throughout the Term of Agreement, the
Executive shall devote his best efforts and substantially all of his business
time and services to the business and affairs of the Company.
3. CHANGE IN CONTROL
-----------------
No benefit pursuant to Section 11 shall be payable hereunder unless a
change in control of the Company ("Change in Control") shall have occurred and
the Executive's employment by the Company shall have been terminated within two
(2) years thereafter. For purposes of this Agreement, a Change in Control shall
be deemed to have occurred if:
-109-
<PAGE> 3
(a) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and immediately after such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
voting stock of the Company immediately prior to such transaction;
(b) The Company sells all or substantially all of its assets to any
other corporation or other legal person, and less than a majority of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such sale are held in the aggregate by the holders of
voting stock of the Company immediately prior to such sale.
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 ("Exchange Act"), disclosing that any person (as
the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of securities representing 20% or more of the voting stock of
the Company.
(d) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K or Schedule 14A (or any successor schedule, form or report or item
therein) that a change in control of the Company has or may have occurred or
will or may occur in the future pursuant to any then-existing contract or
transaction; or
(e) If during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Directors of the Company cease
for any reason to constitute at least a majority thereof, provided, however,
that for purposes of this Section 3(e), each Director who is first elected, or
first nominated for election by the Company's stockholders, by a vote of at
least two thirds of the Directors of the Company (or a committee thereof) then
still in office who were Directors of the Company at the beginning of any such
period will be deemed to have been a Director of the Company at the beginning of
such period.
4. NOTICE OF TERMINATION; DATE OF TERMINATION
------------------------------------------
(a) Any termination of the Executive's employment by the Company or the
Executive shall be communicated by written Notice of Termination to the other
party thereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under the
provision so indicated.
-110-
<PAGE> 4
(b) "Date of Termination" shall mean:
(i) If the Agreement is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day
period),
(ii) If the Executive's employment is terminated pursuant to
Section 10, the date specified in the Notice of Termination,
and
(iii) If the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is given.
5. COMPENSATION OF EXECUTIVE
-------------------------
During the Term of Agreement, the Executive shall be entitled to
receive for the remainder of the Term of Agreement (as extended) an annual base
salary (the "Base Salary"), payable in equal weekly installments, at an annual
rate at least equal to the aggregate annual base salary payable to the Executive
as of the date hereof. The Base Salary may be increased (but may not be
decreased) at any time and from time to time by action of the Board of Directors
of the Company, any committee thereof, or any individual having authority to
take such action, in accordance with the Company's regular practices. Any
increase in the Base Salary shall not serve to limit or reduce any other
obligation of the Company hereunder.
The Executive shall also receive a cash bonus from the Company for any
fiscal year ending after a Change in Control in an amount not less than the
greater of (i) the bonus paid to the Executive with respect to the immediately
preceding fiscal year of the Company and (ii) fifteen percent (15%) of
Executive's Base Salary. Said bonus shall be paid no later than January 31 of
the year following the fiscal year to which it relates.
6. BENEFIT PLANS
-------------
During the Term of Agreement,
(a) The Company agrees to continue in effect any perquisite, benefit or
compensation plan, including, but not limited to, its profit-sharing plan, life
insurance plan, health insurance plan and long-term disability plan in which the
Executive is currently participating (collectively referred to as the "Benefit
Plans"); or to maintain plans providing substantially similar benefits;
(b) The Company agrees not to take any action that would adversely
affect the Executive's participation in, or materially reduce the benefits
under, any of the Benefit Plans or deprive the Executive of any material fringe
benefit currently enjoyed;
- 3 -
<PAGE> 5
(c) The Company agrees to provide the Executive with paid vacation days
during each year during the Term of Agreement and any extensions thereof in
accordance with normal vacation policy (but in no event less than four weeks),
prorated for partial years;
(d) The Company shall pay all dues charged by any business clubs or
associations to which the Executive currently belongs and for which the Company
reimburses the Executive as of the date of execution hereof; and
(e) The Company shall reimburse the Executive for all reasonable
expenses incurred by the Executive for promoting the business of the Company,
including travel and similar expenses, upon submission by Executive of
appropriate documentation therefor.
7. TERMINATION FOR CAUSE
---------------------
(a) The Company may terminate the Executive's employment for Cause. For
the purposes of this Agreement, the Company shall have "Cause" to terminate
employment hereunder only (i) if termination shall have been the result of an
act or acts of dishonesty by the Executive constituting a felony and resulting
or intended to result directly or indirectly in substantial gain or personal
enrichment at the expense of the Company; or (ii) upon the wilful and continued
failure by the Executive substantially to perform his duties with the Company
(other than any such failure resulting from incapacity due to mental or physical
illness) after a demand in writing for substantial performance is delivered by
the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed his duties, and such
failure results in demonstrably material injury to the Company. The Executive's
employment shall in no event be considered to have been terminated by the
Company for Cause if such termination took place as the result of (i) bad
judgment or negligence, or (ii) any act or omission without intent of gaining
therefrom directly or indirectly a profit to which the Executive was not legally
entitled, or (iii) any act or omission believed in good faith to have been in or
not opposed to the interest of the Company, or (iv) any act or omission in
respect of which a determination is made that the Executive met the applicable
standard of conduct prescribed for indemnification or reimbursement or payment
of expenses under either the Regulations of the Company or the laws of the State
of Ohio, in each case as in effect at the time of such act or omission. The
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership of
the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of conduct set forth above in clauses (i)
or (ii) of the first sentence of this paragraph and specifying the particulars
thereof in detail.
(b) If the Executive's employment shall be terminated for Cause, the
Company shall (i) pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
(ii) pay to the Executive the cash value of any
-111-
<PAGE> 6
life insurance policy or arrangement maintained by the Company on the life of
the Executive. The Company shall have no further obligations to the Executive
under this Agreement; provided, however, that if the Executive disputes the
existence of Cause for his termination, the Company shall continue to pay to the
Executive his base salary until the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding and
final arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected). If the resolution of such dispute results in a
determination that the Executive was terminated for Cause, the Executive shall
repay to the Company all base salary paid from the Date of Termination plus
interest at six percent.
8. TERMINATION FOR DEATH OR DISABILITY
-----------------------------------
(a) The Company may terminate this Agreement on account of the
Executive's death, or for "Disability" if the Executive is "Disabled." For
purposes of this Agreement, the Executive shall be considered Disabled only if,
as a result of his incapacity due to physical or mental illness, he shall have
been absent from his duties with the Company on a full-time basis for a period
of one year and a physician selected by him is of the opinion that (i) he is
suffering from "Total Disability" as defined in the Company's profit-sharing
plan, or any successor plan or program and (ii) he will qualify for Social
Security Disability Payment and (iii) within thirty (30) days after written
Notice of Termination is given, he shall not have returned to the full-time
performance of his duties.
(b) If the Company terminates this Agreement on account of the
Executive's death or because the Executive is Disabled, the Company shall pay
to the Executive (or his successors) the amounts, and provide to the Executive
the benefits, specified in Sections 5 and 6 of this Agreement for the remainder
of the Term of Agreement. In addition, upon termination for Disability, the
Company shall pay to the Executive the amount specified in Section 7(b)(ii)
hereof. Upon termination for death, the Company shall pay to the Executive's
estate (or beneficiaries, if applicable) 50% of the amount of any proceeds
received by the Company through any life insurance policy or arrangement
maintained by the Company on the life of the Executive.
9. TERMINATION FOLLOWING RETIREMENT
--------------------------------
(a) This Agreement will terminate upon the Executive's Retirement. For
purposes of this Agreement, "Retirement" shall mean termination of the
Executive's employment with his consent in accordance with the Company's
retirement policy (including early retirement) generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with the Executive's consent with respect to him.
(b) In the event this Agreement terminates following the Executive's
Retirement, the Company shall pay to the Executive (i) his Base Salary accrued
through the Date of Termination, (ii) plus any accrued but unpaid bonuses or
vacation pay, (iii) plus a pro-rata share of his bonus for the year of
termination, (iv) plus any non-forfeiture benefits payable to
-112-
<PAGE> 7
the Executive under any Benefit Plan of the Company, including the amount
specified in Section 7(b)(ii) hereof.
10. TERMINATION OF EMPLOYMENT BY THE EXECUTIVE FOR GOOD REASON
----------------------------------------------------------
(a) The Executive may terminate his employment for Good Reason. For
purposes of this Agreement, Good Reason will exist if any one or more of the
following occur:
(i) Failure by the Company to honor any of its obligations under
Sections 5, 6, or 13; or
(ii) Any purported termination by the Company of the Executive's
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 4 above
and, for purposes of this Agreement, no such purported
termination shall be effective; or
(iii) Failure to elect or reelect or otherwise to maintain the
Executive to the office or the position (or a substantially
equivalent office or position) in the Company that the
Executive held immediately prior to a Change in Control, or
the removal of the Executive as a Director of the Company
(or any successor thereto) if the Executive shall have been
a Director of the Company immediately prior to the Change in
Control; or
(iv) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties
attached to the position with the Company which the
Executive held immediately prior to the Change in Control,
without the prior written consent of the Executive, which is
not remedied within 10 calendar days after receipt by the
Company of written notice from the Executive of such change;
or
(v) A determination by the Executive made in good faith that as
a result of a Change in Control and a change in
circumstances thereafter significantly affecting his
position, including without limitation a change in the scope
of the business or other activities for which he was
responsible immediately prior to a Change in Control, he has
been rendered substantially unable to carry out, has been
substantially hindered in the performance of, or has
suffered a substantial reduction in, any of the authorities,
powers, functions, responsibilities or duties attached to
the position held by the Executive immediately prior to the
Change in Control, which situation is not remedied within 10
calendar days after written notice to the Company from the
Executive of such determination; or
-113-
<PAGE> 8
(vi) The Company shall relocate its principal executive offices,
or require the Executive to have his principal location of
work changed, to any location which is in excess of 25 miles
from the location thereof immediately prior to the Change in
Control or to travel away from his office in the course of
discharging his responsibilities or duties hereunder
significantly more (in terms of either consecutive days or
aggregate days in any calendar year) than was required of
him prior to the Change in Control without, in either case,
his prior written consent.
11. COMPENSATION UPON CERTAIN TERMINATIONS
--------------------------------------
(a) If the Company shall terminate the Executive's employment other
than pursuant to Sections 7, 8, or 9 hereof or if the Executive shall terminate
his employment for Good Reason pursuant to Section 10 hereof, then the Company
shall pay to the Executive in a lump sum on the fifth business day following the
Date of Termination (or, in the case of legal fees referred to in (iii) incurred
after the Date of Termination, within seven days from the receipt of a bill for
such services), the following amounts:
(i) The Executive's Base Salary through the Date of Termination
at the rate in effect at the time Notice of Termination is
given;
(ii) In lieu of any further salary payments for periods
subsequent to the Date of Termination, an amount equal to
the present value (discounted at the rate of six percent) of
three times the sum of (i) Executive's total annual
compensation, including current Base Salary, and (ii) the
most recent annual bonus paid to Executive (or, if higher,
the annual bonus paid to the Executive with respect to the
last fiscal year of the Company ending prior to the Change
in Control);
(iii) All legal fees and expenses incurred as a result of such
termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination, in
seeking to obtain or enforce any right or benefit provided
by this Agreement, or in interpreting this Agreement); and
(iv) The cash value of any life insurance policy or arrangement
maintained by the Company on the life of the Executive.
(b) Unless the Executive is terminated for Cause, the Company shall
maintain in full force and effect, for the Executive's continued benefit for
three (3) years after Date of Termination, all active and retired employee
Benefit Plans and programs or arrangements in which he was entitled to
participate immediately prior to the Date of Termination, provided that
continued participation is possible under the general terms and provisions of
such plans
-114-
<PAGE> 9
and programs. In the event that participation in any such plan or program is
barred, the Company shall arrange to provide him with benefits substantially
similar to those which he is entitled to receive under such plans and programs.
(c) Upon termination of employment for any reason other than for Cause,
any Company car that the Company was providing for use of the Executive at the
time Notice of Termination was given, shall be transferred to the Executive at
no cost with the cost of transfer, if any, and any taxes on transfer to be borne
by the Company.
(d) Upon termination of employment for any reason other than for Cause,
the Company shall allow the Executive, at Company expense, to continue to
utilize the services of an accountant or attorney of his choice for assistance
in enforcing this Agreement and preparation of his tax returns for the year
following termination of employment.
12. PROTECTION OF CONFIDENTIAL INFORMATION; COMPETITION
---------------------------------------------------
The Executive agrees that he will keep all confidential and proprietary
information of the Company or relating to its business confidential, and that he
will not (except with the Company's prior written consent), while in the employ
of the Company or thereafter, disclose any such confidential information to any
person, firm, corporation, association or other entity, other than in
furtherance of his duties hereunder, and then only to those with a "need to
know." The Executive shall not make use of any such confidential information for
his own purposes or for the benefit of any person, firm, corporation,
association or other entity (except the Company) under any circumstances during
or after the term of his employment. The foregoing shall not apply to any
information which is already in the public domain, or is generally disclosed by
the Company or is otherwise in the public domain at the time of disclosure.
The Executive recognizes that because his work for the Company may
bring him into contact with confidential and proprietary information of the
Company, the restrictions of this Section 12 are required for the reasonable
protection of the Company and its investments and for the Company's reliance on
and confidence in the Executive.
During the term of this Agreement and for a period of one year
thereafter, provided that no Change of Control has or shall have occurred, the
Executive shall not engage in any activity which is competitive with the
businesses carried on by the Company.
13. SUCCESSORS, BINDING AGREEMENT
-----------------------------
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession
-115-
<PAGE> 10
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Company in the same amount and on the same terms as would
apply if the Executive terminated his employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount would still be payable hereunder had the Executive continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to his devisee, legatee, or other designee or, if
there be no such designee, to his estate.
14. NOTICE
------
Notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first page of
this Agreement, provided that all notices to the Company shall be directed to
the attention of the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
15. MISCELLANEOUS
-------------
No provisions of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing signed by
The Executive and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Ohio.
16. VALIDITY
--------
The invalidity or unenforceability of any one or more provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
-116-
<PAGE> 11
17. COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
18. ARBITRATION
-----------
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Cleveland, Ohio in
accordance with the rules of the American Arbitration Association then in
effect; provided that all arbitration expenses shall be borne by the Company.
Notwithstanding the pendency of any dispute or controversy concerning
termination or the effects thereof, the Company will continue to pay the
Executive his full compensation in effect immediately before any Notice of
Termination giving rise to the dispute was given and continue him as a
participant in all compensation, benefit and insurance plans in which he was
then participating, until the dispute is finally resolved. Amounts paid under
this paragraph are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement. Judgment may be entered on the arbitrators' award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
19. GROSS-UP FOR FEDERAL EXCISE TAX
-------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
19) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor section or rule thereunder) or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay to the
Executive a payment (a "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes, including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under this Section 19,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm
appointed by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has
-117-
<PAGE> 12
been a Payment, or such earlier time as is requested by the Company. All fees
and expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 19, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a written opinion
that failure to report the Excise Tax on the Executive's applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor section or rule thereunder) at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
20. WITHHOLDING OF TAXES
--------------------
The Company may withhold from any amounts payable under this Agreement
all federal, state, city or other taxes as shall be required pursuant to any law
or government regulation or ruling.
21. LEGAL FEES AND EXPENSES
-----------------------
It is the intent of the Company that the Executive not be required to
incur the legal expenses associated with (i) the interpretation of any provision
in, or obtaining of any right or benefit under, this Agreement or (ii) the
enforcement of his rights under this Agreement by litigation or other legal
action, because the cost and expense thereof would substantially detract from
the benefits intended to be extended to the Executive hereunder. Accordingly,
the Company irrevocably authorizes the Executive from time to time to retain
counsel of his choice, at the expense of the Company as hereafter provided, to
represent the Executive in connection with the interpretation or enforcement of
this Agreement, including the initiation or defense of any litigation or other
legal action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company
-118-
<PAGE> 13
and the Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The Company shall pay or cause to be paid and shall
be solely responsible for any and all attorneys' and related fees and expenses
incurred by the Executive under this Section 21.
22. INDEMNIFICATION
---------------
The Company shall indemnify the Executive against any and all expenses
(including attorneys' fees), judgments, decrees, fines, penalties, and amounts
paid in settlement, actually and reasonably incurred by him ("Expenses"), in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, including all appeals
("Proceedings"), with respect to which the Executive is a party or is threatened
to be made a party, by reason of the fact that the Executive is or was a
director, officer or employee of the Company, unless a court of the State of
Ohio with personal and subject matter jurisdiction determines that it has proven
by clear and convincing evidence that the actions or failure to act upon which
any such Proceedings were predicated were taken or omitted to be taken by the
Executive with a deliberate intent to cause injury to the Company or with
reckless disregard for the best interests of the Company and, with respect to a
criminal action or proceeding, the Executive had reasonable cause to believe
that his conduct was unlawful. Expenses of the Executive incurred in connection
with any Proceeding shall be paid by the Company in advance of final disposition
of the Proceeding upon receipt by the Company of an undertaking by the Executive
to repay such amounts if it shall ultimately be determined that the Executive is
not entitled to indemnity by the Company under this Agreement.
CHEMI-TROL CHEMICAL COMPANY
BY:
--------------------------------
-----------------------------------
Executive
-119-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CHEMI-TROL
CHEMICAL CO. YEAR ENDED DECEMBER 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 112,506
<SECURITIES> 0
<RECEIVABLES> 19,839,874
<ALLOWANCES> 380,000
<INVENTORY> 10,712,677
<CURRENT-ASSETS> 32,110,050
<PP&E> 21,161,344
<DEPRECIATION> 10,509,619
<TOTAL-ASSETS> 47,423,367
<CURRENT-LIABILITIES> 20,958,862
<BONDS> 10,629,946
<COMMON> 4,590,767
0
0
<OTHER-SE> 17,668,471
<TOTAL-LIABILITY-AND-EQUITY> 47,423,367
<SALES> 69,556,888
<TOTAL-REVENUES> 70,452,126
<CGS> 59,744,177
<TOTAL-COSTS> 59,744,177
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 403,218
<INTEREST-EXPENSE> 1,577,650
<INCOME-PRETAX> 2,096,283
<INCOME-TAX> 838,000
<INCOME-CONTINUING> 1,258,283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,258,283
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
