<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________________ to__________________
Commission file number 1-3834
Continental Materials Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-2274391
(State or otherjurisdiction ofincorporation or (I.R.S. Employer
organization Identification No.)
225 West Wacker Drive, Suite 1800 60606
Chicago, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code 312-541-7200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock - $.50 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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
----- -----
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 the Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value (based on March 21, 1995 closing price) of
voting stock held by non-affiliates of registrant: Approximately $8,136,000.
Number of common shares outstanding at March 21, 1995: 1,139,278.
Incorporation by reference: Portions of registrant's definitive proxy
statement for the 1995 Annual meeting of stockholders to be held on May 24, 1995
into Part III of this Form 10-K. (The definitive proxy statement will be filed
with the Securities and Exchange Commission within 120 days after the close of
the fiscal year covered by this Form 10-K.)
Index to Exhibits: on page 35 hereof.
1
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NOTE: References to a "Note" are to the Notes to Consolidated Financial
Statements which are included on pages 15 through 23 of this Annual
Report on Form 10-K.
PART I
Item 1. BUSINESS
Continental Materials Corporation, Inc. and its subsidiaries (collectively
referred to as the "Company") operate primarily in two industry segments, the
Heating and Air Conditioning segment and the Construction Materials segment.
The Heating and Air Conditioning Segment is comprised of Phoenix Manufacturing,
Inc. ("Phoenix") of Phoenix, Arizona and Williams Furnace Co. ("Williams") of
Colton, California. The Construction Materials segment is comprised of Castle
Concrete Company ("Castle") and Transit Mix Concrete Co. ("Transit Mix") both of
Colorado Springs, Colorado.
The Heating and Air Conditioning segment manufactures wall furnaces, console
heaters, evaporative air coolers and fan coil/air handler product lines.
Numerous models with differing heating or cooling capacities as well as exterior
appearances are offered within each line.
The Construction Materials segment is involved in the production and sale of
ready mix concrete and other building materials as well as the exploration,
extraction and sales of limestone, sand and gravel.
In addition to the above operating segments, a General Corporate and Other
classification is utilized covering the general expenses of the corporate office
which provides treasury, insurance and tax services as well as strategic
business planning and general management services.
The Company has a 30% interest in Oracle Ridge Mining Partners ("ORMP"). ORMP
is a general partnership which operates a copper mine near Tucson, Arizona. The
Company is not the managing partner of ORMP and thus its operations are
accounted for on the equity method with the Company's share of ORMP's operations
presented in the other income and expense section of the Company's operating
statements.
Financial information relating to industry segments appears in Note 12 on page
23 of this Form 10-K. Summary financial information on ORMP appears in Note 4
on page 18 and audited financial statements for ORMP are included in Item 8 of
this Form 10-K. See index to item 8 on page 11.
2
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MARKETING, SALES AND SUPPORT
----------------------------
MARKETING
The Heating and Air Conditioning segment markets its products throughout the
United States through plumbing, heating and air conditioning wholesale
distributors as well as direct to some major retail home-centers and other
retail outlets. Phoenix and Williams utilize independent manufacturers
representatives. The Company also employs a small staff of sales personnel.
Sales in this segment are predominantly in the United States and are
concentrated in the Western and Southwestern states. Sales of Williams'
furnaces usually increase in the months of September through January. Sales of
Phoenix' evaporative coolers usually increase in the months of February through
June. In order to sell wall furnaces and evaporative coolers during the "off
season", Williams and Phoenix offer extended payment terms to their customers.
The Construction Materials segment markets its products primarily through its
own direct sales representatives and confines its sales to the Colorado Springs
area. Sales are made to government entities, general and sub-contractors and
individuals. The businesses of Castle and Transit Mix are affected by the
general economic conditions in Colorado Springs (as it relates to construction)
and weather conditions. Revenues usually decline in the winter months as the
pace of construction slows.
During 1994, no customer accounted for 10% or more of the total sales of either
segment.
CUSTOMER SERVICE AND SUPPORT
While the companies in the Heating and Air Conditioning segment do not perform
installation services, they are committed to after-sales service and support of
the products. In addition, Williams holds training sessions at its plant for
distributors, contractors, utility company employees and other potential
customers. The companies in the Construction Materials segment routinely take a
leadership role in formulation of the products to meet the strength requirements
of their customers.
BACKLOG
At December 31, 1994, Williams' order backlog was approximately $900,000
($1,100,000 at January 1, 1994) the majority of which represented orders for
furnaces.
At December 31, 1994, Phoenix had a backlog of approximately $3,000,000
($1,100,000 at January 1, 1994) representing primarily preseason cooler orders.
The above backlogs are all related to the heating and air conditioning segment
and are expected to be filled during the first quarter of 1995.
At December 31, 1994 Transit Mix and Castle had a backlog of approximately
$3,100,000 ($2,600,000 at January 1, 1994) primarily relating to construction
contracts awarded and expected to be filled during the first half of 1995.
Management does not believe that any of the above backlogs represent a trend but
rather are indicative only of the timing of orders received or contracts
awarded.
3
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RESEARCH AND DEVELOPMENT/PATENTS
All companies rely upon, and intend to continue to rely upon, unpatented
proprietary technology and information. In addition, recent research and
development activities in the Heating and Air Conditioning segment has lead to
patent applications related to Phoenix' Power Cleaning System for the
evaporative coolers and the configuration of the heat exchanger for Williams'
furnaces which has increased efficiency above that previously offered by the
industry. The Company believes its interests in its patent applications, as
well as its proprietary knowledge are sufficient for its businesses as currently
conducted.
MANUFACTURING
The Company conducts its manufacturing operations through a number of facilities
as more completely described in Item 2, Properties, below.
Due to the seasonality of its businesses, Williams and Phoenix build inventory
during their "off seasons" in order to have adequate wall furnace and
evaporative cooler inventory to sell during the "season".
In general, raw materials required by the Company can be obtained from various
sources in the quantities desired. The Company has no long-term supply
contracts and does not consider itself dependent on any individual supplier.
Compliance with environmental protection laws and regulations has not had any
material effect upon the Company's capital expenditures, earnings, or
competitive position. Castle and Transit Mix have obtained reclamation bonds in
the aggregate amount of $860,000 and $1,038,000 respectively to cover the
estimated cost of future reclamation on properties currently being mined.
COMPETITIVE CONDITIONS
HEATING AND AIR CONDITIONING - Williams is one of four principal companies
producing wall furnaces and holds a significant share of the wall furnace market
(excluding units sold to the recreational vehicle industry). The wall furnace
market is only a small component of the heating industry. Williams' plant in
Colton, California is located close to the major wall furnace markets and it
covers the remaining market areas from three warehouse locations situated
throughout the country. The sales force consists of Williams' sales personnel
and manufacturers' representatives. The entire heating industry is dominated by
manufacturers (most of which are substantially larger than the Company) selling
diversified lines of heating and air conditioning units directed primarily
toward central heating and cooling systems.
Williams also manufactures a line of gas fired console heaters. Distribution is
similar to wall furnaces with the principal market areas in the South and
Southeast. There are five other manufacturers, none of whom is believed to have
a dominant share of the market.
Williams is a producer of fan coils. Fan coil sales are usually obtained
through a competitive bidding process. This market is dominated by
International Environmental Corp., a subsidiary of LSB Industries, Inc., a
manufacturer of a diversified line of commercial and industrial products. There
are also a number of other companies that produce fan coils. All of the
producers compete on the basis of price and timeliness of delivery.
4
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Phoenix produces evaporative air coolers. This market is dominated by Adobe
Air. There is one other principal competitor plus a number of other small
companies that produce evaporative coolers. All producers of evaporative air
coolers compete aggressively on the basis of price.
CONSTRUCTION MATERIALS - Transit Mix is one of three companies producing ready
mix concrete in the Colorado Springs area. Although Transit Mix holds a
significant share of the market served, the other two competitors compete
aggressively on the basis of price.
There are a number of producers of aggregates, sand and gravel in the marketing
area served by Transit Mix and Castle who compete aggressively on the basis of
price and service.
Metal doors and door frames, rebar, reinforcement and other construction
materials sold in the Colorado Springs metropolitan area are subject to intense
competition. Transit Mix competes aggressively with two larger companies and a
number of small competitors. However, Transit Mix has a slight competitive
advantage in that many of its customers also purchase concrete, sand and
aggregates from Transit Mix and Castle whereas our competitors for these
particular product lines do not offer concrete, sand or aggregates.
EMPLOYEES
The Company employed 552 persons as of December 31, 1994. Employment varies
throughout the year due to the seasonal nature of sales and thus to a lesser
extent, production. A breakdown of the prior three years employment at year end
by segment was:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Heating and Air Conditioning 335 371 516
Construction Materials 203 188 183
Corporate Office 14 14 14
------- ------- -------
Total 552 573 713
------- ------- -------
------- ------- -------
</TABLE>
Factory employees at the Colton, California plant are represented by the
Amalgamated Industrial Workers Union under a contract that expires in June 1997.
Certain drivers, laborers and mechanics at the Colorado Springs facilities are
represented by the Western Conference of Teamsters. The contract expired on
February 28, 1995 and negotiations are ongoing.
The Company considers relations with its employees and with its unions to be
good.
Item 2. PROPERTIES
The heating and air conditioning segment operates out of one owned (Colton,
California) and one leased facility (Phoenix, Arizona). Both manufacturing
facilities utilized by this segment are, in the opinion of management, in good
condition and sufficient for the Company's current needs. Productive capacity
exists at the locations such that the Company could exceed the highest volumes
achieved in prior years or expected in the foreseeable future and maintain
timely delivery.
5
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The construction materials segment operates out of two owned facilities in
Colorado Springs, Colorado. Additionally, this segment owns four mining
properties in four counties in the vicinity of Colorado Springs, Colorado. In
the opinion of management, these four properties contain permitted and minable
reserves sufficient to service sand, rock and gravel requirements for the
foreseeable future.
The corporate office operates out of leased facilities in Chicago, Illinois.
Item 3. LEGAL PROCEEDINGS
See Note 6 on page 19 of this Annual Report on Form 10-K.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 1994.
PART II
Item 5. MARKETING FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Continental Materials Corporation shares are traded on the American Stock
Exchange under the symbol CUO. Market prices for the past two fiscal years are:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C> <C>
1994 Fourth Quarter 13 3/4 10 7/8
Third Quarter 13 7/8 10 7/8
Second Quarter 11 3/8 9 1/8
First Quarter 10 3/8 7 7/8
1993 Fourth Quarter 8 1/2 7 7/8
Third Quarter 9 1/4 8
Second Quarter 8 3/4 7 7/8
First Quarter 9 3/4 6 3/4
</TABLE>
Trading during the two months ended February 28, 1995 ranged from 11 1/8 to
12 3/8.
At December 31, 1994, the Company had approximately 3,400 shareholders of
record.
The Company has never paid a dividend. The Company's policy is to reinvest
earnings from operations, and the Company expects to follow this policy for the
foreseeable future. In addition, the covenants of the Company's unsecured term
loan require prior approval of dividends by the lenders. See Note 5 on page 18.
6
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Item 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA (Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales from continuing operations $75,294 $62,495 $60,982 $58,043 $55,120
------- ------- ------- ------- -------
Net income (loss) from continuing
operations 1,849 1,187 1,201 1,132 (1,035)
Net (loss) income from discontinued
operation (464) 188 (1,064) (534) (116)
Extraordinary item, net -- (1,335) -- -- --
------- ------- ------- ------- -------
Net income (loss) $1,385 $ 40 $ 137 $ 598 $(1,151)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
PER SHARE DATA
Continuing operations $ 1.62 $ 1.02 $ 1.02 $ .96 $ (.88)
Discontinued operation (.41) .16 (.90) (.45) (.10)
Extraordinary item -- (1.15) -- -- --
------- ------- ------- ------- -------
Net income (loss) $ 1.21 $ .03 $ .12 $ .51 (.98)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Average shares outstanding during year 1,140 1,164 1,174 1,174 1,173
FINANCIAL CONDITION
Current ratio 2.0:1 2.2:1 2.5:1 2.5:1 2.6:1
Total assets $48,162 $45,424 $54,916 $55,425 $57,561
Long-term debt, including current
portion 4,923 6,819 16,114 17,950 21,061
Shareholders' equity 26,789 25,404 25,660 25,523 24,924
Ratio of net worth to long-term debt 5.44 3.73 1.59 1.42 1.18
Book value per share $ 23.50 $ 22.28 $ 21.86 $ 21.73 $ 21.23
CASH FLOWS
Net cash provided by (used in):
Operating activities $ 7,191 $ 2,727 $ 4,925 $ 5,132 $ 3,696
Investing activities (1,884) 6,628 (3,182) (1,134) (2,215)
Financing activities (3,596) (9,914) (1,836) (3,112) (1,916)
------- ------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents $ 1,711 $ (559) $ (93) $ 886 $ (435)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
7
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(References to a "Note" are to Notes to Consolidated Financial Statements)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $2,778,000 at year end compared to
$1,067,000 the prior year.
Cash provided from operations in 1994 of $7,191,000 exceeded the $2,727,000
provided in 1993 and the $4,925,000 generated in 1992. The increase in net cash
generated by operating activities in 1994 was mainly due to improved sales
volume and increased levels of accounts payable and accrued expenses. Accounts
payable increased mainly due to the early purchase of raw materials in 1994 for
which 1995 price increases had been announced. The increase in accruals was
primarily due to the timing of payments with a decrease expected during the
first quarter of 1995. The reduction in 1993 from the 1992 level was largely
due to working capital changes.
Net cash used in investing activities was $1,884,000 in 1994 and $3,182,000 in
1992. Net cash of $6,628,000 was provided by investing activities in 1993
primarily as a result of the sale of Imeco, Inc. During 1994, the Company
invested $561,000 in Oracle Ridge Mining Partners, comparable to the amount
invested during 1992 but approximately half of the investment required in 1993.
In addition, during 1993, proceeds of $704,000 were received from the sale of an
equity investment.
Capital expenditures for 1994, 1993 and 1992 were $1,775,000, $3,677,000 and
$2,438,000 respectively. There were no significant commitments for capital
expenditures at the end of 1994. Budgeted capital expenditures for 1995,
exclusive of equipment that may be acquired under operating leases, are
approximately $2,756,000 (primarily routine replacements and upgrades), $450,000
more than planned depreciation. The 1995 expenditures will be funded from
internal sources and available borrowing capacity.
In connection with the sale of Imeco, the Company retained responsibility, if
any, on product liability claims involving Imeco equipment occurring prior to
the June 30, 1993 sale date. The 1994 results were reduced by $726,000,
$426,000 after related tax benefits. This provision is the result of new
developments related to these product liability matters. In March 1995, the
Company settled the suit brought by ConAgra and their insurance carrier. The
amount of the settlement was fully reserved as of December 31, 1994. The
remaining Imeco claims are not expected to have a material effect on future
earnings. See Note 6.
During 1994, cash of $3,596,000 was used in financing activities. The short-
term line of credit was paid off and scheduled long-term debt payments were met.
During 1993, cash of $9,914,000 was used in financing activities. The Company
used cash from the sale of Imeco, $1,700,000 of borrowings under the line of
credit and a portion of the $3,500,000 received from an amendment to the
Company's credit agreement with two banks, to repay $12,795,000 of fixed rate
long-term debt and the related prepayment penalty of $2,023,000. In addition,
the Company acquired 34,000 shares of treasury stock for $296,000 during 1993.
Cash of $1,836,000 was used in 1992 to repay scheduled long-term debt payments.
In February 1995, the Company amended its credit agreement with two banks to
provide $500,000 of additional term debt. The additional debt replaced cash
from available funds that was used to pay off an existing mortgage note in
November 1994. The $12,000,000 unsecured short-term line of credit remains
intact for use in funding seasonal sales programs at Williams Furnace Co. and
Phoenix Manufacturing, Inc. The line is also used for stand-by letters of
credit to insurance carriers in support of deductible amounts under the
Company's insurance program. The interest rates on both the term loan and the
short-term line will be reduced to prime during 1995 as certain 1994
profitability goals, set forth in the credit agreement, were met.
The Company anticipates the primary source of cash flow in 1995 to be from its
operating subsidiaries. This cash flow, supplemented by the line of credit, is
sufficient to cover normal and expected future cash needs, including servicing
debt and planned capital expenditures.
8
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OPERATIONS
1994 VS. 1993
Consolidated net sales from continuing operations increased $12,799,000 (21%).
A majority of the increase ($7,698,000) occurred in the construction materials
segment. Strong economic conditions and mild weather patterns led to high sales
levels throughout the year, including the normally slow winter months. The
heating and air-conditioning segment also realized gains of $5,100,000 mainly
attributable to hot and dry weather patterns in the areas serviced by Phoenix
Manufacturing, Inc.
The continued high level of price competition experienced at all of the
Company's subsidiaries is expected to continue into 1995. During 1994, the
Company experienced some increases in the cost of key raw materials. Selling
prices were increased but the Company was unable to recover all of such cost
increases.
Cost of sales (exclusive of depreciation and depletion) remained consistent at
76% between years. The 1.7% decline in the heating and air-conditioning
segment, due to price competition and the raw material cost increases, was
offset by 1.5% improvement in the construction materials segment due mainly to
increased volume as a relatively large portion of its operating costs and
expenses are fixed in nature.
Selling and administrative expenses rose $1,297,000 (12%) although they declined
as a percentage of net sales from 17% to 16%.
The increase in operating income is mainly due to the increase in net sales.
The Company recorded a loss of $545,000 related to its investment in Oracle
Ridge Mining Partners compared to $1,188,000 in the prior year. The reduction
in the loss is attributed to increased production and higher copper prices as
well as nonrecurring development costs incurred in the prior year. In 1993, the
project was shut down for a three-month period to install equipment and
facilities to increase production and improve copper recovery. Copper prices
increased throughout 1994, beginning around 74 cents per pound in January and
ending at $1.38. Since then, prices have decreased slightly to $1.30 as of the
end of February 1995. During 1994, the partnership entered into a one-year
agreement beginning September 1994 which fixes the price that the partnership
receives for the copper it produces at $1.07 per pound on approximately 50% of
ORMP's production. Copper prices have historically been, and are expected to
remain volatile.
Discussion of the discontinued operation and the prepayment penalty is presented
above under the heading Financial Condition, Liquidity and Capital Resources.
The Company's effective income tax rate on income from continuing operations
(34.2%) reflects federal and state statutory rates adjusted for the effect of
non-deductible expenses and other tax items. The current year was favorably
impacted by a substantially higher percentage depletion allowance. The 1993
rate was favorably influenced by the reversal of certain income tax
contingencies related to matters resolved in favor of the Company. (See Note 10
for the rate reconciliation).
9
<PAGE>
OPERATIONS
1993 VS. 1992
Consolidated net sales from continuing operations increased $1,513,000 (2%).
The net sales of the heating and air-conditioning segment accounted for
virtually all of the gain while the net sales of the construction materials
segment remained strong but static compared to the previous year. Sales at
Williams Furnace Co. increased 12% due to a strengthening in the markets served
and acceptance in the market place of the company's higher efficiency furnaces.
Sales at Phoenix Manufacturing, Inc. declined reflecting cool, wet weather last
spring in the southwestern states.
The Company experienced a high level of price competition at all of its
subsidiaries which the Company expects to continue into 1994. During 1993,
inflation was not a significant factor at any of the operations.
Cost of sales (exclusive of depreciation and depletion) increased marginally due
to higher than normal workers' compensation costs in the construction materials
segment.
Selling and administrative expenses increased $764,000 (8%) due to the increase
in sales and additional costs associated with new product development and
marketing. As a percentage of sales, selling and administrative expense
increased from 16% to 17%.
The decrease in the operating income reflects the higher selling and
administrative cost as well as the marginal increase in cost of sales.
The decrease in interest expense of $98,000 reflects a lower interest rate on
term debt during 1993.
The Company recorded a loss of $1,188,000 related to its investment in Oracle
Ridge Mining Partners. This loss represents the Company's share (30%) of the
loss of the partnership for 1993. The Company began accounting for this
investment on the equity basis in 1993 (see Note 4). The loss is due to mine
development costs, lower than expected mill recoveries and weak copper prices
throughout 1993. The project was shut down from August 2 through the end of
October to install equipment and facilities to improve copper recovery. Copper
prices decreased throughout most of 1993 reaching a low of approximately 72
cents per pound in the fourth quarter. Since then, prices have improved to
approximately 90 cents per pound as of the beginning of March 1994. Copper
prices have historically been, and are expected to remain volatile.
The Company realized a gain of $794,000 from the sale of an equity investment
previously held by Transit Mix Concrete Co.
Discussion of the discontinued operation and the prepayment penalty is presented
above under the heading Financial Condition, Liquidity and Capital Resources.
The Company's 1993 effective income tax rate on income from continuing
operations was favorably influenced by the reversal of certain income tax
contingencies related to matters resolved in favor of the Company (see Note 10
for the rate reconciliation).
10
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
Financial Statements and Schedules of Continental
Materials Corporation and report thereon:
Consolidated statements of operations and
retained earnings for fiscal years
1994, 1993 and 1992 12
Consolidated statements of cash flows
for fiscal years ended 1994, 1993 and 1992 13
Consolidated balance sheets at December 31, 1994
and January 1, 1994 14
Notes to consolidated financial statements 15-23
Independent Auditors' Report 24
Financial Statements and Schedules of Oracle
Ridge Mining Partners and report thereon:
Independent Auditors' Report 25
Balance sheet at December 31, 1994 26
Statement of operations for the fourteen-month
period ended December 31, 1994 27
Statement of partners' deficit for the fourteen-
month period ended December 31, 1994 28
Statement of cash flows for the fourteen-month
period ended December 31, 1994 29
Notes to financial statements 30-33
11
<PAGE>
CONTINENTAL MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For Fiscal Years 1994, 1993 and 1992
(Amounts in thousands, except per share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES $ 75,294 $ 62,495 $ 60,982
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation
and depletion) 57,244 47,648 46,254
Depreciation and depletion 2,311 2,353 2,356
Selling and administrative 11,784 10,487 9,723
---------- ---------- ----------
Operating income 3,955 2,007 2,649
Interest expense (767) (770) (868)
Gain on sale of equity investment -- 794 --
Equity loss from mining partnership (545) (1,188) --
Write-off of terminated acquisition costs -- -- (117)
Other income, net 168 252 160
---------- ---------- ----------
Income from continuing operations
before income taxes 2,811 1,095 1,824
Income tax provision (benefit) 962 (92) 623
---------- ---------- ----------
Net income from continuing operations 1,849 1,187 1,201
Discontinued operation, net of tax:
(Loss) from discontinued operation -- (637) (1,064)
(Loss) gain on sale of
discontinued operation (464) 825 --
---------- ---------- ----------
(Loss) gain from discontinued operation (464) 188 (1,064)
---------- ---------- ----------
Income before extraordinary item 1,385 1,375 137
Extraordinary item, net of tax:
Prepayment penalty on early extinguish-
ment of debt -- (1,335) --
---------- ---------- ----------
Net income 1,385 40 137
Retained earnings, beginning of year 23,752 23,712 23,575
---------- ---------- ----------
Retained earnings, end of year $ 25,137 $ 23,752 $ 23,712
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per share:
Continuing operations $ 1.62 $ 1.02 $ 1.02
Discontinued operation (.41) .16 (.90)
Extraordinary (loss) -- (1.15) --
---------- ---------- ----------
Net income per share $ 1.21 $ .03 $ .12
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares 1,140 1,164 1,174
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
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CONTINENTAL MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS For Fiscal Years 1994, 1993, and 1992
(Amounts in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net income $ 1,385 $ 40 $ 137
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 2,311 2,854 3,358
Deferred income tax benefit (66) (971) (131)
Provision for doubtful accounts 148 79 177
Gain on sale of property and equipment (133) (18) (63)
Gain on sale of equity investment -- (794) --
Gain on sale of discontinued operation -- (1,050) --
Loss on early retirement of debt -- 2,023 --
Equity loss from mining partnership 545 1,188 --
Changes in operating assets and liabilities, net of
effects from sale of subsidiary:
Receivables (1,395) (841) (685)
Inventories (61) 404 872
Prepaid expenses (92) 38 137
Income taxes (145) (374) 671
Accounts payable and accrued expenses 5,037 49 572
Other (343) 100 (120)
---------- ---------- ----------
Net cash provided by operating activities 7,191 2,727` 4,925
---------- ---------- ----------
Investing activities:
Capital expenditures (1,775) (3,677) (2,438)
Investment in mining partnership (561) (1,194) (567)
Return of investment (equity investment) in
environmental managment venture 250 -- (250)
Proceeds from sale of property and equipment 202 45 73
Proceeds from sale of equity investment -- 704 --
Proceeds from sale of discontinued operation -- 10,750 --
---------- ---------- ----------
Net cash (used in) provided by investing activities (1,884) 6,628 (3,182)
---------- ---------- ----------
Financing activities:
(Repayment) borrowings under revolving credit facility (1,700) 1,700 --
Long-term borrowings -- 3,500 --
Repayment of long-term debt (1,896) (12,795) (1,836)
Prepayment penalty -- (2,023) --
Payments to acquire treasury stock -- (296) --
---------- ---------- ----------
Net cash used in financing activities (3,596) (9,914) (1,836)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 1,711 (559) (93)
Cash and cash equivalents:
Beginning of year 1,067 1,626 1,719
---------- ---------- ----------
End of year $ 2,778 $ 1,067 $ 1,626
---------- ---------- ----------
---------- ---------- ----------
Supplemental disclosures of cash flow items:
Cash paid during the year for:
Interest $ 773 $ 1,335 $ 1,877
Income taxes 916 546 287
</TABLE>
Supplemental Schedule of non-cash investing and financing activities:
A portion of the proceeds from the sale of equity investment was in the form of
preferred stock valued at $90.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Continental Materials Corporation
Consolidated Balance Sheets December 31 and January 1, 1994
(Amounts in thousands except share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1,
1994 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,778 $ 1,067
Receivables less allowance of $248 and $139 11,376 10,129
Inventories 16,497 16,435
Prepaid expenses 1,505 1,291
------------ ------------
Total current assets 32,156 28,922
------------ ------------
Property, plant and equipment:
Land and improvements 1,713 1,713
Buildings and improvements 7,731 7,685
Machinery and equipment 38,617 37,609
Mining properties 2,329 2,329
Less accumulated depreciation and depletion (36,664) (35,007)
------------ ------------
13,726 14,329
------------ ------------
Other assets:
Investment in mining partnership 1,539 1,523
Other 741 650
------------ ------------
2,280 2,173
------------ ------------
$ 48,162 $ 45,424
------------ ------------
------------ ------------
LIABILITIES
Current liabilities:
Bank loan payable $ -- $ 1,700
Current portion of long-term debt 1,411 1,896
Accounts payable 7,017 4,747
Income taxes 10 155
Accrued expenses:
Compensation 1,836 1,219
Reserve for self-insured losses 3,278 2,077
Profit sharing 1,146 673
Other 1,433 957
------------ ------------
Total current liabilities 16,131 13,424
------------ ------------
Long-term debt 3,512 4,923
------------ ------------
Commitments and contingencies (Notes 6 and 8)
------------ ------------
Deferred income taxes 1,730 1,673
------------ ------------
SHAREHOLDERS' EQUITY
Common shares, $.50 par value; authorized
3,000,000 shares; issued 1,326,588 shares 663 663
Capital in excess of par value 3,484 3,484
Retained earnings 25,137 23,752
Treasury shares (2,495) (2,495)
------------ ------------
26,789 25,404
------------ ------------
$ 48,162 $ 45,424
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include Continental Materials Corporation
and all of its subsidiaries (the "Company"). Beginning in 1993, the equity
method of accounting is used for the Company's 30% interest in Oracle Ridge
Mining Partners. Prior to 1993, this investment was accounted for on the cost
basis.
Certain prior years' amounts have been reclassified to conform with the current
presentation.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined using
the last-in, first-out (LIFO) method for approximately 88% of total inventories
at December 31, 1994 (87% at January 1, 1994). The cost of all other inventory
is determined by the first-in, first-out (FIFO) method.
PROPERTY AND DEPRECIATION
Property, plant and equipment are carried at cost. Depreciation is provided
over the estimated useful lives of the related assets using the straight-line
method as follows:
Buildings . . . . . . . . . 10 to 31 years
Leasehold improvements. . . Terms of leases
Machinery and equipment . . 3 to 10 years
The cost of property sold or retired and the related accumulated depreciation
are removed from the accounts and the resulting gain or loss is reflected in
other income. Maintenance and repairs are charged to expense as incurred.
Major renewals and betterments are capitalized and depreciated over their useful
lives.
RETIREMENT PLANS
The Company and certain subsidiaries have various contributory and
noncontributory defined contribution profit sharing retirement plans for
specific employees. Costs under the plans are charged to operations as
incurred. The plans are funded currently with the exception of the executive
deferred compensation plan and the supplemental profit sharing plan.
RESERVE FOR SELF-INSURED LOSSES
The Company's risk management program provides for certain levels of loss
retention for workers' compensation, automobile liability and general and
product liability claims. The provision for self-insured losses is recorded
based on the Company's estimate of the liability for claims incurred in
accordance with the requirements of Statement of Financial Accounting Standards
No. 5, "Accounting for Contingencies."
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
15
<PAGE>
INCOME TAXES
Income taxes are reported consistent with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Deferred taxes reflect the
future tax consequences associated with the differences between financial
accounting and tax bases of assets and liabilities.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of trade receivables and temporary cash
investments. The Company invests its excess cash in commercial paper of
companies with strong credit ratings. These securities typically mature within
30 days. The Company has not experienced any losses on these investments.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company maintains reserves for potential
credit losses and such losses have been within management's expectations. See
Note 12 for a description of the Company's customer base and geographical
location by segment.
FISCAL YEAR END
In 1993, the Company changed its fiscal year end from the Friday to the Saturday
nearest December 31. The effect of the change on the 1993 financial statements
was immaterial. Fiscal 1994, 1993 and 1992 each consist of 52 weeks.
2. DISCONTINUED OPERATION
In June 1993, the Company sold its Imeco, Inc. ("Imeco") subsidiary for a cash
payment of $10,750,000. Net assets at the sale date consisted primarily of
receivables of $1,909,000, inventories of $1,397,000 and payables of $1,380,000
as well as non-current assets of net property, plant and equipment of $3,204,000
and net intangibles of $3,771,000.
The sale resulted in a pre-tax gain of $1,050,000 ($825,000 after-tax or $0.71
per share). This gain is net of an accrual, recorded in the fourth quarter of
1993, for management's best estimate of possible costs to be incurred related to
product liability suits retained by the Company. During the fourth quarter of
1994, the Company re-evaluated the accrual and, based on updated information,
recorded an additional $726,000 ($464,000 after-tax or $0.41 per share). See
Note 6.
The results of Imeco have been reported separately as a component of
discontinued operations in the Consolidated Statements of Operations and
Retained Earnings. Net sales of Imeco were $7,513,000 and $18,187,000 for the
six months ended June 30, 1993 and fiscal year 1992, respectively.
16
<PAGE>
3. INVENTORIES
Inventories consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, January 1,
1994 1994
------------- -------------
<S> <C> <C>
Finished goods $ 8,882 $ 9,521
Work in process 1,208 2,802
Raw materials
and supplies 5,407 5,112
------------- -------------
$16,497 $16,435
------------- -------------
------------- -------------
</TABLE>
If inventories valued on the LIFO basis were valued at current costs,
inventories would be higher as follows: 1994--$2,716,000 1993--$2,456,000; and
1992--$2,643,000.
4. INVESTMENT IN MINING PARTNERSHIP
The Company has a 30% ownership interest in Oracle Ridge Mining Partners. ORMP
is a general partnership which operates a copper mine primarily situated in Pima
County, Arizona. The Company accounted for its investment in ORMP on the cost
basis through the end of 1992. In late 1992, the partners of ORMP purchased the
obligations owed by the partnership to a bank that had provided a majority of
the funding for the redevelopment and initial operating stages of the project.
Since the end of 1992, the partners have directly provided all of the financing
needs of ORMP. Consequently, beginning in 1993, the Company changed its
accounting for the investment in ORMP to the equity method.
The Company's share of the losses from ORMP in 1994 and 1993 was $545,000 and
$1,188,000, respectively. The Company made cash advances of $561,000 and
$1,194,000 to ORMP during 1994 and 1993, respectively.
The realization of this investment is contingent upon the successful operation
of the Oracle Ridge mine.
17
<PAGE>
The Company's interest in the assets, liabilities, and results of operations of
Oracle Ridge Mining Partners as of and for the years ended December 31, 1994 and
1993 is summarized as follows (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Current assets $ 1,300 $ 797
Non-current assets 8,259 8,422
Current liabilities (2,065) (1,842)
Equity and advances of other joint venturer (5,350) (5,196)
---------- ----------
Interest in net assets 2,144 2,181
Excess of interest in net assets over
carrying value of investment (605) (658)
---------- ----------
Investment at December 31 $ 1,539 $ 1,523
---------- ----------
---------- ----------
Net sales $ 5,953 $ 3,065
---------- ----------
---------- ----------
Gross profit $ (846) $(3,267)
---------- ----------
---------- ----------
Net loss $(1,973) $(4,009)
---------- ----------
---------- ----------
Share of loss reflected in Company's
Statement of Operations $ (545) $(1,188)
---------- ----------
---------- ----------
</TABLE>
5. LONG-TERM DEBT
Long-term debt consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
December 31, January 1,
1994 1994
------------- -------------
<S> <C> <C>
Unsecured term loan $ 4,900 $ 6,300
Mortgage note -- 486
Other 23 33
------------- -------------
4,923 6,819
Less current portion 1,411 1,896
------------- -------------
$ 3,512 $ 4,923
------------- -------------
------------- -------------
</TABLE>
The unsecured term loan is payable to two banks in semi-annual installments of
$700,000 with final principal payment of all then unpaid principal due on April
20, 1996. The loan bears interest at prime plus 3/4% (prime was 8.5% at December
31, 1994).
The Company is required by the unsecured term loan to maintain certain levels of
consolidated tangible net worth, to attain certain levels of cash flow (as
defined) on an annual basis, and to maintain certain ratios including
consolidated debt to consolidated tangible net worth. Additional borrowing,
acquisition of stock of other companies, purchase of treasury shares and payment
of cash dividends are either limited or require prior approval by the lenders.
18
<PAGE>
Aggregate long-term debt matures as follows (amounts in thousands):
<TABLE>
<S> <C>
1995 $1,411
1996 3,512
--------
$4,923
--------
</TABLE>
During 1994, the Company had a $12,000,000 unsecured line of credit ($9,000,000
in 1993) with two banks to be used for short-term cash needs and standby letters
of credit. Interest was charged at the rate of prime plus 1/4% on cash
borrowings. The weighted average interest rate was 7.2% for fiscal 1994 and
6.3% for fiscal 1993. There was no outstanding balance at December 31, 1994.
The outstanding balance at January 1, 1994 was $1,700,000.
At December 31, 1994, the Company had letters of credit outstanding totalling
approximately $4,429,000 which primarily guarantee various insurance activities.
In February 1995, the Company amended its credit agreement with two banks to
provide an additional $500,000 of term debt. Interest rates on both the term
debt and the short-term line will be reduced to prime during 1995 as certain
1994 profitability goals, as set forth in the credit agreement, were met.
6. COMMITMENTS AND CONTINGENCIES
As discussed in Note 2, the Company retained the responsibility, if any, related
to incidents involving Imeco products occurring prior to June 30, 1993. During
1992 ConAgra, Inc. d/b/a Armour Food Company and its insurance carrier,
Arkwright Mutual Insurance Company, each filed suit against Imeco and Central
Ice Machine Company in the District Court of Douglas County, Nebraska. In March
1995, the Company settled the suit. The amount of the settlement was fully
reserved as of December 31, 1994. Imeco was also named as one of the defendants
in a product liability matter in which an individual was seriously injured while
servicing an evaporative condensor unit manufactured by Imeco. No amount of
damages has yet been stated. For the period involved, the Company maintained an
aggregate deductible amount of $1,000,000 pertaining to product liability claims
and a $10,000,000 umbrella policy for losses in excess of $1,000,000. The
Company is vigorously defending the claim. Although this proceeding is not
expected to have a material effect on financial condition, a negative resolution
of this matter could have a material effect on quarterly or annual operating
results.
The Company is also involved in other litigation matters related to its
business. In the Company's opinion, none of these proceedings, when concluded,
will have a material adverse effect on the Company's results of operations or
financial position.
7. SHAREHOLDERS' EQUITY
Four hundred thousand shares of preferred stock ($.50 par value) are authorized
and unissued.
There was no treasury shares activity during either 1994 or 1992. Activity for
1993 was as follows (dollars in thousands):
<TABLE>
<CAPTION>
Number
of
shares Cost
------------ ------------
<S> <C> <C>
Balance at January 1, 1993 152,310 $2,199
Purchase of treasury shares 34,000 296
------------ ------------
Balance at January 1
and December 31, 1994 186,310 $2,495
------------ ------------
------------ ------------
</TABLE>
A Stock Option Plan (the "Plan") provides for grants of options and option
prices established by the Compensation Committee of the Board of Directors.
Options are exercisable for a period of five years from the date of grant. The
Company has reserved 180,000 shares for distribution under the Plan. No options
are outstanding as of December 31, 1994.
19
<PAGE>
8. RENTAL EXPENSE, LEASES AND COMMITMENTS
The Company leases certain of its facilities and equipment and is required to
pay the related taxes, insurance and certain other expenses. Rental expense was
$1,694,000, $1,964,000 and $1,781,000 for 1994, 1993 and 1992, respectively.
Future minimum rental commitments under non-cancelable operating leases for 1995
and thereafter are as follows: 1995--$1,459,000; 1996--$1,284,000; 1997--
$788,000; 1998--$737,000; 1999--$617,000; and thereafter--$1,091,000.
The Company also receives annual rental income of $145,000 from a building it
owns. The related lease expires in January 2003 and contains renewal options.
9. RETIREMENT PLANS
Retirement plan expenses charged to operations were $1,165,000, $745,000 and
$947,000 in 1994, 1993 and 1992, respectively.
10. INCOME TAXES
The provision (benefit) for income taxes is summarized as follows (amounts in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Federal:Current $ 785 $ 121 $ 392
Deferred (131) (842) (248)
State: Current 61 25 10
Deferred (15) (154) (29)
---------- ---------- ----------
$ 700 $ (850) $ 125
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The provision (benefit) for income taxes has been allocated as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Continuing operations $ 962 $ (92) $ 623
Discontinued operations (262) (70) (498)
Extraordinary item -- (688) --
---------- ---------- ----------
$ 700 $ (850) $ 125
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The difference between the tax rate on income from continuing operations for
financial statement purposes and the federal statutory tax rate was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0%
Percentage depletion (5.1) (.7) (1.3)
State income taxes, net of federal benefit 1.0 (12.7) (.7)
Non-deductible expenses .5 .6 .3
Reduction of tax contingency recorded
in the fourth quarter -- (27.9) --
Other 3.8 (1.7) 1.9
---------- ---------- ----------
34.2% (8.4)% 34.2%
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
20
<PAGE>
For financial statement purposes, deferred tax assets and liabilities are
recorded at a blend of the current statutory federal and states' tax rates --
38%. The principal gross temporary differences that give rise to deferred taxes
are as follows (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Reserves for self-insured losses $2,217 $1,645
Deferred compensation 916 763
Asset valuation reserves 494 641
Other 54 148
-------- --------
Total deferred tax assets $3,681 $3,197
-------- --------
-------- --------
Depreciation $3,420 $3,336
Investment in mining partnership 1,961 1,791
Other -- 3
-------- --------
Total deferred tax liabilities $5,381 $5,130
-------- --------
-------- --------
</TABLE>
21
<PAGE>
11. UNAUDITED QUARTERLY FINANCIAL DATA
The following table provides summarized unaudited quarterly financial data for
1994 and 1993 (amounts in thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Net sales $15,260 $19,265 $19,630 $21,139
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit $ 2,354 $ 3,639 $ 4,572 $ 5,333
-------- -------- -------- --------
-------- -------- -------- --------
Depreciation and depletion $ 567 $ 568 $ 570 $ 606
-------- -------- -------- --------
-------- -------- -------- --------
Net (loss) income:
Continuing operations $ (558) $ 392 $ 763 $ 1,252
Discontinued operations -- -- -- (464)
-------- -------- -------- --------
$ (558) $ 392 $ 763 $ 788
-------- -------- -------- --------
-------- -------- -------- --------
Net (loss) income per share:
Continuing operations $ (.49) $ .34 $ .67 $ 1.10
Discontinued operations -- -- -- (.41)
-------- -------- -------- --------
$ (.49) $ .34 $ .67 $ .69
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
1993
Net sales $12,852 $17,413 $15,951 $16,289
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit $ 1,551 $ 2,860 $ 3,962 $ 4,656
-------- -------- -------- --------
-------- -------- -------- --------
Depreciation and depletion $ 543 $ 584 $ 562 $ 664
-------- -------- -------- --------
-------- -------- -------- --------
Net (loss) income:
Continuing operations $ (451) $ (328) $ 503 $ 1,463
Discontinued operations (238) 845 (34) (385)
Extraordinary item -- (1,335) -- --
-------- -------- -------- --------
$ (689) $ (818) $ 469 $ 1,078
-------- -------- -------- --------
-------- -------- -------- --------
Net (loss) income per share:
Continuing operations $ (.39) $ (.28) $ .43 $ 1.28
Discontinued operations (.20) .72 (.03) (.34)
Extraordinary item -- (1.14) -- --
-------- -------- -------- --------
$ (.59) $ (.70) $ .40 $ .94
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the total for the year.
22
<PAGE>
12. INDUSTRY SEGMENT INFORMATION
The Heating and Air Conditioning segment produces and sells heating and cooling
equipment which is sold primarily to distributors and retail outlets. Sales are
nationwide, but are concentrated in the Southwestern U.S. The Construction
Materials segment is involved in the production and sale of concrete and other
building materials and the exploration, extraction and sale of limestone, sand
and gravel. Sales of this segment are confined to the Colorado Springs area.
Operating profit is determined by deducting operating expenses from all
revenues. In computing operating profit, none of the following has been added
or deducted: unallocated corporate expenses, interest, other income, income
taxes and unusual items.
General corporate assets are principally cash, accounts receivable and leasehold
improvements.
No customer accounts for 10% or more of consolidated sales.
The industry segment information for fiscal years 1994, 1993 and 1992 is as
follows (amounts in thousands):
<TABLE>
<CAPTION>
1994
----
Depreci-
Identifi- ation and Capital
Net Operating able Deple- Expendi-
Sales Income Assets tion tures
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Heating and air condi-
tioning $ 43,271 $ 3,718 $ 27,551 $ 1,087 $ 533
Construction materials 31,878 2,645 18,635 1,183 1,211
General corporate
and other 145 (2,408) 1,976 41 31
---------- ---------- ---------- ---------- ----------
$ 75,294 $ 3,955 $ 48,162 $ 2,311 $ 1,775
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<CAPTION>
1993
----
Heating and air condi-
tioning $ 38,171 $ 3,025 $ 26,197 $ 1,120 $ 1,027
Construction materials 24,180 1,415 18,300 1,173 2,650
General corporate
and other 144 (2,433) 927 60 --
---------- ---------- ---------- ---------- ----------
$ 62,495 $ 2,007 $ 45,424 $ 2,353 $ 3,677
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<CAPTION>
1992
----
Heating and air condi-
tioning $ 36,658 $ 2,893 $ 37,272 $ 1,182 $ 757
Construction materials 24,194 2,096 14,975 1,121 1,630
General corporate
and other 130 (2,340) 2,669 53 51
---------- ---------- ---------- ---------- ----------
$ 60,982 $ 2,649` $ 54,916 $ 2,356 $ 2,438
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of Continental Materials Corporation
We have audited the accompanying consolidated balance sheets of Continental
Materials Corporation and Subsidiaries as of December 31 and January 1, 1994,
and the related consolidated statements of operations and retained earnings and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Continental
Materials Corporation and Subsidiaries as of December 31 and January 1, 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 10, 1995
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
Oracle Ridge Mining Partners:
We have audited the accompanying balance sheet of Oracle Ridge Mining Partners
(the Partnership) as of December 31, 1994, and the related statements of
operations, partners' deficit, and cash flows for the fourteen month period then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1994 and
the results of its operations and its cash flows for the fourteen month period
then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 1 to the
financial statements, the Partnership's losses from operations and partners'
capital deficit raise substantial doubt about the Partnership's ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE LLP
Tucson, Arizona
March 3, 1995
25
<PAGE>
ORACLE RIDGE MINING PARTNERS
BALANCE SHEET
DECEMBER 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 96,754
Accounts receivable 793,301
Inventories (Note 3) 410,102
------------
Total current assets 1,300,157
------------
PROPERTY AND MINERAL INTERESTS (Notes 4 and 10):
Plant, equipment and buildings 8,414,321
Mineral property and claims 954,185
Deferred development costs 3,459,470
------------
12,827,976
Less accumulated depreciation, depletion and amortization 4,630,290
------------
Property and mineral interests - net 8,197,686
------------
OTHER ASSETS (Note 9) 47,875
------------
TOTAL $ 9,545,718
------------
------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,075,500
Accrued payroll taxes 315,645
Accrued property taxes 294,826
Accrued use tax 133,649
Installment purchase liability (Note 10) 148,746
Due to Santa Catalina Mining Corp. (Note 11) 96,755
------------
Total current liabilities 2,065,121
------------
DEBT DUE TO PARTNERS:
Subordinated debt due to partners (Note 7) 7,491,745
Senior debt - Union (Note 5) 4,760,978
Senior debt - Continental (Note 5) 2,040,418
Union debt (Note 6) 348,492
------------
Total debt due to partners 14,641,633
------------
COMMITMENT AND CONTINGENCIES (Notes 5 and 9)
PARTNERS' DEFICIT (7,161,036)
------------
TOTAL $ 9,545,718
------------
------------
</TABLE>
See notes to financial statements.
26
<PAGE>
ORACLE RIDGE MINING PARTNERS
STATEMENT OF OPERATIONS
FOR THE FOURTEEN MONTH PERIOD ENDED DECEMBER 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUES - Net value of concentrate (Note 8) $ 6,586,717
------------
OPERATING COSTS AND EXPENSES:
Production costs 6,285,941
General and administrative 999,070
Property and other taxes 264,651
Depreciation, depletion and amortization 1,211,608
Loss on equipment disposals 19,227
Interest expense 221,878
------------
Total operating costs and expenses 9,002,375
------------
NET LOSS $ 2,415,658
------------
------------
</TABLE>
See notes to financial statements.
27
<PAGE>
ORACLE RIDGE MINING PARTNERS
STATEMENT OF PARTNERS' DEFICIT
FOR THE FOURTEEN MONTH PERIOD ENDED DECEMBER 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNION CONTINENTAL
COPPER, CATALINA,
INC. INC. TOTAL
<S> <C> <C> <C>
PARTNERS' DEFICIT, NOVEMBER 1, 1993 $(3,321,765) $(1,423,613) $(4,745,378)
Net loss (1,690,961) (724,697) (2,415,658)
------------ ------------ ------------
PARTNERS' DEFICIT, DECEMBER 31, 1994 $(5,012,726) $(2,148,310) $(7,161,036)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to financial statements.
28
<PAGE>
ORACLE RIDGE MINING PARTNERS
STATEMENT OF CASH FLOWS
FOR THE FOURTEEN MONTH PERIOD ENDED DECEMBER 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES:
Net Loss $(2,415,658)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion, and amortization 1,211,608
Loss on equipment disposals 19,227
Changes in assets and liabilities:
Accounts receivable (792,301)
Inventories (222,522)
Other assets 67,233
Accounts payable and other accrued liabilities 438,939
Due to Santa Catalina Mining Corp. 91,818
------------
Net cash used in operating activities (1,601,656)
------------
INVESTING ACTIVITIES:
Purchases of plant, equipment and buildings (578,992)
Additions to deferred development costs (498,166)
------------
Net cash used in investing activities (1,077,158)
------------
FINANCING ACTIVITIES:
Subordinated debt due to partners 2,717,245
------------
Net cash provided by financing activities 2,717,245
------------
NET INCREASE IN CASH 38,431
CASH, NOVEMBER 1, 1993 58,323
------------
CASH, DECEMBER 31, 1994 $ 96,754
------------
------------
SUPPLEMENTAL CASH FLOW INFORMATION - Interest paid $ 179,160
------------
------------
</TABLE>
NON CASH INVESTING AND FINANCING ACTIVITIES:
The Partnership acquired $149,000 of equipment by an installment purchase.
See notes to financial statements.
29
<PAGE>
ORACLE RIDGE MINING PARTNERS
NOTES TO FINANCIAL STATEMENTS
FOR FOURTEEN MONTH PERIOD ENDED DECEMBER 31, 1994
-------------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION - Oracle Ridge Mining Partners (the Partnership) is a general
partnership formed under the Arizona Uniform Partnership Act on May 24,
1977 pursuant to a partnership agreement between Union Copper, Inc. (a
Maryland corporation) (Union) and Continental Catalina, Inc. (an Arizona
corporation) (Continental).
Union is a wholly-owned subsidiary of Santa Catalina Mining Corp. (formerly
known as South Atlantic Ventures Ltd.) (a Canadian corporation).
Continental is a wholly-owned subsidiary of Continental Copper, Inc. (an
Arizona corporation) which in turn is a wholly-owned subsidiary of
Continental Materials Corporation (a Delaware corporation).
The Partnership has a copper mining property with an underground mine and
adjacent crushing and grinding equipment situated in Pima County, Arizona
which commenced commercial production in 1991. Smelting is performed by an
unrelated third party at another location.
The Fifth Amended and Restated Partnership Agreement dated October 1, 1994
provides, among other things, the following:
a. Union shall be the managing partner of the project.
b. Profits and losses shall generally be allocated 70% to Union and 30%
to Continental. Certain types of gains or losses may be subject to an
alternative allocation.
BASIS OF PRESENTATION - The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Partnership
has incurred a loss from operations of $2,415,658 for the fourteen month period
ended December 31, 1994, and, as of December 31, 1994, has a partners' capital
deficit of $7,161,036 and a net working capital deficiency of $764,964 which may
indicate that the Partnership will be unable to continue as a going concern for
a reasonable period of time. If the Partnership is not able to generate
sufficient levels of cash flow from operations, additional financial support
will be required from the partners or from other sources to pay its obligations
as they come due. Management believes that it can continue to improve the
efficiency and the output of the mining property to the extent necessary to
attain profitable operations. The ability of the Partnership to ultimately
attain profitable operations is also dependent upon the market price for copper.
The financial statements do not include any adjustments relating to the
recoverability of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Partnership be unable to continue
as a going concern.
30
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
PLANT, EQUIPMENT AND BUILDINGS are carried at cost less accumulated
depreciation. Depreciation is provided on the straight-line basis over
estimated useful lives which range from four to fifteen years.
INVENTORIES - Inventories of concentrate and supplies are stated at the
lower of average cost or estimated market value.
MINERAL PROPERTY AND CLAIMS are carried at cost, reflecting costs incurred
in connection with the acquisition of the properties, less depletion and
write-downs for recognized impairments in value. The carrying value of the
mineral property and claims will be charged to operations of the
Partnership over future years by means of depletion charges computed on the
basis of actual ore production and estimated recoverable ore reserves.
DEFERRED DEVELOPMENT COSTS are carried at cost reflecting all mine
development costs incurred since the recommencement of development in 1989,
including an allocable portion of depreciation, interest and general and
administrative expenses. Since the commencement of production in March,
1991, only direct mine development expenditures have been deferred. Such
costs will be charged to operations in the same manner as mineral property
and claims.
REVENUE RECOGNITION - Revenue is recognized when product is delivered in
satisfaction of sales agreements and title passes to the buyer. Final
revenue amounts are adjusted based on the results of the final assays of
the copper concentrate approximately 60 to 90 days after shipment.
INCOME TAXES - Each partner reflects its share of taxable income or loss in
its tax return and no income taxes are recorded in the financial statements
of the Partnership.
3. INVENTORIES
Inventories consisted of the following at December 31, 1994:
<TABLE>
<S> <C>
Copper concentrate $ 135,000
Warehouse supplies and stores 206,079
Other - reagents, explosives 69,023
------------
$ 410,102
------------
------------
</TABLE>
31
<PAGE>
4. PROPERTY AND MINERAL INTERESTS
Plant, equipment and buildings consisted of the following at December 31,
1994:
<TABLE>
<S> <C>
Crushing and processing plant $ 3,935,880
Underground equipment 2,068,442
Mining and service equipment 1,057,125
Tailing pond 665,377
Vehicles 117,651
Buildings 386,546
Office equipment 153,147
Road improvements 30,153
------------
8,414,321
Less accumulated depreciation (3,730,253)
------------
Net plant, equipment and buildings $4,684,068
------------
------------
</TABLE>
Depreciation expense for the fourteen month period ended December 31, 1994
totaled $874,513.
Mineral property and claims and deferred developments costs consisted of the
following at December 31, 1994:
<TABLE>
<S> <C>
Mineral property and claims $ 954,185
Deferred development costs 3,459,470
------------
4,413,655
Less accumulated depletion and amortization (900,037)
------------
Net mineral property and claims and deferred development costs $3,513,618
----------
----------
</TABLE>
Depletion and amortization expense for the fourteen month period ended
December 31, 1994 totaled $337,095.
5. SENIOR DEBT
The Partnership owes Union and Continental $4,760,978 and $2,040,418,
respectively, as non-interest bearing senior debt with no defined maturity
date. Such debt is collateralized by substantially all of the assets of the
Partnership.
6. UNION DEBT
As of December 31, 1994, the Partnership was indebted to Union in the amount
of $348,492. The loan bears interest at the prime rate plus 2% and does not
carry a defined maturity date. Interest is waived for periods in which the
Partnership incurs a net loss before interest expense for this debt.
Interest has been waived by Union for the fourteen months ended December 31,
1994. This debt is subordinated to the Senior Debt.
32
<PAGE>
7. SUBORDINATED DEBT DUE TO PARTNERS
As of December 31, 1994, the Partnership had subordinated debt due to the
partners of $5,244,011 to Union and $2,247,734 to Continental. The
subordinated debt bears interest at the prime rate plus 2%. Interest is
waived for periods in which the Partnership incurs a net loss before interest
expense for this debt. Interest has been waived by Union and Continental for
the fourteen months ended December 31, 1994. The debt is subordinated to the
Senior Debt (Note 5) and the Union Debt (Note 6) and does not carry a
defined maturity date.
8. MAJOR CUSTOMER AND FIXED PRICE AGREEMENT
The Partnership sells all of its concentrate under a sales agreement to a
single unrelated customer. Under the terms of an amendment to the sales
agreement, the first 160 metric tons of copper per month are sold at a fixed
price of $1.07 per pound. If the Partnership does not deliver 160 metric
tons, in a given month, the shortfall is added to the next months base
requirement of 160 metric tons on a cumulative basis. Monthly sales in
excess of 160 metric tons are sold at a computed average market price. The
Partnership sold 3,878 metric tons under this agreement for the fourteen
months ended December 31, 1994. The market price per pound of copper was
$1.43 at December 31, 1994. The fixed price agreement expires August 30,
1995 and the sales agreement expires December 31, 1995.
9. COMMITMENT
Under an arrangement with the State of Arizona, the Partnership has provided
a $45,000 bond to be used for reclamation purposes. In addition, the
agreement requires that for each ton of ore mined an additional $0.05 will be
provided (up to a total of $99,000) for reclamation. Management believes
that the amounts provided under this agreement will be sufficient to pay for
all reclamation costs.
10.INSTALLMENT PURCHASE
In 1994, the Partnership entered into agreements to purchase two pieces of
equipment on an installment basis. At December 31, 1994, the remaining
liability related to the purchases was $148,746, all due in 1995. The
installment agreements are collateralized by the related items of equipment.
11.RELATED PARTY TRANSACTIONS
Related party transactions are disclosed throughout the financial statements.
Additional related party transactions are as follows for the fourteen month
period ended December 31, 1994:
<TABLE>
<S> <C>
Management fees to Santa Catalina Mining Corp.
for January, February, May, November and December 1994 $ 60,000
Reimbursement of expenses incurred by Santa Catalina Mining Corp.
on behalf of the Partnership $ 36,755
</TABLE>
Santa Catalina Mining Corp. is entitled to a management fee equal to
$12,000 per month in connection with the performance of its duties as
managing partner of the partnership. However, the managing partner shall
not be entitled to such fee in the event net operating income for any given
month, calculated on an accrual basis, is less than $15,000.
33
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no Form 8-K filed within the 24 months prior to the date of the
most recent financial statements reporting a change of accountants and/or
reporting a disagreement on any matter of accounting principle or financial
statement disclosure.
PART III
Part III has been omitted from this 10-K Report since Registrant will file, not
later than 120 days following the close of its fiscal year ended December 31,
1994, its definitive 1995 proxy statement. The information required by Part III
will be included in that proxy statement and such information is hereby
incorporated by reference, but excluding the information under the headings
"Compensation Committee Report" and "Comparison of Total Shareholders' Return".
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1 Financial statements required by Item 14 are included in Item 8 of
Part II.
(a) 2 The following is a list of financial statement schedules filed as part
of this Report:
Report of Independent Auditors on Schedules.....................
Schedule II Valuation and Qualifying Accounts & Reserves........
For Years Ended December 31, 1994, January 1, 1994
and January 1, 1993.........................................
All other schedules are omitted because they are not applicable or the
information is shown in the financial statements or notes thereto.
34
<PAGE>
(a) 3 The following is a list of all exhibits filed as part of this Report:
Exhibit 3 1975 Restated Certificate of Incorporation dated May 28, 1975
filed as Exhibit 5 to Form 8-K for the month of May 1975,
incorporated herein by reference.
Exhibit 3a Registrant's By-laws as amended September 19, 1975 filed as
Exhibit 6 to Form 8-K for the month of September 1975,
incorporated herein by reference.
Exhibit 3b Registrant's Certificate of Amendment of Certificate of
Incorporation dated May 24, 1978 filed as Exhibit 1 to Form 10-Q
for quarter ended June 30, 1978, incorporated herein by
reference.
Exhibit 3c Registrant's Certificate of Amendment of Certificate of
Incorporation dated May 27, 1987 filed as Exhibit 3c to Form 10-K
for the year ended January 1, 1988, incorporated herein by
reference.
Exhibit 10 Continental Materials Corporation Amended and Restated 1994 Stock
Option Plan dated May 25, 1994 filed as Appendix A to the 1994
Proxy Statement, incorporated herein by reference.*
Exhibit 10a Fifth Amendment to Revolving Credit and Term Loan Agreement
between The Northern Trust, LaSalle National Bank and Continental
Materials Corporation dated as of January 31, 1995 (filed
herewith).
Exhibit 10b Form of Supplemental Deferred Compensation Agreement filed as
Exhibit 10 to Form 10-Q for the quarter ended July 1, 1983,
incorporated herein by reference.*
Exhibit 10c Continental Materials Corporation Employee Profit Sharing
Retirement Plan Amended and Restated Generally Effective January
1, 1989 (filed herewith).
Exhibit 11 Statement Regarding Computation of Per Share Earnings (filed
herewith).
Exhibit 21 Subsidiaries of Registrant (filed herewith).
Exhibit 23 Consent of Independent Accountants (file herewith).
Exhibit 27 Financial Data Schedule (filed herewith).
Exhibit 28 Continental Materials Corporation Employees Profit Sharing
Retirement Plan on Form 11-K for the year ended December 31, 1994
(to be filed by amendment).
* - Compensatory plan or arrangement
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December
31, 1994.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CONTINENTAL MATERIALS CORPORATION
---------------------------------
Registrant
By: /S/Joseph J. Sum
--------------------------------------
Joseph J. Sum, Vice President, Finance
Date: March 28, 1995
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.
SIGNATURE CAPACITY(IES) DATE
------------------------ ------------------------- --------------
/S/ James G. Gidwitz
------------------------
James G. Gidwitz Chief Executive Officer
and a Director March 28, 1995
/S/ William A. Ryan
------------------------
William A. Ryan President and a Director March 28, 1995
/S/ Joseph J. Sum
------------------------
Joseph J. Sum Vice President and a
Director March 28, 1995
/S/ Mark S. Nichter
------------------------
Mark S. Nichter Secretary and Controller March 28, 1995
/S/ Thomas H. Carmody
------------------------
Thomas H. Carmody Director March 28, 1995
/S/ Joseph L. Gidwitz
------------------------
Joseph L. Gidwitz Director March 28, 1995
/S/ Ralph W. Gidwitz
------------------------
Ralph W. Gidwitz Director March 28, 1995
/S/ Ronald J. Gidwitz
------------------------
Ronald J. Gidwitz Director March 28, 1995
/S/ William G. Shoemaker
------------------------
William G. Shoemaker Director March 28, 1995
/S/ Theodore R. Tetzlaff
------------------------
Theodore R. Tetzlaff Director March 28, 1995
36
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON SCHEDULES
Our report on the consolidated financial statements of Continental
Materials Corporation and Subsidiaries is included on page 24 of this Annual
Report on Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule listed
in the index on page 34 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 10, 1995
<PAGE>
CONTINENTAL MATERIALS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (C) (D)
for the fiscal years 1994, 1993 and 1992
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C(1) COLUMN D COLUMN E
Balance at Additions
Beginning of Charged to Costs Deductions - Balance at End of
Description Period and Expenses Describe Period
-------------------------------- ------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
YEAR 1994
Allowance for doubtful accounts $ 139,000 $148,000 $ 39,000 (a) $248,000
------------ ------------ -------------- ------------
Inventory valuation reserve $ 420,000 $289,000 $486,000 (b) $223,000
------------ ------------ -------------- ------------
YEAR 1993
Allowance for doubtful accounts $ 258,000 $101,000 $220,000 (e) $139,000
------------ ------------ -------------- ------------
Inventory valuation reserve $ 40,000 $398,000 $ 18,000 (b) $420,000
------------ ------------ -------------- ------------
YEAR 1992
Allowance for doubtful accounts $ 320,000 $177,000 $239,000 (a) $258,000
------------ ------------ -------------- ------------
Inventory valuation reserve $ 223,000 $238,000 $421,000 (b) $ 40,000
------------ ------------ -------------- ------------
<FN>
Notes:
(a) Accounts written off, net of recoveries. (c) Reserve deducted in the balance sheet from the asset to which it
applies.
(b) Amounts written off upon disposal of assets. (d) Column C(2) has been omitted as the answer would be "none".
(e) Accounts written off, net of recoveries plus $102,000 reserve balance transferred with sale of subsidiary.
</TABLE>
<PAGE>
FIFTH AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS FIFTH AMENDMENT (this "Fifth Amendment"), dated as of January 31,
1995, is by and between CONTINENTAL MATERIALS CORPORATION, a corporation
organized under the laws of the State of Delaware (the "Borrower"), THE NORTHERN
TRUST COMPANY, an Illinois banking corporation ("Northern"), and LASALLE
NATIONAL BANK, a national banking association ("LaSalle Bank", Northern and
LaSalle Bank referred to individually as a "Lender" and collectively as the
"Lenders"), and shall amend that certain Revolving Credit and Term Loan
Agreement dated as of April 20, 1992 executed by and between the Borrower,
Northern and LaSalle Bank as previously amended by that certain First Amendment
to Revolving Credit and Term Loan Agreement dated as of April 19, 1993 executed
by and between the Borrower, Northern and LaSalle Bank, that certain Second
Amendment to Revolving Credit and Term Loan Agreement dated as of June 30, 1993
executed by and between the Borrower, Northern and LaSalle Bank, that certain
Third Amendment to Revolving Credit and Term Loan Agreement dated as of
September 13, 1993 executed by the Borrower, Northern and LaSalle Bank and that
certain Fourth Amendment to Revolving Credit and Term Loan Agreement dated as of
March 15, 1994 executed by the Borrower, Northern and LaSalle Bank
(collectively, the "Credit Agreement").
WITNESSETH:
WHEREAS, the Borrower and the Lenders desire to amend the Credit Agreement
in certain respects as set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. TERMS USED. Terms used but not otherwise defined herein are used with
the same meanings as in the Credit Agreement, as amended hereby.
2. SECTION 5.4(B). Section 5.4 of the Credit Agreement is hereby deleted
in its entirety and the following is hereby inserted in lieu thereof:
"(b) CURRENT RATIO. Permit the ratio of consolidated current assets to
current liabilities at any time or from time to time to be less than 1.75:1.0;
PROVIDED, HOWEVER, that solely for the purpose of calculating the current ratio
under this subsection 5.4(b), the amount of current liabilities attributable to
the Term Loan shall be the lesser of $1,400,000 or the aggregate amount of
indebtedness outstanding under the Term Notes."
3. SECTION 5.6. Section 5.6 of the Credit Agreement is hereby amended by
deleting "$500,000 (as determined for the period beginning on March 15, 1994 and
ending on the Termination Date)" from the fifth (5th) and sixth (6th) line
thereof and inserting "$1,500,000 (as determined for the period beginning on
January 31, 1995 and ending on the Termination Date)" in lieu thereof.
<PAGE>
4. SECTION 8.1(D). Section 8.1(d) of the Credit Agreement is hereby
deleted in its entirety and the following is hereby inserted in lieu thereof:
"(d) The term "Commitment - Term Loan" shall mean each such amount set
forth below across from the name of each Lender:
<TABLE>
<CAPTION>
Lender Amount
------ ------
<S> <C>
Northern $2,700,000
LaSalle Bank $2,700,000."
</TABLE>
5. Section 9.2(a) of the Credit Agreement is hereby deleted in its
entirety and the following is hereby inserted in lieu thereof:
"(a) if to the Borrower to 225 West Wacker Drive, Chicago, Illinois
60606 (Attention: Treasurer)."
6. THIRD AMENDED AND RESTATED TERM NOTES. The Term Loan shall be
evidenced by third amended and restated term notes, substantially in the form of
EXHIBIT A hereto, with appropriate insertions, dated the date of issuance, each
payable to the order of each Lender, in the principal amount of $2,700,000 for
each Lender (collectively, the "Third Amended and Restated Term Notes"). The
Third Amended and Restated Term Notes constitute a renewal and restatement of,
and a replacement and substitute for, the Second Amended and Restated Term Note
dated as of March 15, 1994 executed by the Borrower in favor of Northern and the
Second Amended and Restated Term Note dated as of March 15, 1994 executed by the
Borrower in favor of LaSalle Bank (collectively, the "Second Amended and
Restated Term Notes"). The indebtedness evidenced by the Third Amended and
Restated Term Notes is continuing indebtedness, and nothing herein or in the
Third Amended and Restated Term Notes shall be deemed to constitute a payment,
settlement or novation of the Second Amended and Restated Term Notes or to
release or otherwise adversely affect any lien, mortgage or security interest
securing such indebtedness or any rights of either Lender against any guarantor,
surety or other party primarily or secondarily liable for such indebtedness.
The term "Term Note", wherever used in the Credit Agreement, shall be deemed to
refer to the Third Amended and Restated Term Notes. EXHIBIT B to the Credit
Agreement is hereby amended in its entirety to read as set forth in EXHIBIT A
hereto.
7. REPRESENTATIONS AND WARRANTIES. The Borrower hereby remakes, as at
the date of execution hereof, all of the representations and warranties set
forth in Section 4 of the Credit Agreement as amended hereby and additionally
represents and warrants that: (a) the borrowings under the Credit Agreement as
amended hereby, the execution and delivery by the Borrower of this Fifth
Amendment and the Third Amended and Restated Term Notes and the performance by
the Borrower of its obligations under this Fifth Amendment, the Credit Agreement
as amended hereby and the Third Amended and Restated Term Notes are within the
Borrower's corporate powers, have been authorized by all necessary corporate
action, have received all necessary governmental approval (if any shall be
required) and do not and will not contravene
-2-
<PAGE>
or conflict with any provision of law or of the charter or by-laws of the
Borrower or any subsidiary or of any agreement binding upon the Borrower or any
subsidiary; and (b) no Event of Default or Unmatured Event of Default under the
Credit Agreement, as amended hereby, has occurred and is continuing on the date
of execution hereof.
8. CONDITIONS OF EFFECTIVENESS. The effectiveness of this Fifth
Amendment is subject to the conditions precedent that the Lenders shall have
received all of the following, each duly executed and dated the date hereof, in
form and substance satisfactory to the Lenders and their respective counsel, at
the expense of the Borrower, and in such number of signed counterparts as the
Lenders may request:
(a) FIFTH AMENDMENT. This Fifth Amendment;
(b) THIRD AMENDED AND RESTATED TERM NOTES. The Third Amended and
Restated Term Notes in the form attached hereto as EXHIBIT A, with
appropriate insertions, payable to each Lender for the face amount of each
Lender's Commitment -Term Loan;
(c) FOURTH AMENDED AND RESTATED GUARANTIES. A Fourth Amended and
Restated Guaranty dated as of the date hereof executed by each of Transit
Mix, Phoenix, Williams and Castle;
(d) RESOLUTIONS. A copy of a resolution of the Board of Directors of
the Borrower authorizing or ratifying the execution, delivery and
performance, respectively, of this Fifth Amendment, the Credit Agreement as
amended hereby, the Third Amended and Restated Term Notes, and the other
documents provided for in this Fifth Amendment, certified by the Secretary
of the Borrower; and a copy of a resolution of the Board of Directors of
each of Transit Mix, Phoenix, Williams and Castle authorizing or ratifying
the execution, delivery and performance of a Fourth Amended and Restated
Guaranty, and the other documents provided for in such Fourth Amended and
Restated Guaranty, certified by the Secretary of each of Transit Mix,
Phoenix, Williams and Castle, respectively;
(e) NO AMENDMENT - ARTICLES OF INCORPORATION AND BY-LAWS.
Certificate of no amendments to the Articles of Incorporation of each of
the Borrower, Transit Mix, Phoenix, Williams and Castle, respectively,
since March 15, 1994 and certificate of no amendments to the By-laws of
each of the Borrower, Transit Mix, Phoenix, Williams and Castle,
respectively, since March 15, 1994, each certified by the Secretary of each
of the Borrower, Transit Mix, Phoenix, Williams and Castle, respectively;
(f) INCUMBENCY. A certificate of the Secretary of the Borrower
certifying the names of the officer or officers of the Borrower authorized
to sign this Fifth Amendment, the Third Amended and Restated Term Notes,
and the other documents provided for in this Fifth Amendment, together with
a sample of the true signature of each such officer (the Lenders may
conclusively rely on such certificate until formally advised by a like
-3-
<PAGE>
certificate of any changes therein); and a certificate of the Secretary of
each of Transit Mix, Phoenix, Williams and Castle certifying the names of
the officer or officers of Transit Mix, Phoenix, Williams and Castle
authorized to sign each respective Fourth Amended and Restated Guaranty,
and the other documents provided for in such Fourth Amended and Restated
Guaranty, together with a sample of the true signature of each such officer
(the Lenders may conclusively rely on such certificate until formally
advised by a like certificate of any changes therein); and
(g) CERTIFICATE OF GOOD STANDING. A good standing certificate from
the State of Delaware attesting to the good standing of the Borrower.
(h) MISCELLANEOUS. Such other documents as the Lenders may request.
9. COUNTERPARTS. This Fifth Amendment may be executed by the parties on
any number of separate counterparts and by each party on separate counterparts;
each counterpart shall be deemed an original instrument; and all of the
counterparts taken together shall be deemed to constitute one and the same
instrument.
10. SUCCESSORS AND ASSIGNS. This Fifth Amendment and the Credit Agreement
as amended hereby shall be binding upon and inure to the benefit of the
Borrower, the Lenders and their respective successors and assigns, except that
the Borrower may not transfer or assign any of its rights or interest hereunder
or thereunder without the prior written consent of the Lenders.
11. CAPTIONS. Captions in this Fifth Amendment are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
12. FEES. The Borrower agrees, upon written request of the Lenders, to
pay or reimburse the Lenders for all reasonable costs and expenses (including
legal fees and reasonable time charges of attorneys who may be employees of the
Lenders, whether in or out of court, in original or appellate proceedings or in
bankruptcy) of preparing, seeking advice in regard to, and enforcing this Fifth
Amendment, the Credit Agreement as amended hereby, the Third Amended and
Restated Term Notes and any document or instrument executed in connection
herewith and therewith.
13. CONSTRUCTION. This Fifth Amendment shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
Illinois, and shall be deemed to have been executed in the State of Illinois.
14. SUBMISSION TO JURISDICTION; VENUE. To induce the Lenders to enter
into this Fifth Amendment, the Borrower irrevocably agrees that, subject to each
Lender's sole and absolute election, all suits, actions or other proceedings in
any way, manner or respect, arising out of or from or related to this Fifth
Amendment, the Credit Agreement as amended hereby, the Third Amended and
Restated Term Notes, or any document executed in connection herewith and
therewith, shall be subject to litigation in courts having situs within Chicago,
Illinois. The Borrower hereby consents and submits to the jurisdiction of any
local, state or federal court
-4-
<PAGE>
located within Chicago, Illinois. The Borrower hereby waives any right it may
have to transfer or change the venue of any suit, action, or other proceeding
brought against the Borrower by the Lenders in accordance with this Section.
15. AMENDMENT TO CREDIT AGREEMENT. This Fifth Amendment shall be deemed
to be an amendment to the Credit Agreement. All references to the Credit
Agreement in any other document or instrument shall be deemed to refer to the
Credit Agreement as amended hereby. As hereby amended, the Credit Agreement is
hereby ratified and confirmed in each and every respect.
[signature page to follow]
-5-
<PAGE>
CONTINENTAL MATERIALS CORPORATION
By: /s/ Joseph J. Sum
----------------------------------------
I Its: Vice President
----------------------------------------
THE NORTHERN TRUST COMPANY
By: /s/ Jeff Cohodes
-----------------------------------------
Its: Vice President
-----------------------------------------
LASALLE NATIONAL BANK
By: /s/ Ronald T. Kunkel
-----------------------------------------
Its: Commercial Banking Officer
-----------------------------------------
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<PAGE>
EXHIBIT 10C
CONTINENTAL MATERIALS CORPORATION
EMPLOYEES PROFIT SHARING RETIREMENT PLAN
_____________________________
_____________________________________
Amended and Restated Generally Effective January 1, 1989
WHEREAS, Continental Materials Corporation, a Delaware
corporation (the "Company"), adopted on January 22, 1965, a profit sharing plan
and trust; and
WHEREAS, said plan and trust has from time to time been amended;
and
WHEREAS, said plan and trust is now being further amended;
NOW, THEREFORE, the Continental Materials Corporation Employees Profit
Sharing Retirement Plan is hereby amended and restated in its entirety,
effective as of January 1, 1989, as follows:
ARTICLE I.
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and
phrases shall have the meanings stated below unless a different meaning is
plainly required by context. For purposes of construction of this Plan, the
masculine term shall include the feminine and the singular shall include the
plural in all cases in which they could thus be applied.
ACCOUNT(S) means the separate account or accounts which are
maintained for the benefit of each Participant.
ACCOUNT BALANCE means, for each Participant, the total balance
standing to his Account or Accounts under the date of reference determined in
accordance with the valuation procedures described herein.
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AFFILIATE means any corporation or other business entity which
is part of the same controlled group as an Employer determined under the rules
of Section 414(b), (c) and (m) of the Code.
AFTER-TAX SAVINGS CONTRIBUTION ACCOUNT means the separate Account
which shall be maintained by the Trustee for each Participant to reflect (a) all
of his After-Tax Savings Contributions and any earnings or losses thereon, and
(b) in the case of a Participant who participated before 1985, all of his pre-
1985 employee contributions and any earnings or losses thereon.
AFTER-TAX SAVINGS CONTRIBUTIONS means the after tax contributions made
by the Participant, as described in Section 3.03(b), and, in the case of a
Participant who participated in the Plan before 1985, his employee contributions
made before 1985.
APPROVED ABSENCE means an absence from work approved by the Employer
under uniform rules and conditions for all Employees, and shall include a
military leave.
BENEFICIARY means the person or persons, estate, trust or organization
designated by a Participant to receive any benefits under the Plan which may be
due upon the Participant's death.
BREAK IN SERVICE or ONE-YEAR BREAK IN SERVICE means a Plan Year during
which an Employee completes five hundred (500) or fewer Hours of Service.
CODE means the Internal Revenue Code of 1986, as amended from time to
time.
COMPANY means the Continental Materials Corporation, a Delaware
corporation, and any predecessor or successor to it.
COMPENSATION means the total amount of cash compensation paid to an
Employee in a Plan Year as calculated by the Employer for Federal income tax
purposes including salary, wages, commissions, overtime payments, bonuses and
amounts, if any, deferred under a salary reduction agreement in accordance with
Section 401(k) of the Code. If an Employee becomes a Participant during a Plan
Year, his Compensation in such Plan Year for purposes of determining the amount
of the Employer contribution contributed on his behalf shall be his Compensation
earned while he is a Participant. Notwithstanding the foregoing, Compensation
in excess of the Annual Compensation Limitation shall be disregarded. The
"Annual Compensation Limitation" shall be $200,000 ($150,000 as of January 1,
1994) or such other amount determined under Code Section 401(a)(17).
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For purposes of applying the Annual Compensation Limitation an Employee
who is a Family Member (as defined below) of either:
(a) a 5 percent owner (or deemed a 5 percent owner by application of
Section 318 of the Code); or
(b) a highly compensated Employee who is one of the ten most highly
compensated Employees
will not be treated as a separate Employee. In such a case, the
Family Aggregation Rules shall be applied.
If, as a result of applying the Family Aggregation Rules the Annual
Compensation Limitation is exceeded, the Annual Compensation
Limitation shall be prorated among the individuals in the Family
Aggregation Group in proportion to each such individual's Compensation
as determined under this section prior to application of the Annual
Compensation Limitation.
If Compensation for any prior Plan Year is taken into account in
determining a Participant's allocations or benefits for the current
Plan Year, the Compensation for such prior Plan Year is subject to the
applicable Annual Compensation Limitation in effect for that prior
Plan Year if less than the current year's Compensation limitation.
COVERED EMPLOYEE means an Employee employed by an Employer at a
location and/or in a job classification which has been designated by the Company
as being a location and/or classification of Employees which may become eligible
to participate in the Plan. Those locations and classifications are listed in
Exhibit A hereto.
EFFECTIVE DATE OF AMENDMENT means January 1, 1989, the date on which
the provisions of this amended and restated Plan became effective except as
specially provided herein.
EMPLOYEE means a person employed by the Employer and shall not include
an independent contractor.
EMPLOYER means the Company and each Affiliate which has adopted this
Plan with the consent of the Company. The Employers are listed in Exhibit A
hereto. If the Effective Date of an Employer's adoption of this Plan is
different from the general Effective Date of Amendment, it will be set forth in
Exhibit A hereto. The terms hereof shall apply to all Employers except to the
extent that any differences are set forth in Exhibit A hereto in which event the
terms set forth in Exhibit A shall govern.
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EMPLOYER CONTRIBUTION ACCOUNT means the separate Account which shall
be maintained by the Trustee for each Participant with respect to each Employer
of such Participant to reflect all Employer contributions made on behalf of such
Participant by each Employer, and any Forfeitures allocated thereto and any
earnings thereon.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
FAMILY AGGREGATION RULES means the rules described below:
(1) These Family Aggregation Rules are applied to Participants who are
Family Members of either:
(a) a 5 percent owner (or deemed a 5 percent owner by application of
Section 318 of the Code) (hereafter "5 Percent Owner"); or
(b) a highly compensated Participant (as defined in this Article) who
is one of the ten most highly compensated Participants.
(2) Any compensation paid to the Family Member and any applicable Plan
contribution or benefit accrued on behalf of such Family Member shall
be treated as if it were paid to (or on behalf of) the 5 Percent Owner
or one of the ten most highly compensated Participants. For these
purposes, a Family Member is the spouse or a lineal descendant (who
has not reached age 19 before the close of the Plan Year) of any 5
Percent Owner or highly compensated Participant. A group of Family
Members shall be called collectively a "Family Aggregation Group".
(3) For purposes of these Family Aggregation Rules, compensation is
defined as all compensation paid to the Participant for the Plan Year
and currently includible in gross income, including bonuses and
commissions ("FAR Compensation"). If the period for determining FAR
Compensation used in calculating an Employee's allocation for a Plan
Year is a short Plan Year (i.e. shorter than 12 months) the Annual
Compensation Limitation is an amount equal to the otherwise applicable
Annual Compensation Limitation multiplied by the fraction, the
numerator of which is the number of days in the short Plan Year and
the denominator of which is 365.
FISCAL YEAR means the taxable year used by the Company for Federal
income tax purposes.
FORFEITURE means the portion of a Participant's Employer Contribution
Account to which he is not entitled, as determined under Section 5.03.
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HOUR OF SERVICE means:
(1) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for an Employer. These hours shall be
credited to the Employee for the computation period in which the
duties are performed.
(2) Each hour for which an Employee is paid, or entitled to payment, by an
Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty (to the extent required
by federal law) or leave of absence. No more than five hundred one
(501) Hours of Service shall be credited under this paragraph (2) for
any single continuous period (whether or not such period occurs in a
single computation period) except as required by applicable federal
law. Hours of Service under this paragraph (2) shall be calculated
and credited pursuant to Section 2530.200b 2 of the Department of
Labor Regulations, which are incorporated herein by this reference.
(3) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by an Employer. The same Hours of
Service shall not be credited both under paragraph (1) or paragraph
(2) as the case may be, and under this paragraph (3). These hours
shall be credited to the Employee for the period to which the award or
agreement pertains rather than the period in which the award,
agreement or payment is made.
(4) In accordance with Department of Labor Regulation 2530.200b-3(e), each
Employee shall be credited with forty five (45) Hours of Service per
week for each week in which he would be credited with service pursuant
to the foregoing if adequate records of his Hours of Service are not
available.
(5) Hours of Service shall be credited for employment with any Affiliate.
(6) Solely for purposes of determining whether a Break in Service for
participation and vesting purposes has occurred, an Employee who is
absent from work for maternity or paternity reasons shall receive
credit for the Hours of Service which would otherwise have been
credited to him but for such absence, or in any case in which such
Hours of Service cannot be determined, eight (8) Hours of Service per
day of such absence. For purposes of this paragraph (6), an absence
from work for maternity or paternity reasons means an absence:
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(a) by reason of the pregnancy of the Employee,
(b) by reason of a birth of a child of the Employee,
(c) by reason of the placement of a child with the Employee in
connection with the adoption of such child by such individual, or
(d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Hours of Service credited under this paragraph (6) shall be
credited in the computation period in which the absence begins if the
crediting is necessary to prevent a Break in Service in that period,
or in all other cases, in the immediately following computation
period.
Notwithstanding the preceding, no credit shall be given for Hours of
Service applicable to maternity or paternity leave unless the Employee
furnishes the Plan Administrator such timely information as the Plan
Administrator may reasonably require to establish that the absence
from work is because of maternity or paternity leave and the number of
days for which there was such an absence.
PARTICIPANT means an Employee who fulfills the eligibility
requirements as provided in Article II, who makes the contributions required by
Section 3.03(a) and who continues to qualify as a Participant. A Participant
becomes a former Participant when he terminates employment.
PLAN means the Continental Materials Corporation Employees Profit
Sharing Retirement Plan, as amended from time to time.
PLAN ADMINISTRATOR means the person or persons who may be appointed by
the Company. In the absence of such appointment, the Plan Administrator shall
be the Company. The Plan Administrator shall serve pursuant to the terms of
Article VIII.
PLAN YEAR means the calendar year.
PRE TAX SAVINGS CONTRIBUTION ACCOUNT means the separate Account which
shall be maintained by the Trustee for each Participant to reflect all of his
Pre-Tax Savings Contributions and any earnings thereon.
PRE TAX SAVINGS CONTRIBUTIONS means the contributions made by an
Employer that are attributable to the reduction in Compensation a Participant
agrees to accept from an Employer each Plan Year, as described in Section
3.03(a) of the Plan.
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QUALIFIED DOMESTIC RELATIONS ORDER means any judgment, decree or order
(including approval of a property settlement agreement) that relates to the
provision of child support, alimony payments or marital property rights to a
spouse, former spouse, child or other dependent of a Participant Payee and is
made pursuant to a state domestic relations law, including a community property
law that creates, recognizes or assigns to such person the right to receive all
or a portion of a Participant's benefits payable hereunder, and meets the
requirements of Section 414(p) of the Code.
ROLLOVER CONTRIBUTION ACCOUNT means the separate Account which shall
be maintained by the Trustee for each Employee to reflect any Rollover
Contributions made by him and any earnings thereon.
ROLLOVER CONTRIBUTIONS means the contributions made by an Employee
pursuant to Section 3.04 of the Plan.
SHARE means a share of common stock of the Company, which is a
qualifying employer security as defined in Section 407(d)(5) of ERISA and
Section 409(1) of the Code.
TOTAL AND PERMANENT DISABILITY means a participant is unable for the
foreseeable future to perform his normal work for an Employer or any other work
for which he is qualified by reason of education, training or experience as
determined by a competent physician chosen by the Company. Uniform standards
shall apply to Participants in similar conditions.
TRUST AGREEMENT or TRUST means, respectively, the trust agreement
establishing the Continental Materials Corporation Employees Profit Sharing
Retirement Plan Trust as amended from time to time, and the trust established
thereunder.
TRUST FUND means all cash, securities, real estate, Shares or any
other property held by the Trustee pursuant to the terms of the Trust Agreement,
together with the income therefrom.
TRUSTEE means the person or persons appointed by the Company as
provided under Section 7.01 of the Plan to act as Trustee of the Trust,
including any Limited Co-Trustee which may be appointed pursuant to the
provisions of the Trust Agreement.
VALUATION DATE means the last day of the sixth month of each Plan Year
and the last day of each Plan Year. In addition, the Company may adopt more
frequent Valuation Dates for purposes of allocating earnings if the Company
deems it appropriate in order to allocate earnings more equitably among
Participants.
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YEAR OF SERVICE means a Plan Year during which an Employee completes
at least one thousand (1,000) Hours of Service, including years prior to the
Effective Date of Amendment of the Plan. A Plan Year during which an Employee
completes less than one thousand (1,000) Hours of Service but more than five
hundred (500) Hours of Service shall be a substandard Year of Service. A
substandard Year of Service shall neither be considered a One Year Break in
Service nor be counted as a Year of Service.
ARTICLE II.
Eligibility and Participation
2.01 ELIGIBILITY
(a) Each Employee included under the provisions of the Plan prior to
this restatement shall continue to participate in accordance with
the provisions of this Plan, provided that he continues to make
the contributions required by Section 3.03(a).
(b) Each other Employee who is a Covered Employee shall be eligible
to make the contributions required by Section 3.03(a) and to
participate in the Plan on the later of the Effective Date of
Amendment or the first day of any calendar month coincident with
or immediately following his completion of a 12-month period
commencing (i) on his date of employment; or (ii) on the first
day of any Plan Year beginning after his date of employment,
during which he has completed at least one thousand (1,000) Hours
of Service.
(c) Any Employee who does not choose to make the required
contributions required under Section 3.03(a) and to participate
in the Plan on the date when he is eligible may elect to make the
required contributions and to participate on the first day of any
calendar month immediately following his election to participate,
if then otherwise eligible.
(d) For purposes of eligibility for participation, the initial
computation period shall begin with the date on which the
Employee first performs an Hour of Service. The participation
computation period shall shift to the Plan Year which includes
the anniversary of the date on which the Employee first performed
an Hour of Service if he does not render one thousand (1,000)
Hours of Service in the twelve month period commencing on his
date of employment.
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2.02 ENROLLMENT FORMS
An Employee who elects to become a Participant in the Plan shall
complete a Designation of Beneficiary in the form prescribed by the
Company. In addition, an Employee shall complete a salary reduction
agreement and an Authorization of Payroll Deductions pursuant to
Section 3.03 in the forms prescribed by the Company, and shall deliver
them to his Employer at least ten (10) days prior to the first day of
the month on which he elects his participation to become effective.
Each eligible Employee shall furnish the Company with such information
concerning his age or other data necessary or appropriate for the
administration of the Plan as the Company may require.
2.03 TERMINATION OR DISCONTINUANCE OF CONTRIBUTIONS AND REHIRING
(a) A Participant who terminates employment and is subsequently
rehired shall be eligible to again participate immediately if
then otherwise eligible.
(b) A Participant who voluntarily discontinues his Pre-Tax Savings
Contributions may rejoin the Plan as of the first January 1 or
July 1 which is at least six (6) months after the date he
discontinued such contributions, provided that such Participant
has notified the Company in writing of his desire to enter the
Plan, if then otherwise eligible.
(c) An Employee who terminates employment before becoming a
Participant and is reemployed before incurring a One-Year Break
in Service shall be eligible to become a Participant when he
meets the eligibility requirements of Section 2.01, based on his
original date of employment.
(d) An Employee who terminates employment before becoming a
Participant and is reemployed after incurring a One-Year Break in
Service shall be eligible to become a Participant when he meets
the eligibility requirements of Section 2.01, based on his date
of reemployment.
(e) A Participant shall not suffer a One-Year Break in Service during
such period in which his performance of service for an Employer
has been interrupted on account of layoff, sickness, accident,
vacation, Approved Leave or entry into the armed forces of the
United States in time of war, during such times as
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state or Federal legislation requires military conscription or on
a voluntary basis, provided that he resumes the performance of
his services for an Employer within five (5) days after such
period of layoff, sickness, accident, vacation or Approved Leave,
or the later of ninety (90) days after the discharge from such
armed forces or such time as required by Federal law. If such
Participant shall not return to work at the expiration of said
period, then such Participant shall be deemed to have terminated
his employment with his Employer on the date of the expiration of
such leave of absence and his rights under the Plan shall
thereupon be determined in accordance with the provisions of
Article V. All Employees shall be treated alike under similar
circumstances.
ARTICLE III.
CONTRIBUTIONS
3.01 COMPANY CONTRIBUTIONS
(a) Employer contributions to the Trust Fund for each Plan Year shall
be in such amount as the Employer, in its sole discretion, shall
determine; provided, however, that the total of such contribution
for any Plan Year shall not exceed the maximum amount deductible
for such Fiscal Year for Federal income tax purposes. Employer
contributions may be made in cash or in Shares valued at the fair
market value thereof at the time such Employer contribution is
made. The Employer may earmark cash contributions as being
allocable to the Stock Contribution Fund described in Article
XIII.
(b) In order to meet the non-discrimination requirements of Section
401(k) and 401(m) of the Code, as set forth in Sections 4.09 and
4.10 hereof, the Company may, in its discretion, establish a
special rate of Employer contributions applicable only to those
Participants who earn less than a specified level of Compensation
or such other class of Participants as the Company may determine.
Contributions made under this paragraph (b) shall be deemed, for
all Plan purposes, to be Pre-Tax Savings Contributions.
3.02 WHEN CONTRIBUTIONS DUE
The contribution of each Employer under the Plan for any Plan Year
shall be due on the last day of that Plan Year and shall be paid over
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to the Trustee not later than the time prescribed by law for filing
such Employer's Federal income tax return for such Fiscal Year
(including any extensions).
3.03 EMPLOYEE CONTRIBUTIONS
(a) Each Participant shall have the option to enter into a salary
reduction agreement with his Employer to provide that the
Participant agrees to accept a reduction in salary from the
Employer equal to from one percent (1%) to ten percent (10%) of
his Compensation, in whole percentages. Effective January 1,
1995, the 10% limit in the preceding sentence shall be replaced
by a 12% limit.
The salary reduction amounts shall be called the Pre-Tax Savings
Contributions.
An Employer may amend or revoke any salary reduction agreement
entered into by a Participant if the Employer determines that
such a revocation or amendment is necessary to ensure that the
additions to a Participant's Accounts for any Plan Year will not
exceed the limitations set forth in Article IV of the Plan.
Effective for the period November 16, 1994 through December 31,
1994, the ten percent limitation on Pre-Tax Savings Contributions
shall be replaced by a ninety-six percent (96%) limitation.
However, Notwithstanding the preceding sentence, a Participant's
salary reduction percentage shall be limited to that percentage
which results in his aggregate salary reduction percentage for
1994 being no greater than 12%.
(b) Subject to the limitations set forth in Article IV of the Plan, a
Participant may elect to make After-Tax Savings Contributions to
the Trust Fund in any Plan Year during which he is a Participant
in an amount equal to between one percent (1%) and ten percent
(10%) of his Compensation, in whole percentages. These
contributions shall be deducted from the Participant's
Compensation each pay period. In addition, a Participant may
contribute in any Plan Year an amount which, together with all
other contributions made by that Participant in prior Plan Years,
will cause his total contribution not to exceed ten percent (10%)
of the Compensation received by him during all Plan Years that he
has been a Participant in the Plan. This amount shall be paid by
the Participant either as a payroll deduction as specified in
writing by the Participant in a form approved by the Company or
by a cash payment to the
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Trustee. A Participant who elects to make additional
contributions by payroll deduction shall complete an
Authorization of Payroll Deduction Form as prescribed by the
Company. As soon as practicable, the Company shall pay the
amounts so paid or deducted to the Trustee to be held and
administered in trust pursuant to the Trust Agreement.
(c) The Company shall direct the Trustee to establish and maintain a
Pre-Tax Savings Contribution Account and an After-Tax Savings
Contribution Account in the name of each Participant who elects
to make Pre-Tax Savings Contributions and After-Tax Savings
Contributions.
(d) A Participant may change the amount or percentage of his Pre-Tax
Savings Contributions or his After-Tax Savings Contributions at
any time, but effective with the next subsequent pay period, by
filing another authorization form with the Company at least two
weeks prior to the effective date of the change.
(e) A Participant may elect in writing to discontinue his Pre-Tax
Savings Contributions or his After-Tax Savings Contributions by
notifying the Company at least two weeks before the end of any
pay period. In the event of a discontinuance of his Pre-Tax
Savings Contributions he shall cease to be a Participant. An
Employee may resume making Pre-Tax Savings Contributions only
after the expiration of a waiting period following the date of
discontinuance, as specified in Section 2.03(b).
(f) Distribution of a Participant's Pre-Tax Savings Contribution
Account shall not commence prior to the earlier of his death,
Total and Permanent Disability or termination of employment,
except upon demonstration of hardship, as described in Article
XI of the Plan or pursuant to a qualified domestic relations
order described in Section 6.13.
3.04 ROLLOVER CONTRIBUTIONS
An Employee shall be entitled to contribute to the Plan all or any
part of the property he has received from any trust which forms a
part of a trust described in Section 401(a) of the Code, which is
exempt from tax under Section 501(a) of the Code, or from an employee
annuity plan described in Section 403(a)(1) of the Code, or from an
individual retirement account described in Section 408(a) of the Code
(if the entire amount received represents the entire amount
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in the account or the entire value of the annuity, and the entire
amount is solely attributable to rollover contributions from an
employee trust described in Section 401(a) of the Code, which is
exempt from tax under Section 501(a) of the Code, or an annuity plan
described in Section 403(a) of the Code and any earnings on such
sum), which is paid or distributed to the Employee in one or more
distributions which constitute all or part of the balance in his
account distributed as a result of a termination of a plan or a
discontinuance of contributions to a profit sharing or stock bonus
plan or lump sum distribution within the meaning of Section
402(e)(4)(A) of the Code (determined without reference to Section
402(e)(4)(B) of the Code). This paragraph is effective for
contributions prior to January 1, 1993.
Effective January 1, 1993, an Employee shall be entitled to contribute
to the Plan all or any part of the property he has received from any
trust which forms a part of a trust described in Section 401(a) of the
Code, which is exempt from tax under Section 501(a) of the Code, or
from an employee annuity plan described in Section 403(a)(1) of the
Code so long as such contribution is non-taxable under Code Section
402(c) or 402(e)(6).
The right of contribution shall extend only from the date of such
receipt for a period of sixty (60) calendar days. The Trustee shall
create a separate Rollover Contribution Account for the Employee to
which shall be credited his Rollover Contributions. The Rollover
Contribution Account shall be invested with the other assets of the
Plan in the investment fund or funds selected by the Employee in
accordance with the rules stated herein and the Employee at all times
shall be fully vested in his Rollover Contribution Account. An
Employee may withdraw all or a portion of the value of his Rollover
Contribution Account, but not less than one hundred dollars ($100),
per withdrawal. Such election must be in writing and must be submitted
at least thirty (30) days prior to the effective date of the
withdrawal and must be in a form approved by the Company.
ARTICLE IV.
ALLOCATIONS, ACCOUNTING AND ADJUSTMENTS
4.01 COMPOSITION OF TRUST FUND
All amounts contributed to the Plan, as increased or decreased by
income, expenditure, appreciation and depreciation, shall constitute a
single fund known as the Trust Fund. The Trust Fund shall consist of
an investment fund or funds established by the Company. A separate
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Employer Contribution Account shall be maintained for each Participant
with respect to each Employer of such Participant. A Pre-Tax Savings
Contribution Account and an After-Tax Savings Contribution Account
shall be maintained for each Participant with respect to each Employer
of such Participant. A Rollover Contribution Account shall be
maintained for each Employee who elects to make Rollover
Contributions. Each Participant's Accounts shall be further subdivided
into one, two or more sub accounts to reflect the percentage of the
contributions which are invested in the various investment funds
described above, as appropriate.
4.02 ALLOCATION OF EMPLOYEE CONTRIBUTIONS
As of each Valuation Date, the Pre-Tax Savings Contributions and the
After-Tax Savings Contributions made to the Plan during such Plan Year
by each Participant shall be credited to the Pre-Tax Savings
Contribution Account or the After-Tax Savings Contribution Account of
each Participant, as appropriate.
4.03 ALLOCATION OF EARNINGS AND DISTRIBUTIONS TO ACCOUNTS
The increase or decrease in the net worth of each investment fund
shall be allocated among the accounts of Participants who have a
portion of their Account Balances invested in that investment fund on
the Valuation Date in accordance with such rules as the Trustee shall
determine.
4.04 ALLOCATION OF EMPLOYER CONTRIBUTIONS
Upon actual contribution of the Employer's contribution for each Plan
Year, and effective as of the last day of each Plan Year, and after
the allocation of earnings, the Employer contribution for such Plan
Year shall be allocated to the Employer Contribution Accounts of all
Participants who are Employees of the Employer who make contributions
pursuant to Section 3.03(a) and are either (a) actively employed by
such Employer on the last day of such Plan Year and have completed at
least one thousand (1,000) Hours of Service during such Plan Year, or
(b) terminate employment during the Plan Year on account of retirement
on or after age sixty (60), Total and Permanent Disability or death,
in the proportion that such Participant's Compensation for such Plan
Year bears to the total Compensation of all such Participants for such
Plan Year. When all or a portion of the Employer contribution is made
in the form of Shares, the allocation of Shares to Participants'
Accounts shall be
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made as though cash had been contributed in an amount equal to the
fair market value of the stock at the time such contribution is made.
4.05 ALLOCATION OF FORFEITURES
Upon actual contribution of the Employer's contribution for each Plan
Year, and effective as of the last day of each Plan Year, after the
allocation of earnings, any Forfeitures which have become available
during such Plan Year due to the former Participants who had been in
the employ of the Employer shall be allocated to the Employer
Contribution Accounts of all Participants employed by that Employer
who make the contributions required by Section 3.03(a) and are either
(a) actively employed by such Employer on the last day of such Plan
Year and have completed at least one thousand (1,000) Hours of Service
during such Plan Year, or (b) terminate employment during the Plan
Year on account of retirement on or after age sixty (60), Total and
Permanent Disability or death, in the proportion that such
Participant's Compensation for such Plan Year bears to the total
Compensation of all such Participants for such Plan Year. When a
Participant forfeits an interest in the Stock Contribution Fund, the
Shares which are a component of the Forfeiture will be allocated to
Participant's Accounts in the same manner as the remainder of the
Forfeiture.
4.06 MAXIMUM ANNUAL ADDITIONS
(a) The sum of the following additions to a Participant's Accounts in
any Plan Year shall not exceed the lesser of (1) thirty thousand
dollars ($30,000), or such other amount as may be established by
the Secretary of the Treasury pursuant to Section 415 of the
Code, or (2) twenty five percent (25%) of the Participant's
Compensation (minus 401(k) salary deferral contributions) for
such Plan Year:
(i) The Employer contributions.
(ii) The Pre-Tax Savings Contributions.
(iii) The Participant's After-Tax Savings Contributions.
(iv) The Forfeitures.
(b) In the event that such additions to a Participant's Accounts in
any Plan Year would, in the absence of these rules, be in excess
of the maximum annual limits, the following
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adjustments shall be made, in the order listed, to the extent
necessary to bring the additions within the required limits:
(i) Any After-Tax Savings Contributions shall be returned to him
together with earnings thereon if any.
(ii) A portion of the Participant's Pre-Tax Savings Contribution
shall be returned to him together with earnings thereon if
any; provided, that, in the event that such a return would
reduce his Pre-Tax Savings Contributions below the minimum
amount required to be a Participant he shall nevertheless be
treated as making minimum Pre-Tax Savings Contributions
hereunder for the Plan Year.
(iii) The Employer contributions, if any, otherwise allocable to
the Participant's Employer Contribution Account shall be
reduced, and the amount of such reduction shall be credited
to a suspense account (which shall not share in the
allocation of earnings) and shall be applied to reduce
Employer contributions in the succeeding Plan Year.
(c) To the extent not expressly set forth herein, the rules of Code
Section 415 are hereby incorporated by reference.
4.07 DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS
If it is determined that, as a result of the limitations of Section
415(e), there must be a reduction in the Participant's combined
benefits, then the Employer shall make any necessary reduction under
the defined benefit plan.
4.08 PARTICIPANT ELECTION OF INVESTMENT FUNDS
Each Participant in the Plan may select the investment fund or funds
in which his Accounts shall be invested. Each such initial election
shall be made in writing on forms to be furnished by the Plan
Administrator and shall specify that portion of the Participant's
existing Account Balance on the date of such election to be invested
in the investment fund or funds established by the Company, based upon
a percentage increment, as established by the Company, of the
Participant's Account Balance. Each of the Participant's Accounts
shall be invested in the same proportions in each such fund. Changes
in the Account Balances invested in the specified funds due to
Employer or Employee contributions, Forfeitures and earnings and
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losses shall not require reallocation of the Account Balances in the
specified proportions unless subsequently elected by the Participant.
The Participant may also elect the portion of the future Employer
contributions, Pre-Tax Savings Contributions and After-Tax Savings
Contributions and Forfeitures to be invested in the investment fund or
funds established by the Company, based upon a percentage increment,
as established by the Company, of such contributions or Forfeitures.
A Participant may change his investment fund elections by informing
the Plan Administrator either in writing or by phone, in a manner
established by the Company. The frequency that a Participant may
change such elections shall be established by the Company.
If no election form has been executed by the Participant and submitted
to the Trustee by the Plan Administrator, the entire Account Balance
shall be invested one or more investment funds as determined by the
Company.
4.08A CMC STOCK FUND
Effective with the effectiveness of a Registration Statement filed
with the Securities and Exchange Commission regarding the Plan, the
Company may maintain an investment fund to be called the CMC Stock
Fund, which shall be separate from the Stock Contribution Fund
described in Article XIII hereto, but which shall be invested in
Shares and cash and cash equivalents pending the purchase of Shares,
and the purchase of Shares shall subject to the rules stated below, be
purchased as soon as practical after the receipt of contributions or
transferred amounts.
Except as hereafter set forth in this Section 4.08A, the rules set
forth in Section 4.08 applicable to investment funds generally shall
apply to the CMC Stock Fund. However, in no event may a Participant
direct that more than 25% of his Account Balance exclusive of that
portion of his Account Balance in the Stock Contribution Fund
(determined immediately after the effectiveness of said direction) be
invested in the CMC Stock Fund.
The purchase of Shares by and for the CMC Stock Fund shall be
suspended whenever the Trustee shall determine that Shares are not
then readily available or whenever the Company shall direct the
Trustee to suspend such purchases because, in the Company's sole
judgment, the purchase of additional Shares at such time is not in the
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best interests of the Participants or might adversely affect the
status of the Plan under Section 401(a) of the Code.
Brokerage commissions, transfer taxes and other charges and expenses
incurred by the Plan in connection with the CMC Stock Fund shall be
charged to that fund to the extent such amounts are not paid by the
Company.
The Trustee may establish uniform guidelines for minimum amounts of
Shares which may be purchased at any one time, and other similar
guidelines for purposes of administrative convenience. The rules of
Sections 13.011, 13.012 and 13.02 13.05 hereof shall apply to the CMC
Stock Fund in a manner similar to their application to the Stock
Contribution Fund.
4.09 401(k) DISCRIMINATION LIMITATIONS
In no event shall any Employer make Pre-Tax Savings Contributions for
any Plan Year that would result in the actual deferral percentage of
the highly compensated employees who are Participants, as defined
below, exceeding the actual deferral percentage of the group of all
other Participants by the amount and/or proportion permitted under the
rule of (a) or (b) below whichever would allow the actual deferral
percentage of the highly compensated Participants to be larger.
(a) The actual deferral percentage for the highly compensated
Participants is not more than the actual deferral percentage of
all other Participants multiplied by 1.25; or
(b) The excess of the actual deferral percentage for the highly
compensated Participants over the actual deferral percentage of
all other Participants is not more than two percentage points,
and the actual deferral percentage for the highly compensated
Participants is not more than the actual deferral percentage of
the other Participants multiplied by 2.
The actual deferral percentage of each group of Participants for any
Plan Year shall be the average of the ratios (calculated separately
for each Participant in each group) of (A) the Pre-Tax Savings
Contributions made on behalf of each Participant for such Plan Year,
to (B) such Participant's Compensation for such Plan Year. To the
extent necessary to conform to such limitation, the Plan Administrator
shall reduce Pre-Tax Savings Contributions made on behalf of the
highly compensated Participants in the following manner: First, the
Pre-Tax Savings Contribution made on behalf of the Participant who
elected 12 percent during such Plan Year shall be
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reduced to 11 percent on a pro rata basis (i.e., a specified
percentage of each dollar in this category shall not be allocated to
or remain in such Participant's Pre-Tax Savings Contribution Account);
second, the Pre-Tax Savings Contribution made on behalf of each
Participant who elected 11 percent during such Plan Year shall be
reduced to 10 percent. This process shall be continued until such
limitation is met. Any such reduction in the Pre-Tax Savings
Contribution made on behalf of such Participant shall be refunded to
him together with any income allocable to such Pre-Tax Savings
Contributions as soon as administratively possible but in no event
later than March 15 of the immediately succeeding Plan Year.
4.10 401(m) LIMITATIONS
In no event shall any Employer make Employer contributions for any
Plan Year that would result in the contribution percentage of the
highly compensated employees who are Participants, as defined below,
exceeding the contribution percentage of the group of all other
Participants by the amount and/or proportion permitted under the rule
of (a) or (b) below whichever would allow the contribution percentage
of the highly compensated Participants to be larger.
(a) The contribution percentage for the highly compensated
Participants is not more than the contribution percentage of all
other Participants multiplied by 1.25; or
(b) The excess of the contribution percentage for the highly
compensated Participants over the contribution percentage of all
other Participants is not more than two percentage points, and
the contribution percentage for the highly compensated
Participants is not more than the contribution percentage of the
other Participants multiplied by 2.
The percentage of each group of Participants for any Plan Year shall
be the average of the ratios (calculated separately for each
Participant in each group) of (A) After-Tax Savings Contributions,
Employer contributions and, if the Plan Administrator so elects, the
Pre-Tax Savings contributions made on behalf of each Participant for
such Plan Year, to (B) such participant's compensation for such Plan
Year. To the extent necessary to conform to such limitation, the Plan
Administrator shall first refund After-Tax Savings Contributions and
thereafter reduce Employer contributions allocated to the highly
compensated Participants pro rata to the allocations made.
Any such reduction in the Employer contribution allocated to such
Participant together with any income allocable to such contributions
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shall be distributed to the Participant as soon as administratively
possible but in no event later than March 15 of the immediately
succeeding Plan Year.
4.11 DEFINITIONS APPLICABLE TO SECTIONS 4.09 AND 4.10
For purposes of Section 4.09 and 4.10, the term "Participant" includes
all Covered Employees who have met the service requirements of Section
2.01 and who continue to be employed regardless of whether they have
filed an election to reduce Compensation as provided for in Section
3.03.
4.12 $7,000 LIMITATION
In no event shall any Participant's Pre-Tax Savings Contributions for
any Plan Year exceed $7,000 or such higher amount as may be permitted
under Code Section 402(g). In the event that any Pre-Tax Savings
Contributions in excess of that amount are in fact, made, such excess
shall be returned to the Participant no later than April 15 in the
year following the Plan Year in which such excess Pre-Tax Savings
Contributions were made.
4.13 401(k) TESTING RULES
For purposes of determining whether the actual deferral percentage
test of Code Section 401(k) is satisfied, the rules below will apply:
(a) If two or more Employer plans are aggregated in accordance with
the Plan Aggregation Rules, all Pre-Tax Contributions and
Employer contributions ("Elective Contributions") are to be
treated as made under a single plan.
(b) The actual deferral percentage of a highly compensated
Participant (as defined below) is determined by treating all cash
or deferred arrangements for which the highly compensated
Participant is eligible (other than those plans which are
Permissive Aggregation Groups) as a single arrangement.
(c) The actual deferral percentage for a group or individuals subject
to the Family Aggregation Rules is determined by combining Pre-
Tax Contributions, Compensation, and amounts treated as Pre-Tax
Contributions of all eligible Family Members. Except to the
extent taken into account in the preceding sentence, the
Compensation, and amounts treated as Pre-Tax Contributions of all
Family Members are disregarded
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in determining the actual deferral percentages for the groups of
highly compensated Participants and nonhighly compensated
Participants.
4.14 401(m) TESTING RULES
For purposes of determining whether the Plan satisfies the actual
contribution percentage test of Code Section 401(m), the following
rules shall apply.
(a) For purposes of determining the actual contribution percentage,
if an individual is subject to the Family Aggregation Rules, the
contribution percentage shall be calculated as if the Family
Aggregation Group is one individual. Further, if Employer
contributions are treated as a Pre-Tax Contribution to satisfy
the actual deferral percentage test described in Code section
401(k)(3), those Employer contributions shall not be taken into
account to satisfy the requirements of the actual contribution
percentage test under Code section 401(m)(2).
(b) All Pre-Tax Contributions and Employer contributions that are
made under two or more plans which are aggregated in accordance
with the Plan Aggregation Rules shall be treated as under a
single plan.
(c) The actual contribution percentage of a highly compensated
Participant (as defined herein) will be determined by treating
all plans as a single plan provided the plans are subject to
section 401(a), highly compensated Participants are eligible for
the plans, and the plans are part of a Required Aggregation
Group.
(d) For a highly compensated Participant or 5 Percent Owner who is
subject to the Family Aggregation Rules, the actual contribution
percentage for the Family Aggregation Group (which is treated as
one highly compensated Participant) is the ratio determined by
combining the Pre-Tax Contributions, Employer contributions and
Compensation of all eligible Family Members. Except to the extent
taken into account in the preceding sentence, the contributions
and Compensation of all Family Members are disregarded in
determining the actual contribution percentages for the groups of
highly compensated Participants and nonhighly compensated
Participants.
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(e) For a highly compensated Participant whose actual
contribution percentage is determined under the Family
Aggregation Rules, the determination of the amount of
excess aggregate contributions shall be made by reducing
the excess aggregate contributions which are allocated
among the Family Members in proportion to the
contributions of each Family Member that have been
combined.
4.15 NON-DISCRIMINATION TESTING RULES
For purposes of the actual deferral percentage test in Section 4.09
and the actual contribution percentage test in Section 4.10 the
following rules and definitions shall apply:
(a) For purposes of determining who is a highly compensated
Participant for a particular Plan Year the following rules shall
be applied:
(i) For purposes of determining the group of highly
compensated Participants for a "Determination Year",
the Determination Year shall be the Plan Year.
(ii) For purposes of any "Look-Back Year" calculation
in determining the group of highly compensated
Participants, the Look-Back Year shall be the
twelve month period immediately preceding the
Determination Year.
(iii) For these purposes, the "Top Paid Group" is the
group consisting of the top 20 percent of the
Employees when ranked on the basis of
Compensation paid for services during such Plan
Year. For these purposes, Compensation is the
same as defined in Section 4.15(b).
(b) A "highly compensated Participant" shall mean any Participant
who, during the year or the preceding year:
(i) was at any time a 5 Percent Owner;
(ii) received Compensation from the Employer in
excess of $75,000 (or such other amount as
determined when cost-of-living adjustments are
made under Section 415(d));
(iii) received Compensation from the Employer in excess of
$50,000 (or such other amount as provided by the
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Code) and was in the Top-Paid Group of Employees for
such year; or
(iv) was at any time an officer and received Compensation
greater than 50 percent of the amount in effect under
Section 415(b)(1)(A) for such year.
(c) A "5 Percent Owner" is any person who owns (or is
considered as owning within the meaning of Section 318 of
the Code) more than 5 percent of the outstanding stock of
the corporation or stock possessing more than 5 percent of
the total combined voting power of all stock of the
corporation.
(d) For purposes of this Section, "Compensation" shall be construed
in accordance with Code Section 414(q)(7).
4.16 DUAL LIMITATION
To the extent required by applicable law, in no event will the sum of
the actual deferral percentage as described in Section 4.09 and the
contribution percentage as described in Section 4.10 for
highly compensated employees who are Participants
exceed the sum of:
(i) 125% of the greater of
(a) the actual deferral percentage of all other
Participants, or
(b) the contribution percentage of all other
Participants; and
(ii) Two plus the lesser of
(a) the actual deferral percentage of all other
Participants, or
(b) the contribution percentage of all other
Participants, but in no event shall this
amount exceed 200% of the lesser of
those two amounts.
If this aggregate limitation would otherwise be exceeded,
the Plan Administrator shall determine whether to distribute excess
Pre-Tax Savings Contributions or distribute excess After-Tax Savings
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Contributions or Employer contributions to highly-
compensated employees who are Participants, and the generally
applicable rules will be followed for the distribution of the type of
contribution chosen.
ARTICLE V.
Vesting
5.01 EMPLOYEE CONTRIBUTION ACCOUNTS AND ROLLOVER CONTRIBUTION ACCOUNT
A Participant (or Employee with respect to his Rollover Contribution
Account who is not a Participant) shall at all times have a fully
vested, nonforfeitable interest in his Pre-Tax Savings Contribution
Account, his After-Tax Savings Contribution Account and his
Rollover Contribution Account.
5.02 EMPLOYER CONTRIBUTION ACCOUNT
A Participant shall have a fully vested, nonforfeitable interest in
his Employer Contribution Account on the first to occur of the
follow ing events:
(a) his sixtieth (60th) birthday,
(b) the date on which he shall be determined to have a Total and
Permanent disability,
(c) the date of his death, or
(d) his completion of six (6) Years of Service.
5.03 TERMINATION OF EMPLOYMENT
(a) If a Participant withdraws from Plan participation or terminates
employment for any reason other than Total and Permanent
Disability or death and before the completion of six (6) Years
of Service or before his sixtieth (60th) birthday, he shall be
vested in the percentage of his Employer Contribution Account set
forth in the following table:
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Completed Years
of Service Vested Percentage
--------------- -----------------
less than 1 0%
1 20%
2 30%
3 40%
4 60%
5 80%
6 or more 100%
(b) The portion of the Participant's Employer Contribution
Account in which he is not vested at his termination of
employment shall be declared a Forfeiture on the last day of
the Plan Year in which his termination of employment occurred.
The Forfeiture shall be taken from the investment funds in
which his Account was invested pro rata to the value of his
Account's interest in the investment funds. Such Forfeiture
shall be reallocated among the remaining Participants
employed by the Employer who employed the former Employee
as described above.
(c) If a Participant returns to the employ of an Employer and
rejoins the Plan before he incurs five (5) consecutive One-Year
Breaks in Service, the portion of his Employer Contribution
Account that had been forfeited shall be reinstated to his
Employer Contribution Account in full, unadjusted by any
gains or losses occurring subsequent to the Valuation Date
preceding his termination of employment, by using the
Forfeitures for the Plan Year in which his reemployment
occurred. If the Forfeitures are insufficient to restore the
forfeited amount in the year of reemployment, the remainder
shall be restored by the earnings of the Trust Fund. If the
earnings of the Trust Fund are insufficient to restore the
forfeited amount in the year of reemployment, the remainder
shall be restored by an Employer contribution. If a Participant
who is reemployed shall again incur a termination of
employment or a withdrawal from Plan participation under
circumstances in which he is not fully vested in his Employer
Contribution Account, the portion of his Employer
Contribution Account in which he is vested shall be
determined by adding to the amount actually held by the
Trustee any amount previously distributed to him, the vested
percentage shall be applied to this total, the amount of the
previous distribution shall be subtracted, and the remaining
amount shall be his vested balance. The non-vested
percentage of a Participant's Employer Contribution Account
shall not share in the earnings or losses of the Trust Fund
during his absence from the Employer.
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5.04 EFFECT OF ONE YEAR BREAK IN SERVICE
If a Participant or Employee incurs a One-Year Break in Service and
is thereafter reemployed by an Employer, he shall regain his Years of
Service earned before such One-Year Break in Service upon such
reemployment and rejoining the Plan.
If a vested or partially-vested Participant or Employee incurs a
One-Year Break in Service and is thereafter reemployed by an
Employer, he shall regain his Years of Service earned before such
One-Year Break in Service upon reemployment with an Employer
and rejoining the Plan.
ARTICLE VI.
Time and Method of Payment
6.01 EVENTS AND MANNER OF PAYMENT
A Participant shall be entitled to receive payment of his benefits
upon his retirement, Total and Permanent Disability or termination of
employment for any other reason. A Participant's Beneficiary shall
be entitled to receive payment of the Participant's benefits upon the
death of the Participant.
Whenever the Plan Administrator shall direct the Trustee to make
payment to a Participant or his Beneficiary, the Plan Administrator
shall direct the Trustee to pay the vested value of the Participant's
Account Balance (determined as of the Valuation Date coincident
with or next following the Participant's termination of employment)
to or for the benefit of the Participant or his Beneficiary as a lump
sum, in cash.
If the distribution is due to the death of the Participant, the
distribution shall be made to the Participant's Beneficiary only if
the Participant was unmarried at death or if the Participant and his
spouse both elected to have the benefit paid to a Beneficiary,
subject to Section 6.04.
Payment to a five percent (5%) owner of an Employer (as described
in Section 416(i) of the Code) shall be made or commenced no later
than the April 1 following the calendar year in which he attains age
seventy and one half (70-1/2), whether or not he has retired.
Effective January 1, 1989, this rule shall apply to all Participants.
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Payment shall be made or commenced as soon as administratively
practical after the close of the Plan Year in which the employment of
the Participant terminates, unless (a) the Participant, or his spouse
in the event of his death, agrees to a later date, but not later than
the April 1 following the calendar year in which he attains or would
have attained age seventy and one half (70-1/2), and (b) the
Company consents to such later date.
6.02 DISTRIBUTION OF UNALLOCATED EMPLOYEE CONTRIBUTIONS
If on the date of termination of a Participant's employment, the
Company shall be holding contributions made by or on behalf of the
Participant but not yet allocated to his Accounts, the Company shall
pay such amounts either directly to the Participant (or his
Beneficiary, as the case may be) or to the Trustee, to be distributed
by the Trustee in accordance with Section 6.01.
6.03 CERTAIN RETROACTIVE PAYMENTS
If the amount of the payment required to commence on the date
determined under Section 6.01 cannot be ascertained by such date, a
payment retroactive to such date may be made no later than sixty
(60) days after the earliest date on which the amount of such
payment can be ascertained under the Plan.
6.04 BENEFICIARY
(a) If a Participant is married on the date of his death, the
Beneficiary of such Participant shall be his spouse, unless the
Participant's spouse consents in writing not to be said
Beneficiary and such written consent is witnessed either by
the Plan Administrator or by a notary public. Notwithstanding
the foregoing, this paragraph (a) shall not apply if it is
established to the Plan Administrator's satisfaction either that
the spouse cannot be located or that other circumstances set
forth in regulations promulgated under Section 417 of the Code
which preclude the necessity of the spouse's consent are
present with respect to the Participant.
(b) Except as otherwise provided in paragraph (a), each Participant
shall have the right to designate, by giving a written
designation to the Plan Administrator, a Beneficiary to receive
any death benefit which may become payable upon the death
of such Participant. Successive designations may be made, and
the last designation received by the Plan Administrator prior to
the death
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of the Participant shall be effective and shall revoke
all prior designations. If a designated Beneficiary shall die
before the Participant, his interest shall terminate, and, unless
otherwise provided in the Participant's designation, such
interest shall be paid in equal shares to those Beneficiaries, if
any, who survive the Participant. Except as otherwise
provided in paragraph (a), the Participant shall have the right
to revoke the designation of any Beneficiary without the
consent of the Beneficiary.
(c) If a Participant shall fail to designate a Beneficiary, if such
designation shall for any reason be illegal or ineffective, or if
no Beneficiary shall survive the Participant, his death benefits
shall be paid:
(i) to his surviving spouse;
(ii) if there is no surviving spouse, to his descendants
(including legally adopted children and their
descendants) PER STIRPES; or
(iii) if there is neither a surviving spouse nor surviving
descendants, to the executor or other personal
representative of the Participant to be distributed in
accordance with the Participant's will or applicable
law.
(d) The Plan Administrator may determine the identity of the
distributees and in so doing may act and rely upon any
information it may deem reliable upon reasonable inquiry, and
upon any affidavit, certificate or other paper believed by it to
be genuine, and upon any evidence believed by it to be
sufficient.
6.05 ADMINISTRATIVE POWERS RELATING TO PAYMENTS
If a Participant or Beneficiary is a minor or is under a legal
disability or, by reason of illness or mental or physical disability,
is unable, in the opinion of the Plan Administrator, to attend
properly to his personal financial matters, the Trustee may make such
payments in such of the following ways as the Plan Administrator shall
direct:
(a) directly to such Participant or Beneficiary;
(b) to the legal representative of such Participant or Beneficiary;
or
(c) to some relative by blood or marriage, or friend, for the benefit
of such Participant or Beneficiary.
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Any payment made pursuant to this Section 6.05 shall be in complete
discharge of the obligation for such payment under the Plan.
6.06 BENEFITS OF PERSONS WHO CANNOT BE LOCATED
If the Plan Administrator notifies a Participant or Beneficiary in
writing at his last known address that he is entitled to benefits
under the Plan and the Participant or Beneficiary fails to claim his
benefits within five (5) calendar years after notification, his
benefits shall be distributed to the person or persons who would have
been entitled to the benefits in the event of the death of the
Participant or Beneficiary whose whereabouts is unknown, assuming that
such death had occurred on the distribution date following the fifth
anniversary of the mailing of the notification.
6.07 ELECTION OF PRE-TEFRA DISTRIBUTION
Anything to the contrary notwithstanding, if any Participant has
delivered to the Plan Administrator, on or before December 31, 1983,
an election as to the form in which his benefits are to be
distributed, which election is qualified under Section 242(b)(2) of
TEFRA, and if such election has not been revoked, the distribution of
his benefits shall be made in accordance with the express terms of
such election.
6.08 RESTRICTIONS ON RECEIPT OF TRANSFER
This Plan shall not accept any involuntary trustee-to-trustee
transfers but may accept rollovers (including direct rollovers) from a
plan which is subject to the minimum funding standards of Section 412
of the Internal Revenue Code.
6.09 DISTRIBUTION UPON SALE OF IMECO, INC.
This Section is effective June 30, 1993. Upon the sale by the
Company of its wholly owned subsidiary, Imeco, Inc., pursuant to
that certain Stock Purchase Agreement, by and between the
Company and York International, Inc., dated ____________, 1993
(the "Stock Purchase Agreement"), each Participant employed by
Imeco, Inc. on the day of the transfer of the Imeco stock pursuant to
the Stock Purchase Agreement shall have a fully vested,
nonforfeitable interest in his Employer Contribution Account. The
Plan Administrator shall direct the Trustee to transfer the Account
Balances of the Participants described in this Section 6.09 to the
York International, Inc. Plan if the Plan Administrator determines
that all the requirements of Section 414 of the Internal Revenue
Code, relating to transfer of plan assets, have been fulfilled.
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6.10 TRANSFER TO OTHER PLAN
This Section is effective June 30, 1993. The Trustee, upon written
direction by the Employer, shall transfer some or all of the assets
held under the Trust to another plan or trust designated by the
Employer meeting the requirements of the Code relating to qualified
plans and trusts, whether such transfer is made pursuant to a merger
or consolidation of this plan with such other plan or trust or for any
other allowable purpose.
6.11 CERTAIN DISTRIBUTIONS
Distributions under this Plan shall generally be made only to the
person who is entitled to the same. However, distributions made in
the circumstances described below shall constitute the discharge of
the Trustree's and Plan Administrator's obligations hereunder.
(a) Pursuant to Section 6.12 below, the Plan Administrator may, at
the request of a Distributee, direct the Trustee to transfer all
or part of such distribution to the trustee or custodian of any
tax qualified plan or individual retirement arrangement,
provided, however, that the Distributee must satisfy the Plan
Administrator that such transfer can be made tax-free.
(b) Distributions to minors or persons under legal disability may be
made in the discretion of the Trustee: (i) directly to such
persons; (ii) to the guardian of such persons; or (iii) by
expending such amounts for the education and/or maintenance of
said persons.
6.12 ROLLOVER DISTRIBUTIONS
Effective January 1, 1993, notwithstanding any provision of the Plan
to the contrary that would otherwise limit a Distributee's election
under this part, a Distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
For the purposes of this Section 6.12, the following definitions
apply:
(a) An "Eligible Rollover Distribution" is any distribution of all or
any part of the balance to the credit of the Distributee, except
that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic
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payments (not less frequently than annually) made for the life
(or life expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the
Distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Internal
Revenue Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(b) An "Eligible Retirement Plan" is an individual retirement account
described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that
accepts the Distributee's eligible rollover distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(c) A "Distributee" includes an employee or former employee. In
addition, the employee's spouse or former spouse who is the
Alternative Payee under a Qualified Domestic Relations Order,
as defined in section 414(p) of the Code, is a Distributee with
regard to the interest of the spouse or former spouse.
(d) A "Direct Rollover" is a payment by the plan to the Eligible
Retirement Plan specified by the Distributee.
6.13 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
Notwithstanding any other restriction upon the time when benefits
are to be paid herein, the Plan Administrator may make a lump sum
payment to any Alternate Payee under a Qualified Domestic
Relations Order, as soon as administratively possible after the
receipt and verification of such Order.
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ARTICLE VII.
Management of Funds
7.01 APPOINTMENT OF TRUSTEE
A Trustee shall be appointed by the Company to administer the
Trust Fund. The Trustee shall serve at the pleasure of the
Company, and shall have the rights, powers and duties set forth in
the Trust Agreement. All assets of the Trust Fund shall be held,
invested and reinvested by the Trustee.
7.02 ASSETS OF TRUST
All contributions under this Plan shall be paid to the Trustee and,
except as provided in Section 7.03, all assets of the Trust Fund,
including income from investments and from all other sources, shall
be retained for the exclusive benefit of Participants, spouses, former
Participants and Beneficiaries, and shall be used to pay benefits to
such persons, or to pay expenses of administration of the Plan and
Trust to the extent not paid by the Company.
7.03 REVERSION OF EMPLOYER CONTRIBUTIONS
At no time shall any part of the corpus or income of the Trust Fund
be used for or diverted to purposes other than for the exclusive
benefit of Participants and their Beneficiaries.
Notwithstanding the above, in the case of a contribution which is
made by the Employer by a mistake of fact, such contribution may
be returned to such Employer within one (1) year after the payment
of the contribution to the Trust Fund. If a contribution is
conditioned on qualification of the Plan under Section 401 of the
Code, and if the Plan does not qualify, then such contribution may
be returned to such Employer within one (1) year after the date of
denial of qualification of the Plan. If a contribution is conditioned
upon the deductibility of the contribution under Section 404 of the
Code, then, to the extent the deduction is disallowed, such a
contribution may be returned to such Employer within one (1) year
after the disallowance of the deduction.
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ARTICLE VIII.
Administration of Plan
8.01 PLAN ADMINISTRATOR
The Company may appoint a Plan Administrator who shall serve at
the pleasure of the Board. The Plan Administrator shall have the
powers and duties of a plan administrator under ERISA and the
Code, except such powers and duties as may be delegated to the
Trustee or other fiduciaries.
8.02 RIGHTS, POWERS AND DUTIES OF PLAN ADMINISTRATOR
The Plan Administrator shall have such authority as may be
necessary to discharge its responsibilities under the Plan,
including the following rights, powers and duties:
(a) The Plan Administrator shall adopt rules governing its
procedures not inconsistent herewith, and shall keep a
permanent record of its meetings and actions. The Plan
Administrator shall maintain the Accounts of Participants and
Beneficiaries under the Plan or shall cause them to be
maintained under its direction.
(b) The Plan Administrator shall direct the Limited Co-Trustee in
writing to make payments from the Trust Fund to persons
who qualify for such payments hereunder. Such written order
shall specify the name of the person, his address, and the
amount and frequency of such payments. The Plan Administrator
shall be entitled to rely upon a certificate of the Company as to
the service, age, earnings or other pertinent information
regarding a Participant.
(c) The Plan Administrator shall not take action or direct the
Trustee to take any action with respect to any of the benefits
provided hereunder which would be discriminatory in favor of
those Participants or eligible Employees who are officers,
shareholders or highly compensated Employees of an
Employer.
(d) The Plan Administrator shall have the sole responsibility for
the administration of the Plan; and, except as herein expressly
provided, the Plan Administrator shall have the exclusive right
to interpret the provisions of the Plan and to determine any
question arising hereunder or in connection with the
administration of the Plan, including the remedying of any
omission, inconsistency or ambiguity, and its decision or
action in
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respect thereof shall be conclusive and binding upon any and all
Participants, spouses, former Participants, Beneficiaries, heirs,
distributees, executors, administrators and assigns, subject to
the provisions of Article IX.
(e) The Plan Administrator may employ such counsel and agents
in such clerical, medical, accounting and other services as it
may require in carrying out the provisions of the Plan, and to
rely upon any opinions or reports furnished by them.
(f) Participants, spouses, former Participants, or their
Beneficiaries shall be notified by the Plan Administrator of
their right to receive benefits. The Plan Administrator shall
establish a uniform procedure for such notification.
(g) The Plan Administrator shall finally and conclusively decide all
questions, problems, and controversies relating to the
eligibility of Employees, the determination of Years of Service,
Hours of Service and One-Year Breaks in Service. The Plan
Administrator shall keep application and authorization forms of
all Participants and all communications involving the same,
make information available to Participants regarding benefit
payment options, and direct the Trustee regarding payment of
benefits.
(h) The Plan Administrator shall establish reasonable procedures
which a Participant must follow in verifying his absence for
reason of maternity or paternity leave and the length thereof.
8.03 EXERCISE OF PLAN ADMINISTRATOR'S DUTIES
The Plan Administrator shall discharge its duties solely in the
interest of Participants, former Participants and their Beneficiaries:
(a) for the exclusive purposes of providing benefits to such
Participants, former Participants and Beneficiaries and, in the
discretion of the Company, defraying reasonable expenses of
Plan administration, and
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims.
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8.04 INDEMNIFICATION OF FIDUCIARIES
Each Employer shall indemnify all officers and Employees of such
Employer assigned fiduciary responsibility under Federal law to the
extent that such officers or Employees incur loss or damage which
may result from such officers' or Employees' duties, exercise of
discretion under the Plan, or any other act or omission hereunder.
Such duties, exercises of discretion, acts or omissions will not be
indemnified by an Employer in the event that such loss or damage is
judicially determined or agreed by the involved officers or
Employees to be due to their respective gross negligence or willful
misconduct.
8.05 COMPENSATION
Any individual acting as agent of the Plan Administrator shall serve
without compensation for services as such, but all proper expenses
incurred by the individual incident to the functioning of the Plan
shall be paid from the Trust to the extent not paid by the Company.
8.06 BOND
No bond or other security shall be required of the Plan
Administrator for the faithful performance of its duties, except as
may be required by ERISA, the Code or by any other state or Federal
law or regulation.
ARTICLE IX.
Claims Procedures
9.01 INFORMAL REVIEW
A Participant or former Participant shall request the payment of his
benefits under the Plan by completing the appropriate forms upon
his termination of employment for any reason and returning them to
the Plan Administrator. In the event that such Participant's
employment terminates by reason of death, such request shall be
made by his Beneficiary.
Any Participant, former Participant or Beneficiary of either, who
wishes to request an informal review of a claim for benefits or who
wishes an explanation of a benefit or its denial may direct to the
Plan Administrator a written request for an informal review. The Plan
Administrator shall respond to the request by issuing a notice to the
claimant as soon as possible but in no event later than sixty (60)
days
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from the date of the request. This notice furnished by the Plan
Administrator shall be written in a manner calculated to be
understood by the claimant and shall include the following:
(a) The specific reason or reasons for any denial of benefits;
(b) The specific Plan provisions on which any denial is based;
(c) A description of any further material or information which is
necessary for the claimant to perfect his claim and an
explanation of why the material or information is needed; and
(d) An explanation of the Plan's formal claim review procedure.
If the claimant does not respond to the notice, posted by first class
mail to the address of record of the Plan Administrator, within one
hundred and twenty (120) days from the posting of the notice, the
claimant shall be considered satisfied in all respects. If the Plan
Administrator fails to respond to the claimant's written request for
an informal review, the claimant shall be entitled to proceed to the
formal claim review procedure described in Section 9.02. All
decisions by the Plan Administrator are subject to Section 9.02,
final, conclusive and binding with respect to all parties.
9.02 FORMAL REVIEW
In the event that the notice concerning the informal review is
insufficient to satisfy the claimant, the claimant or his duly
authorized representative shall submit to the Plan Administrator
within one hundred and twenty (120) days of the mailing date of the
notice, a written notification of appeal of the claim denial.
The notification of appeal of the claim denial shall permit the
claimant or his duly authorized representative to utilize the
following formal claim review procedures:
(a) to review pertinent documents; and
(b) to submit issues and comments in writing to which the Plan
Administrator shall respond.
The Plan Administrator shall furnish a written decision on formal
review not later than sixty (60) days after receipt of the
notification of appeal, unless special circumstances require an
extension of the time for processing the appeal. In no event, however,
shall the Plan Administrator respond later than one hundred and twenty
(120) days
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after a request for a formal review. The decision on formal
review shall be in writing and shall include specific reasons for the
decision, and shall be written in a manner calculated to be
understood by the claimant and contain specific reference to the
pertinent Plan provisions on which the decision is based.
ARTICLE X.
AMENDMENT AND TERMINATION
10.01 TERMINATION
(a) It is the expectation of the Company that it shall continue this
Plan and the payment of contributions hereunder indefinitely,
but the continuation of the Plan is not assumed as a
contractual obligation of the Company; and the right is
reserved by the Company and each Employer at any time to
permanently discontinue its contributions hereunder. In the
event that the Plan is terminated in whole or in part or if
contributions by the Company or an Employer are completely
discontinued, the interest of all affected Participants shall be
fully vested and nonforfeitable.
(b) This Plan may be terminated by the Company, by action of its
board of directors, at any time. Such termination shall becomes
effective upon written notice to the Trustee. An Employer, by
actions of its board of directors, may terminate the Plan as to
its Employees, at any time, with the consent of the Company.
(c) Upon termination of the Plan, further payment of the Company
contributions to the Trust shall cease. The Trustee shall notify
each Participant of the termination of the Plan.
Each Participant who terminates employment at the time of Plan
termination shall be entitled to receive the entire amount of his
Account balances and the Trustee shall make payment to
each Participant of such amount in cash or in assets of the
Trust Fund, as the Trustee shall determine. If, on termination
of the Plan, a Participant remains an Employee of the
Company, the amount of his benefits shall be retained in the
Trust until after his termination of employment and shall be
paid in accordance with Section 6.01.
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(d) If any Employer other than the Company terminates its
participation in the Plan or completely discontinues its
contribution, the amounts credited to the Participants' Ac
counts of such Employer shall be fully vested and
nonforfeitable, and with respect to each such Participant who
immediately thereafter is employed by another Employer not
terminating its participation or discontinuing its
contributions, the Plan Administrator shall transfer such
amounts to an Account in the Employee's name with such
other Employer. Such Account shall be fully vested and
nonforfeitable.
10.02 RIGHT TO AMEND, MODIFY, CHANGE OR REVISE PLAN
The Company, by action of its board of directors, may at any time and
from time to time amend, modify, change or revise this Plan in whole
or in part, by notice thereof in writing delivered to the Trustee;
provided, however:
(a) That no amendment shall have the effect of vesting in the
Company any interest in or control of any funds, securities or
other property subject to the terms of the Trust;
(b) That no amendment shall authorize or permit at any time any
part of the corpus or income of the Trust Fund to be used or
diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries, except as provided in
Section 7.03;
(c) That no amendment shall have any retroactive effect as to
deprive any Participant, former Participant or Beneficiary of
any benefit already accrued; save only that no amendment
made in conformance with the provisions of the Code or any
other statute relating to employees trusts, or of any official
regulation or rulings issues pursuant thereto, shall be
considered prejudicial to the rights of any Participant or
Beneficiary.
10.03 MERGER AND CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS
In the case of any merger or consolidation with, or transfer of assets
and liabilities to, any other plan, provisions shall be made so that
each Participant in the Plan on the date thereof would receive a
benefit immediately after the merger, consolidation or transfer which
is equal to or greater than the benefit he would have been entitled to
receive immediately prior to the merger, consolidation or transfer (if
the Plan had terminated).
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ARTICLE XI.
MISCELLANEOUS
11.01 NO CONTRACT OF EMPLOYMENT; EMPLOYER RECORDS FINAL
Nothing herein contained shall be construed to constitute a contract
of employment between any Employer and any Employee or create
or expand any benefit rights which are not the subject matter of this
Plan. The employment records of an Employer and the
Trustee's records shall be final and binding upon all
Employees as to their rights and participation.
11.02 RESTRICTIONS UPON ASSIGNMENTS AND CREDITOR'S CLAIMS
Except as otherwise provided in the Plan, no Participant,
his estate or any Beneficiary shall have any power to
assign, pledge, encumber or transfer any interest in the
Trust Fund while the same shall be in the possession of the
Trustee. Any such attempt at alienation shall be void. No
such interest shall be subject to attachment, garnishment,
execution, levy or any other legal or equitable proceeding
or process and any attempt to so subject such interest
shall be void. The preceding sentences shall also apply to the
creation, assignment or recognition of a right to any benefit payable
with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a Qualified Domestic Relations
Order. The Plan Administrator shall establish reasonable
procedures to determine whether a domestic relations order is a
Qualified Domestic Relations Order. Such procedures must be in
writing, must provide for the prompt notification of each person
specified in the order as being entitled to payment of benefitsunder
the Plan, and must permit an alternate payee to designate a
representative for receipt of copies of notices that are sent to the
alternate payee with respect to a domestic relations order.
11.03 RESTRICTION OF CLAIMS AGAINST TRUST
The Trust under this Plan and agreement from its inception shall be
a separate entity aside and apart from the Employers and their
assets. The Trust and the corpus and income thereof shall in no
event and in no manner whatsoever be subject to the rights or
claims of any creditor of any Employer. Neither the establishment of
the Trust, the modification thereof, the creation of any fund or
account, nor the
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payment of any benefits shall be construed as giving any Participant
or any other person whomsoever any legal or equitable rights against
an Employer or the Trustee unless the same shall be specifically
provided for in this Plan.
11.04 BENEFITS PAYABLE BY TRUST
All benefits payable under the Plan shall be paid or provided for
solely from the Trust and the Employers assume no liability or
responsibility therefor.
11.05 SUCCESSOR TO EMPLOYER
In the event that any successor corporation to the Company, by
merger, consolidation, purchase or otherwise, shall elect to adopt
the Plan, such successor corporation shall be substituted hereunder
for the Company upon filing in writing with the Trustees of its
election to do so.
11.06 APPLICABLE LAW
The Plan shall be construed and administered in accordance with
ERISA and with the laws of Illinois, to the extent that such laws are
not preempted by ERISA.
ARTICLE XII.
TOP-HEAVY PROVISIONS
12.01 GENERAL
Notwithstanding anything herein to the contrary, the following
provisions shall apply with respect to any Plan Year in which the
Plan is deemed to be Top-Heavy.
12.02 DEFINITIONS
TOP-HEAVY
The Plan is deemed to be Top-Heavy for any Plan Year if, as of the
Determination Date for such Plan Year, any of the following
conditions exist:
(a) If the Top-Heavy Ratio for the Plan exceeds sixty percent
(60%) and the Plan is not part of a Required Aggregation
Group of plans or a Permissive Aggregation Group of plans;
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(b) If the Plan is part of a Required Aggregation Group of plans
(but is not part of a Permissive Aggregation Group of plans) and
the Top-Heavy Ratio for the group of plans exceeds sixty percent
(60%); or
(c) If the Plan is part of a Required Aggregation Group of plans
and part of a Permissive Aggregation Group of plans and the
Top-Heavy Ratio for the Permissive Aggregation Group of
plans exceeds sixty percent (60%).
DETERMINATION DATE means, with respect to any Plan Year, the
last calendar day of the immediately preceding Plan Year.
KEY EMPLOYEE means any Employee or former Employee (or any
Beneficiary of such Employee) who, at any time during the Plan Year
or any of the four immediately preceding Plan Years, is or was:
(a) an officer of any Employer whose compensation exceeds fifty
percent (50%) of the dollar limitation in effect under Section
415(b)(1)(A) of the Code for such Plan Year;
(b) a shareholder who owns one of the ten largest interests in an
Employer which interest is at least 1/2% if such shareholder's
Compensation exceeds the dollar limitation in effect under
Section 415((c)(1)(A) of the Code;
(c) a shareholder who owns more than five percent (5%) of the
stock of an Employer; or
(d) a shareholder who owns more than one percent (1%) of the
stock of an Employer and whose Compensation for any Plan
Year in which he owns such percentage share exceeds
$150,000.
An officer is defined as the actual officer group of an Employer;
provided, however, that not more than the greater of three (3)
Employees or ten percent (10%) of the Employees (but in no event
more than 50 Employees) shall be considered as officers in
determining whether the Plan is Top-Heavy).
NON-KEY EMPLOYEE means any Employee who is not a Key
Employee.
PERMISSIVE AGGREGATION GROUP means the Required
Aggregation Group of plans plus any other plan or plans of an
Employer which, when considered as a group with the Required
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Aggregation Group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
REQUIRED AGGREGATION GROUP means the group of:
(a) Each qualified plan of an Employer in which at least one Key
Employee participates; and
(b) Any other qualified plan of an Employer which enables a plan
described in paragraph (a) above to meet the requirements of
Section 401(a)(4) or Section 410 of the Code.
TOP-HEAVY RATIO
(a) If an Employer maintains one or more defined contribution
plans and the Employer has not maintained any defined benefit
plan which during the five (5) Plan Year period ending on the
Determination Date has covered or could cover a Participant in
this Plan, the Top-Heavy Ratio shall be a fraction, the
numerator of which is the sum of the Account Balances of all
Key Employees as of the Determination Date (including any
part of any Account Balance distributed in the five (5) Plan
Year period ending on the Determination Date), and the
denominator of which is the sum of all Account Balances
(including any part of any Account Balance distributed in the
five (5) Plan Year period ending on the Determination Date) of
all Participants as of the Determination Date, both computed in
accordance with Section 416 of the Code. The numerator and
denominator of the Top-Heavy Ratio shall be adjusted to
reflect any contribution which is required to be taken into
account but unpaid as of the Determination Date.
(b) If an Employer maintains one or more defined contribution
plans and the Employer maintains or has maintained one or
more defined benefit plans which during the five (5) Plan Year
period ending on the Determination Date have covered or
could cover a Participant in this Plan, the Top-Heavy Ratio
shall be a fraction, the numerator of which is the sum of
Account Balances under the defined contribution plans for all
Key Employees and the present value of accrued benefits
under the defined benefit plans for all Key Employees, and the
denominator of which is the sum of the Account Balances
under the defined contribution plans for all Participants and
the present value of accrued benefits under the defined benefit
plans for all Participants, determined in accordance with
Section 416 of the Code. The numerator and denominator of
the Top-Heavy Ratio shall be adjusted for any
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distribution of an Account Balance or an accrued benefit made in
the five (5) Plan Year period ending on the Determination Date
and any contribution required to be taken into account but unpaid
as of the Determination Date.
(c) For purposes of paragraphs (a) and (b) above, the value of the
Account Balances and the present value of the accrued
benefits shall be determined as of the most recent
Determination Date. The Account Balances and accrued
benefits of a Participant who (1) is not a Key Employee but
who was a Key Employee in a prior Plan Year, or (2) has not
performed services for an Employer under the Plan at any time
during the five (5) Plan Year period ending on the
Determination Date, shall be disregarded. The calculation of
the Top-Heavy Ratio, and the extent to which distributions,
rollovers and transfers are taken into account, shall be made in
accordance with Section 416 of the Code. When aggregating
plans, the value of Account Balances and accrued benefits
shall be calculated with reference to the Determination Dates
that all within the same calendar year.
12.03 MAXIMUM ANNUAL COMPENSATION
In any Plan Year that the Plan is Top-Heavy, the maximum annual
Compensation which shall be taken into account under this Plan
shall be limited to $200,000, or such other amount as may be
provided from time to time under cost of living or other adjustments
issued by the Secretary of the Treasury pursuant to Section 416 of
the Code. Effective January 1, 1989, that limitation shall apply
regardless of whether the Plan is Top-Heavy. Effective January 1,
1994, this amount is limited to $150,000, or such other amount as may
be provided from time to time under cost of living or other
adjustments issued by the Secretary of the Treasury pursuant to
Section 401(a)(17) of the Code.
12.04 MINIMUM ALLOCATION REQUIREMENTS
In any Plan Year that the Plan is Top-Heavy, the Employer
contribution for each Participant who is a Non-Key Employee shall
not be less than three percent (3%) of such Non-Key Employee's
Compensation; subject, however, to the following special rules:
(a) If the Employer maintains more than one defined contribution
plan, the minimum required contribution under all defined
contribution plans combined for Non-Key Employees shall be
three percent (3%).
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(b) The percent shall be reduced to less than three percent (3%) in
any year in which the highest percentage contribution for a
Key Employee is less than three percent (3%). In any Plan
Year in which the highest percentage contribution for a Key
Employee is less than three percent (3%), the contribution for
Non-Key Employees shall be equal to the highest percentage
contribution for Key Employees.
(c) If the Employer also maintains a defined benefit plan, the
Employer generally will not be required to both contribute a
minimum contribution under this Plan and to provide a
minimum benefit under the defined benefit plan for Non-Key
Employees; subject, however, to the requirements of such
regulations as are issued by the Secretary of the Treasury
pursuant to Section 416 of the Code.
Employees eligible to participate in the Plan who do not
participate because they do not make the contributions
required by Section 3.03 and Participants who do not complete at
least one thousand (1,000) Hours of Service in the Plan Year
shall also receive the above minimum allocation.
12.05 MISCELLANEOUS
(a) In any Plan Year in which the Plan is deemed to be Top-Heavy
and in which an Employer maintains both a defined
contribution plan and a defined benefit plan, the number 1.25
shall be replaced by the number 1.0 for the purpose of
determining the limitations imposed by Section 415 of the Code
to the extend required under Section 416(h) of the Code.
In any Plan Year in which the Plan is Top-Heavy but
the sum of the Key Employees' benefits from all
defined contribution and defined benefit plans does
not exceed ninety percent (90%) of the total for all
Participants, the number 1.25 shall not be replaced by
the number 1.0 for the purpose of determining the
limitations imposed by Section 415 of the Code if the
minimum required contribution for each Participant
who is a Non-Key Employee is not less than four
percent (4%) of such Non-Key Employee's
Compensation.
(b) Distribution made to an Employee in the five (5) Plan Year
period ending on any Determination Date shall be included in
calculating the value of the accrued benefit of an Employee.
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(c) Rollover Contributions or transfers from other non-Employer
sponsored plans after December 31, 1983, shall not be
considered part of an Employee's Accounts for purposes of
determining whether or not the Plan is Top-Heavy.
ARTICLE XIII.
STOCK CONTRIBUTION FUND
13.01 ESTABLISHMENT OF STOCK CONTRIBUTION FUND AND ALLOCATIONS
Shares contributed pursuant to Section 3.01 shall be held in a
separate investment fund called the "Stock Contribution Fund"
together with any cash contributed and earmarked for that Fund and
any income thereon. No Participant may direct that any other
contributions to the Plan or amounts held in any other investment
fund be credited or transferred to the Stock Contribution Fund; nor
may any Participant direct that any amounts to his credit in the
Stock Contribution Fund be transferred to another investment fund.
13.011 Within 60 days after each Valuation Date, the
Company shall deliver to the Trustee a certificate
stating the value of a Share as of the Valuation Date.
The Trustee shall determine fair market value of the
Stock Contribution Fund as of that Valuation Date on
the basis of such certificate. For purposes of
reporting Account balances to Participants and
Beneficiaries, the value of Shares rather than the
number of Shares allocated to a Participant's Account
may be shown.
13.012 As of each Valuation Date, the Plan Administrator
shall allocate the income of the Stock Contribution
Fund for that period in accordance with the following.
Any income of the Fund other than dividends
received on Shares shall be allocated among the
Accounts of all Participants a portion of whose
Accounts is in the Stock Contribution Fund on the
valuation date in proportion to the ratio that each said
Participant's interest in the Stock Contribution Fund
bears to the total of all such Participants, measured as
of the last preceding Valuation Date.
There shall be credited to the Account of each
Participant to which Shares have been allocated, any
Shares or other property distributed as a dividend
with respect to Shares
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previously allocated or credited to the Participant's
account.
13.02 DISTRIBUTIONS
The portion of a Participant's Account attributable to the Stock
Contribution Fund may be distributed only in cash and no
Participant or Beneficiary shall have the right to demand that Shares
be distributed. The Trustee shall use cash contributions earmarked
for the Stock Contribution Fund to make such distributions. To the
extent that any cash contributions are used to make distributions
they will be deemed to have been used to purchase Shares from the
Accounts of Participants and Beneficiaries entitled to the
distributions which Shares are then allocated to the Accounts of
Participants who retain an interest in the Stock Contribution Fund in
the manner provided for the allocation of Employer contributions
generally.
13.03 ACQUISITION OF SHARES AND PAYMENT OF EXPENSES
The Trustee shall invest the Stock Contribution Fund in Shares and
cash and cash equivalents pending investment in Shares. The
Trustee may purchase Shares from any person or entity, in its
individual or other capacity, including the Company. The
administrative expenses of the Stock Contribution Fund including
brokerage commissions, transfer taxes and other charges and
expenses not paid by an Employer shall be borne by that Fund. The
Trustee may use cash contributions earmarked for the Stock
Contribution Fund to defray administrative expenses of that Fund.
13.04 VOTING OF SHARES
The Trustee shall, except as specifically provided below, have the
right to vote the Shares held by The Stock Contribution Fund on
each matter brought before an annual or special stockholders'
meeting of the Company. Each Participant (or, in the event of his
death, his Beneficiary) shall have the right, to the extent of Shares
allocated to his account, to direct the Trustee in writing as to the
manner in which to respond to a tender or exchange offer with
respect to Shares, and the Trustee shall respond in accordance with
the instructions so receive. The Plan Administrator shall utilize its
best efforts to timely distribute or cause to be distributed to each
participant (or Beneficiary) copies of all materials distributed to
stockholders of the Company in connection with any such tender or
exchange offer, together with a form requesting confidential
instructions on whether or not such Shares will be tendered or
exchanged. Such instructions shall be forwarded by Participants
and
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Beneficiaries to the outside firm of certified public accountants
regularly used by the Company, and the accounting firm shall inform
the Trustee only of the aggregate number of Shares to be tendered
or exchanged. If the accounting firm shall not receive timely
direction from a Participant (or Beneficiary) has the right of
direction, shall be tendered or exchanged. The instructions received
by the accounting firm from Participants and Beneficiaries shall be
held in confidence and shall not be divulged or released to any
person, including officers or employees of the Company or any
Affiliate.
13.05 SALES OF SHARES AND COMPANY'S RIGHTS OF FIRST REFUSAL
Subject to the rules provided above with respect to responding to a
tender or exchange offer, the Trustee may sell or otherwise dispose
of the Shares held in the Stock Contribution Fund; however, such
Shares are subject to the prior rights to purchase by the Company
described below and the certificates representing such Shares shall
bear a legend stating that any person accepting the Shares
evidenced by such certificates agrees to be bound by such prior
rights to purchase unless the Company shall have forfeited such
rights in the manner described below.
If the Trustee intends to transfer Shares held in the Stock
Contribution Fund to any person other than the Company, he shall
give 60 days' written notice to the Company of his intention so to
transfer. The notice, in addition to stating the fact of the
intention to transfer Shares, shall state (i) the number of Shares to
be transferred, (ii) the name, business and residence address of the
proposed transferee, and (iii) the amount of the consideration and the
other terms of the sale.
Within 30 days of the Company's receipt of the notice of intent to
transfer, the Company may exercise an option to purchase all of the
Shares proposed to be transferred or forfeit its option.
The purchase price of Shares as to which an option granted to the
Company hereby is exercised shall be the fair market value of the
Shares on the date the written notice of exercise is received by the
Trustee; provided, that the purchase price shall not be less than the
price offered to the Trustee by the transferee named in the notice of
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intent to transfer if such offer represents a bona fide offer to
purchase. The purchase price shall be paid by the Company in cash
within a reasonable time from the date the written notice of exercise
is received by the Trustee.
ARTICLE XIV.
LOANS AND WITHDRAWALS
14.01 LOANS TO PARTICIPANTS
The Trustee may lend a Participant an amount that does not exceed
the lesser of:
$50,000; or
fifty percent (50%) of the Participant's nonforfeitable interest
in his Account Balance (but not less than $10,000) if he had
ceased to be a Participant on the date such loan was made.
All loans shall be of a minimum amount of $1,000 of such other
amount as prescribed in writing by the Plan Administrator. All loans
shall be made only at the request of the Participant and upon the
approval of the Plan Administrator, which shall follow a uniform,
nondiscriminatory policy in reviewing loan requests.
In addition to such rules and regulations as the Plan Administrator
may adopt, all loans shall comply with the following terms and
conditions:
(a) An application for a loan by a Participant shall be made in
writing to the Plan Administrator, whose action thereon shall
be final. The Plan Administrator shall specify the form of the
application and any supporting data required.
(b) The period of repayment for any loan shall be five (5) years
from the first day of the month following the date the loan is
processed. Any loan used to acquire a dwelling unit which will
be used as the principal residence of the Participant, does not
have to be repaid within five (5) years, but shall be paid in a
time agreed by the Plan Administrator and the Participant.
Loans shall be repayable in substantially equal installments
including interest payable monthly, beginning on the first day
of the month following the date the loan is approved. The
loan shall be considered an investment of such Participant's
Accounts, and the
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<PAGE>
interest paid on the loan shall be credited to the Accounts of
the Participant. The amount of the outstanding loan shall not
share in the allocation of earnings of the Trust Fund. In the
event of retirement, Total and Permanent Disability, death or
termination of employment while any loan is outstanding, the
unpaid balance and any interest due shall immediately become due
and payable (which may be paid by check) and upon default shall
be charged against the amounts which are to be paid or set aside
for such Participant or Beneficiary.
(c) Each loan shall be permitted only to the extent necessary to
allow the Participant to purchase or make a major improvement
to his principal residence, to pay the post-secondary education
expense of a member of his household, to meet the cost of
unused medical expenses borne by the Participant or to meet
any other BONA FIDE financial emergency as determined by the
Plan Administrator.
(d) Each loan shall only be permitted to the extent the Participant
certifies or demonstrates to the satisfaction of the Plan
Administrator that the purpose described in paragraph (c)
above imposes an immediate and heavy financial need upon
the Participant.
(e) Each loan shall bear interest at a rate which is not less than
the current rate paid by three year Treasury notes as
of the date of the loan.
(f) Each loan shall be supported by collateral as determined by the
Company. A loan shall also be supported by the Participant's
promissory note including a pledge of interest as collateral for
the amount of the loan, including interest, payable to the order
of the Trustee. The promissory note shall require that the
unpaid principal and interest will (at the Plan Administrator's
option) become due and payable if a loan payment is not made
within thirty (30) days after the due date of any installment.
In the event of default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs in
the Plan.
(g) If a Participant borrows amounts under more than one qualified
plan maintained by an Employer, all the plans are treated as
one plan for purposes of the borrowing restrictions outlined.
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<PAGE>
(h) Subject to the preceding limitations, a Participant may elect the
percentage of the loan to be withdrawn from each of his vested
Accounts.
14.02 WITHDRAWAL OF ROLLOVER CONTRIBUTION ACCOUNT
A Participant (or Employee if not a Participant) may elect in writing
to withdraw part or all of the value of his Rollover Contrition
Account, subject to the requirements of Section 3.05. Such
withdrawal shall be subject to the rules and procedures established
by the Plan Administrator.
14.03 WITHDRAWAL OF AFTER-TAX SAVINGS CONTRIBUTIONS
A Participant may elect in writing to withdraw any whole percentage,
up to one hundred percent (100%), of the value of his After-Tax
Savings Contributions at any time after two (2) years of Plan
participation, subject to the following conditions:
(a) Any request for a withdrawal must be submitted at least thirty
(30) days prior to the effective date of the withdrawal and must
be in a form approved by the Company.
(b) Such a withdrawal shall be permitted only to the extent
necessary to allow the Participant to purchase or make a major
improvement in his principal residence, to pay the post-secondary
education expense of a member of his household, to
meet the cost of unusual medical expenses borne by the
Participant or to meet any other BONA FIDE financial emergency
as determined by the Plan Administrator. The Plan
Administrator shall administer this Article XI in accordance
with the applicable Treasury Regulations as in effect from time
to time.
(c) Such a withdrawal shall only be permitted to the extent the
Participant certifies or demonstrates to the satisfaction of the
Plan Administrator that the purpose described in paragraph (b)
imposes an immediate and heavy financial need upon the
Participant.
(d) The minimum withdrawal shall be $500.
(e) A withdrawal may be made twice a year, on January 1st or July
1st.
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<PAGE>
14.10 WITHDRAWAL OF PRE TAX SAVINGS CONTRIBUTIONS
If the value of a Participant's Rollover Contribution Account and
After-Tax Savings Contribution Account is not sufficient to meet
the financial needs of the Participant, a Participant may elect in
writing to withdraw his Pre-Tax Savings Contributions but not any
earnings thereon, in whole percentages up to one hundred percent
(100%), subject to the restrictions in Section 14.09 and applicable
regulations promulgated under Section 401(k) of the Code.
14.11 WITHDRAWAL OF EMPLOYER CONTRIBUTIONS
If the value of a Participant's Rollover Contribution Account,
After-Tax Savings Contribution Account, and Pre-Tax Savings
Contribution Account to the extent is not sufficient to meet the
financial needs of the Participant, a Participant may elect in
writing to withdraw vested Employer contributions, in whole
percentages up to one hundred percent (100%), subject to the
restrictions in Section 14.10.
IN WITNESS WHEREOF, the Company has caused this instrument
to be executed by its duly authorized officers on December 30, 1994, and
effective as provided herein.
CONTINENTAL MATERIALS CORPORATION
By: /s/ Joseph J. Sum
------------------------------
Its: Vice President
------------------------------
Dated: December 30, 1994
----------------------------
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<PAGE>
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Computations of earnings per share can be determined from the Consolidated
Statements of Operations and Retained Earnings on page 10, Consolidated Balance
Sheets on page 12 and footnote 7 of "Notes to Consolidated Financial Statements"
on page 17 of this Annual Report on Form 10-K. Stock options have been excluded
from the computation of earnings per share because there were none outstanding
at December 31, 1994.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Registrant has no parent; see proxy statement for Registrant's principal
shareholders. The following are Registrant's subsidiaries which are included in
the consolidated financial statements:
Name of Subsidiary State or Other
(Each Owned 100% by Registrant Jurisdiction
Except as Otherwise Stated) of Incorporation
------------------------------------------ --------------------
Castle Concrete Company Colorado
Continental Catalina, Inc.* Arizona
Continental Copper, Inc. Arizona
Continental Quicksilver, Inc. Idaho
Continental Uranium, Inc. Colorado
Edens Industrial Park, Inc. Illinois
Phoenix Manufacturing, Inc. Arizona
ProSoft International, Inc.** Colorado
Transit Mix Concrete Co. Colorado
Williams Furnace Co. Delaware
* owned by Continental Copper, Inc.
**owned by Transit Mix Concrete Co.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Continental Materials Corporation and Subsidiaries on Form S-8 (File No.
33-23671) of our report dated March 10, 1995 on our audits of the consolidated
financial statements and financial statement schedules of Continental Materials
Corporation and Subsidiaries as of December 31, 1994 and January 1, 1994, and
for the three years in the period ended December 31, 1994, which reports are
included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 28, 1995
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