===========================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1996
______________
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1339
______
OREGON METALLURGICAL CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0448167
_______________________________ ________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
530 34th Avenue S.W.
Albany, Oregon 97321
____________________________________ _____
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 967-9000
______________
NONE
______________________________________________________
(Former name or address, if changed since last report)
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 the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class Outstanding as of May 6, 1996
_____________________________ _____________________________
Common stock, $1.00 par value 11,346,612
===========================================================================
<PAGE>
PART I: Financial Information
ITEM 1: Financial Statements
OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months
__________________
For the period ended March 31, 1996 1995
________ ________
<S> <C> <C>
Net sales $ 51,309 $ 30,838
Cost of sales 40,948 25,506
________ ________
GROSS PROFIT 10,361 5,332
Research, technical and product
development expenses 617 365
Selling, general and administrative
expenses 4,290 3,400
________ ________
INCOME FROM OPERATIONS 5,454 1,567
Interest expense 634 575
Minority interest in subsidiary 225 106
________ ________
INCOME BEFORE INCOME TAXES 4,595 886
Provision for income taxes 1,250 351
________ ________
NET INCOME $ 3,345 $ 535
======== ========
Net income per share $ 0.30 $ 0.05
======== ========
Weighted average shares
and share equivalents outstanding 11,327 11,055
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands except par value)
<TABLE>
<CAPTION>
Unaudited
March 31, December 31,
1996 1995
____ ____
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,154 $ 572
Accounts receivable, net 33,038 25,894
Inventories 71,163 66,010
Prepayments 1,035 689
Deferred tax assets 4,201 3,242
__________ __________
TOTAL CURRENT ASSETS 110,591 96,407
Property, plant and equipment, net 34,973 35,138
Other assets, net 1,473 1,532
__________ __________
TOTAL ASSETS $ 147,037 $ 133,077
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,106 $ 616
Book overdraft 3,657 2,014
Accounts payable 17,603 16,973
Accrued payroll and employee benefits 6,567 6,659
Other accrued expenses 6,150 3,595
Provision for losses on long-term
agreements 2,781 2,781
__________ __________
TOTAL CURRENT LIABILITIES 37,864 32,638
Other liabilities:
Long-term debt, less current portion 28,944 26,746
Deferred tax liabilities 4,044 3,149
Deferred compensation payable 508 678
Accrued postretirement benefit 1,608 1,563
Provision for losses on long-term agreements,
less current portion 1,353 1,636
Minority interest 1,019 780
__________ __________
TOTAL LIABILITIES 75,340 67,190
__________ __________
Shareholders' equity:
Common stock, $1.00 par value;
25,000 shares authorized; shares issued:
1996 11,214, 1995, 11,018 11,214 11,018
Additional paid-in capital 40,653 38,340
Retained earnings 19,890 16,545
Cumulative foreign currency
translation adjustment (60) (16)
__________ __________
TOTAL SHAREHOLDERS' EQUITY 71,697 65,887
__________ __________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 147,037 $ 133,077
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Unaudited Three Months
____________
For the period ended March 31, 1996 1995
____ ____
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,345 $ 535
Adjustments to reconcile net income
to cash used in operating activities:
Depreciation and amortization 1,381 1,126
Deferred income tax benefit 545 88
Compensation paid or payable in common stock 1,307 473
Minority interest in subsidiary 225 178
Decrease (increase) in:
Accounts receivable (7,144) (2,340)
Inventories (5,153) (7,140)
Income taxes receivable ---- 94
Prepayments (346) 414
Increase (decrease) in:
Accounts payable 630 1,897
Accrued payroll and employee benefits 403 513
Other accrued expenses 2,555 283
Provision for losses on long-term
agreements (283) ----
Other (24) 45
__________ ________
Net cash used in operating activities (2,559) (3,834)
__________ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to properties, plant and equipment (1,142) (219)
Other (20) (383)
_________
Net cash used in investing activities (1,162) (602)
__________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit agreement 46,660 23,537
Payments on revolving credit agreement (44,118) (20,222)
Proceeds from long-term debt 177 ----
Payments on long-term debt (31) (3)
Book overdraft 1,643 ----
Other ---- 20
__________ ________
Net cash provided by financing activities 4,331 3,332
__________ ________
Effect of exchange rates on cash and
cash equivalents
(28) (7)
__________ ________
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 582 (1,111)
CASH AND CASH EQUIVALENTS:
Beginning of period 572 1,636
__________ ________
End of period $ 1,154 $ 525
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
The interim consolidated financial statements have been prepared by Oregon
Metallurgical Corporation (the Company) without audit. In the opinion of
management, the accompanying unaudited consolidated financial statements
contain all adjustments necessary to present fairly the financial position
of the Company as of March 31, 1996, and December 31, 1995, the results of
operations; and the cash flows of the Company for the three months ended
March 31, 1996 and 1995. The interim consolidated financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto appearing in the Company's Annual Report to
Shareholders.
The results for the first quarter of 1996 are not necessarily indicative of
future financial results.
NOTE 2. ORGANIZATION AND OPERATIONS
The Company is a major producer and distributor of titanium sponge, ingot,
mill products and castings for aerospace, industrial and recreation
applications. As of March 31, 1996, the company is 32% owned by the Oregon
Metallurgical Corporation Employee Stock Ownership Plan (the ESOP).
NO. 3 BASIS OF CONSOLIDATION
Titanium Industries, Inc. an eighty percent (80%) owned subsidiary is a
full-line service titanium metals distributor with facilities in the United
States, Canada, United Kingdom and Germany. The consolidated financial
statements of the Company include the accounts of Titanium Industries, Inc.
and the Company's wholly-owned subsidiary, OREMET France S.a.r.l. Titanium
Industries, Inc.'s accounts reflect the activities of its wholly-owned
subsidiaries, Titanium International, LTD., Titanium Wire Corporation and
Titanium International GmbH. All material intercompany accounts and
transactions have been eliminated in consolidation.
-5-
<PAGE>
NOTE 4. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
_________ ____________
<S> <C> <C>
Finished goods.......................... $ 20,243 $ 18,141
Work-in-progress........................ 21,222 19,837
Raw materials........................... 29,698 28,032
________ ________
$ 71,163 $ 66,010
======== ========
</TABLE>
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
_________ ____________
<S> <C> <C>
Land.................................... $ 1,189 $ 1,189
Buildings and improvements.............. 11,431 11,455
Machinery and equipment................. 42,453 42,248
Integrated sponge facility.............. 45,641 45,641
Construction in progress................ 1,737 846
________ ________
102,451 101,379
Less accumulated depreciation.......... (67,478) (66,241)
$ 34,973 $ 35,138
======== ========
</TABLE>
-6-
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
_______________________________________________________________
RESULTS OF OPERATIONS
_____________________
OVERVIEW
The Company reported net income of $3.3 million, or $0.30 per share, for
the first quarter of 1996. This level of earnings represents a major
breakthrough in the Company's efforts to return to profitability. During
the fourth quarter of 1995, the Company reported a net loss of $3.0
million, or $0.26 per share. Increased shipments and pricing across all of
the Company's product lines were the primary factors in the Company's
improved performance. The fourth quarter of 1989 was the last quarter the
Company posted profits of this magnitude. The Company's financial
performance was consistent with the results of other major U.S. titanium
producers.
The Company's net sales and twelve-month sales order backlog (sales
backlog) continued to grow at a brisk pace. Net sales increased 29% to
$51.3 million, compared to $39.6 million for the fourth quarter of 1995.
The sales backlog was $134 million on March 31, 1996, an increase of 28%
over the December 31, 1995 sales backlog of $105 million. The twelve-month
sales backlog reflects recent customer order placements, but may not be an
accurate indicator of annual or quarterly sales volume.
The Company's shipments and sales orders from the aerospace, golf and
industrial markets continue to expand. While the demand for military
aerospace applications continues to be weak, the sale of titanium plate
used for armor has grown and represents an expanding new market for
titanium.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to the Three Months Ended
____________________________________________________________________
March 31, 1995:
______________
NET SALES:
Net sales were $51.3 million for the first quarter of 1996, an increase of
66% over the first quarter of 1995 sales of $30.8 million. The increase in
sales was primarily driven by increased demand and pricing for both the
Company's manufactured and service center products.
TITANIUM SPONGE:
During the first quarter of 1996, the Company's integrated sponge facility
operated at near capacity, primarily supplying the Company's internal
demand for titanium sponge as well as sales to RMI Titanium Company (RMI)
under a long-term titanium sponge supply agreement. Sales of titanium
sponge, and sponge conversion services increased 49% for the first quarter
of 1996 compared to the first quarter of 1995. Sponge shipments increased
26% and the average sponge price per pound increased 18%. The increase in
the average price per pound of 18% can be attributed to sales of high
purity sponge, which the Company started commercially producing in limited
quantities in 1995. The Company projects that it will continue to operate
its sponge facility at near capacity with substantially all production
being utilized for internal consumption or for supply to RMI. The Company
is presently supplementing its sponge production with purchases from other
producers.
-7-
<PAGE>
INGOT:
Sales of ingot increased 117% for the first quarter of 1996 compared to the
first quarter of 1995. Ingot shipments increased 79% and average ingot
price per pound increased 21%. The Company operated its melt facilities
at near capacity during the first quarter of 1996. The Company produces
ingot for both internal use in its mill products division and for sale to
outside customers.
MILL PRODUCTS:
OREMET Titanium Division (Primary production facilities located in Albany,
Oregon) produces or contracts for outside production of a variety of mill
products: billet, bar, plate, sheet and engineered parts. OREMET Titanium
Division mill product sales increased 116% for the first quarter of 1996
compared to the first quarter of 1995. Shipments of mill products
increased 56% and the average price per pound increased 38%. Sale of
titanium billet to producers of golf club heads is responsible for a
substantial portion of the growth in mill product sales.
The Company's service centers market a wide variety of mill products
including engineered parts that are manufactured by various producers.
During the first quarter of 1996, both shipments and pricing for service
center products increased compared to the first quarter of 1995.
CASTINGS:
Sales of castings increased 40% for the first quarter of 1996 compared to
the first quarter of 1995.
COST OF SALES:
Cost of sales for the first quarter of 1996 increased $15.4 million, or
60.5% to $40.9 million, compared to $25.5 million in the first quarter of
1995. The primary reasons for the increase in cost of sales were increased
shipments, coupled with rising raw material and conversion costs. The
Company's gross profit percentage increased to 20.2% for the first quarter
of 1996 compared to 17.3% for the first quarter of 1995. The improvement
in the gross profit percentage is primarily due to increases in prices.
RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES:
Research, technical and product development expenses (RT&D) increased $0.3
million, or 69% for the first quarter of 1996, to $0.6 million compared to
$0.4 million in the comparable quarter of 1995. The main focus of RT&D is
to develop enhanced production procedures, provide customers with required
technical support and develop new products and markets. RT&D works jointly
on projects with customers, federal agencies and research universities.
The increase in RT&D expenses reflect the Company's commitment to this
area.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses (SG&A) increased $0.9 million,
or 26%, for the first quarter of 1996 to $4.3 million from $3.4 million in
the comparable quarter of 1995. In response to an increased level of
activity, all departments included in the SG&A category incurred additional
personnel-related costs and to other support related expenses.
INTEREST EXPENSE:
Interest expense increased $0.1 million, or 10.3%, to $.6 million in the
first quarter of 1996 compared to the first quarter of 1995. The increase
in interest expense was the direct result of an increase in borrowings
needed to fund expanded operating levels.
MINORITY INTERESTS:
The amounts reported as minority interests eliminate the minority
shareholder's 20% interest in the net income of TI from the Company's
Consolidated Statements of Operations.
PROVISION FOR INCOME TAXES:
The Company reported a provision for income taxes of $1.3 million, or an
effective tax rate of 26% for the first quarter of 1996 compared to $.4
million, or an effective tax rate of 35% for the comparable period in 1995.
The difference between the federal and state combined statutory tax rate
of 39% and the effective tax rate of 26% for the first quarter of 1996 is
primarily due to an adjustment to the Company's deferred tax asset
valuation allowance.
-8-
<PAGE>
The deferred tax asset valuation allowance has been adjusted, reflecting
the revised future income expectations of the Company and the belief that
the reinstated deferred tax assets will be realized by the Company.
NET INCOME:
The Company reported net income of $3.3 million ($0.30 per share) for the
first quarter of 1996 compared to a net income of $0.5 million ($0.05 per
share) for the comparable period in 1995.
NON-U.S. OPERATIONS AND MONETARY ASSETS
FOREIGN SUBSIDIARIES:
The Company has the following foreign subsidiaries:
Titanium International Limited (TIL), a sales and service center located in
the United Kingdom, and Titanium International GmbH (TIG), a sales and
service center located in Germany, are wholly-owned subsidiaries of TI, an
80% owned subsidiary of the Company. As of March 31, 1996, TIL and TIG had
$9.6 million in total assets and approximately 45 employees.
Oremet France, S.a.r.l. is a wholly-owned sales and service center located
near Paris, France. As of March 31, 1996, Oremet France has approximately
$0.9 million in total assets and six employees.
Changes in the value of foreign currencies relative to the U.S. dollar
cause fluctuations in the U.S. dollar financial position and operating
results. The impact of foreign currency fluctuations on the Company was
not significant during the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW:
Net cash used in operating activities totaled $2.6 million for the first
quarter of 1996, compared to $3.8 million for the comparable period of
1995. Increases in sales and the sales backlog are driving increased
levels of accounts receivable and inventory which represented the primary
uses of cash for the quarter.
During the first quarter of 1996, the Company incurred $1.3 million in
expenses relating to its Stock Compensation Plans and Savings Plan. The
Company will satisfy liabilities arising under these plans by issuing
shares of the Company's common stock. See note 10 the Company's 1995
annual report for further discussion regarding the Company's Stock
Compensation and Defined Contribution Plans.
-9-
<PAGE>
Net cash used in investing activities totaled $1.2 million for the first
quarter of 1996 compared to $0.6 million for the first quarter of 1995.
The Company had additions to property, plant and equipment of $1.1 million
in the first quarter of 1996.
Net cash provided by financing activities totaled $4.3 million for the
first quarter of 1996, compared to $3.3 million for the comparable period
of 1995. For the first quarter of 1996, $4.2 million was provided from net
proceeds on the Company's revolving credit agreements and book overdraft.
CREDIT AGREEMENT:
The Company may borrow up to $35 million under the terms of a revolving
credit agreement with BankAmerica Business Credit, Inc. (BABC). The credit
agreement expires in September 1997. The balance outstanding under the
credit agreement as of March 31, 1996 is $23.3 million.
As of March 31, 1996, interest charged under the credit agreement is at
BABC's reference rate (8.25%) plus either 1% or 1.5% depending on the
financial performance of the Company. The credit facility provides for a
LIBOR based borrowing option which the Company has exercised.
CAPITAL EXPENDITURES:
The Company has no material open commitments which obligate it to make
future capital expenditures. The Company's 1996 capital plan anticipates
that expenditures will approximate $9.0 million. Capital expenditures
required to maintain compliance with applicable environmental regulations
are included in the Company's capital expenditure plan to the extent that
they can be determined. The Company's capital expenditures will be funded
by a combination of internally generated cash and external financing.
The Company's recent capital expenditure history is as follows (dollars in
millions):
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995 1994 1993
____ ____ ____ ____
<S> <C> <C> <C> <C>
Additions to
property, plant
and equipment $1.1 $1.9 $1.9 $1.2
</TABLE>
The Company estimates that 1996 additions to property, plant and equipment
will approximate $7.0 million. The Company's credit facility with BABC
provides that capital expenditures may not exceed $7.0 million for any
fiscal year.
-10-
<PAGE>
INCOME TAXES:
The Company anticipates that in 1996 it will fully utilize its federal net
operating loss carryforwards of $3.6 million and will pay federal taxes on
any remaining balance of its federal taxable income. The operations of TIL
in the U.K. will potentially result in the Company's most significant
foreign tax obligations. The Company has a State of Oregon net operating
loss carryforward of $30.0 million which will limit the amount of state
taxes paid in 1996. In addition, the Company pays minimal franchise and
income taxes in various states and foreign jurisdictions.
ADEQUACY OF LIQUIDITY AND CAPITAL RESOURCES:
The Company's access to borrowing facilities, internally generated cash and
capital markets are expected to provide the resources necessary to support
increased operating needs and to finance continued growth, capital
expenditures and repayment of long-term debt obligations.
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
________________________________
A. Exhibits
10.1 Amendment to Oregon Metallurgical Corporation Employee
Stock Ownership Plan
11.1 Statement re: computation of per share earnings.
27.1 Financial Data Schedule
B. Forms 8-K
No reports on Form 8-K were filed by the company during the
quarter ended March 31, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OREGON METALLURGICAL CORPORATION
Registrant
Date: May 13, 1996 /s/ Dennis P. Kelly
______________ __________________________________
Dennis P. Kelly
Vice President, Finance and
Chief Financial Officer
Signing on behalf of the Registrant and as
Chief Accounting Officer
-11-
OREGON METALLURGICAL
CORPORATION
EMPLOYEE STOCK
OWNERSHIP PLAN
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1989
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Nature of the Plan........................................ 1
___________________
Definitions............................................... 2
___________
3. Eligibility and Participation............................. 11
_____________________________
(a) Eligibility and Participation....................... 11
_____________________________
(b) Rehired Employee.................................... 11
________________
(c) Termination of Participation........................ 12
____________________________
4. Plan Contributions........................................ 12
__________________
(a) Contributions....................................... 12
_____________
(1) Initial Acquisition Loan Contributions........ 12
______________________________________
(2) Other Acquisition Loans (If Any).............. 13
________________________________
(3) Profit Sharing Plan Contributions............. 13
_________________________________
(4) Limitation on Profit Sharing Contributions.... 14
__________________________________________
(5) Discretionary Plan Contributions.............. 14
________________________________
(b) Due Dates........................................... 14
_________
(c) Initial Contribution................................ 14
____________________
(d) Mistake of Fact..................................... 14
_______________
(e) Employee Contributions.............................. 15
______________________
5. Investment of Trust Assets................................ 15
__________________________
(a) Exclusive Benefit Reversion......................... 15
___________________________
(b) Investment.......................................... 15
__________
(c) Acquisition Loans................................... 15
_________________
(d) Loans to Participants............................... 17
_____________________
(2) Maximum Loan Amount........................... 17
___________________
(3) Repayment of Loans............................ 18
__________________
(4) Terms......................................... 19
_____
6. Allocations to Participants' Accounts..................... 23
_____________________________________
(a) Account............................................. 23
_______
(1) Stock Account................................. 23
_____________
i
<PAGE>
(2) Cash Account.................................. 23
____________
(3) Directed Investment Account................... 24
___________________________
(4) Allocations................................... 24
___________
(b) Plan Contributions.................................. 25
__________________
(c) Initial Contribution................................ 26
____________________
(d) Allocation and Contribution Limitations............. 26
_______________________________________
(e) Net Income (or Loss) of the Trust................... 28
_________________________________
(f) Allocation of Dividends............................. 29
_______________________
(g) Accounting for Allocations.......................... 29
__________________________
7. Vesting of Participants' Accounts......................... 30
_________________________________
(a) Current Employees................................... 30
_________________
(b) Vesting Schedule.................................... 30
________________
(c) 5-Year Break in Service............................. 31
_______________________
8. Expenses of the Plan and Trust............................ 31
______________________________
9. Rights with Respect to Voting and Other Stock Dispositions 32
__________________________________________________________
(a) Participant Directions.............................. 32
______________________
(b) Information......................................... 34
___________
10. Disclosure to Participants................................ 35
__________________________
(a) Summary Plan Description............................ 35
________________________
(b) Summary Annual Report............................... 35
_____________________
(c) Annual Statement.................................... 35
________________
(d) Additional Disclosure............................... 36
_____________________
(e) Rollover Statement.................................. 36
__________________
11. Capital Accumulation...................................... 36
____________________
12. In-Service Distributions.................................. 36
________________________
(a) Dividends........................................... 36
_________
(b) Withdrawal of Distribution Allowance................ 37
____________________________________
(c) Diversification Elections........................... 38
_________________________
(d) Special Withdrawal Rules for Participants Who Meet
__________________________________________________
Age and Service Requirements........................ 39
____________________________
(e) Processing and Form of Withdrawals and Conversion
_________________________________________________
Requests............................................ 40
________
13. Distribution Following Termination of Participation....... 42
___________________________________________________
(a) Distribution........................................ 42
____________
(b) Retained Account.................................... 44
________________
(c) Deferred Distribution Withdrawal Right.............. 44
______________________________________
ii
<PAGE>
(d) Eligible Rollover................................... 44
_________________
(e) 30-Day Notice....................................... 46
_____________
14. How Capital Accumulation Will Be Distributed.............. 46
____________________________________________
(a) Method.............................................. 46
______
(b) Payment............................................. 47
_______
(c) Distributee......................................... 47
___________
(d) Withholding......................................... 48
___________
15. Rights, Restrictions and Options on Oremet Stock.......... 48
________________________________________________
(a) Put................................................. 48
___
(b) Restriction......................................... 48
___________
16. No Assignment of Benefits................................. 49
_________________________
17. Administration............................................ 49
______________
18. Claims Procedure.......................................... 52
________________
19. No Duties or Rights Except as Provided in Plan............ 54
______________________________________________
20. "Top-Heavy" Contingency Provision......................... 54
_________________________________
(a) Application......................................... 54
___________
(b) Top-Heavy........................................... 54
_________
(c) Operation........................................... 55
_________
(d) Two Plans........................................... 55
_________
(e) Adjustment to Additional Limitation................. 55
___________________________________
(f) Definitions......................................... 55
___________
21. Future of the Plan........................................ 59
__________________
22. Governing Law............................................. 60
_____________
iii
<PAGE>
OREGON METALLURGICAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
AMENDED AND RESTATED EFFECTIVE
JANUARY 1, 1989, EXCEPT AS
OTHERWISE STATED
Section 1. Nature of the Plan.
__________________
The purpose of this Plan is to enable participating Employees to share
in the growth and prosperity of Oregon Metallurgical Corporation (referred
to in this Plan as "Oremet") and to provide them with an opportunity to
accumulate capital for their future economic security. Therefore, the
Trust under the Plan is designed to invest primarily in Oremet Common
Stock.
The Plan, hereby adopted and amended as of the Effective Date, and
amended and restated effective January 1, 1989, is a stock bonus plan which
is intended to be qualified under Section 401(a) of the Internal Revenue
Code (the "Code") and is an employee stock ownership plan ("ESOP") under
Section 4975(e)(7) of the Code.
The Plan is intended to be permanent and to benefit Employees of
Oremet on the Effective Date as well as Employees entering into the service
of Oremet thereafter.
All Trust Assets held under the Plan and Trust will be administered,
distributed and otherwise governed by the provisions of this Plan and the
related Trust Agreement. The Plan is to be administered by the ESOP
Administrators for the exclusive benefit of Participants and their
Beneficiaries.
___________________________________________________________________________
PAGE 1 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
Section 2. Definitions.
___________
In this Plan, whenever the context so indicates, the singular or
plural number and the masculine or feminine gender shall be deemed to
include the other, the terms "he," "his" and "him" shall refer to a
Participant, and the capitalized terms shall have the following meanings:
Account...................... One of several accounts maintained to
record the interest of a Participant
or his Beneficiary in the Plan.
See Section 6.
Adjusted Plan
Compensation............ (a) with respect to a Participant
covered by the Labor Agreement, his
Plan Compensation; (b) with respect
to a Participant who is not covered
by the Labor agreement and who was
paid Compensation for the
respective Plan Year in an amount
equal to or less than $20,000, his
Plan Compensation; and (c) with
respect to a Participant who is not
covered by the Labor Agreement and
who was paid Compensation for the
respective Plan Year in excess of
$20,000, the sum of 100% of his
Plan Compensation equal to or less
than $20,000 and 96% of his Plan
Compensation in excess of $20,000
(and for employees whose eligibility
computation period overlaps two (or
more) plan years, applied
separately for such part of the
compensation as falls within the
two respective years).
Affiliated Company........... (i) Any corporation that is a
member of a controlled group of
corporations (as defined in Section
414(b) of the Code) that includes
Oremet; (ii) any trade or business
(whether incorporated or
unincorporated) that is under common
control (as defined in Section 414(c)
of the Code) with Oremet; and (iii)
any member of an affiliated service
group (as defined in Section 414(m)
of the Code) that includes Oremet.
Anniversary Date............. The last day of each Plan Year.
___________________________________________________________________________
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<PAGE>
Beneficiary.................. The person (or persons) entitled to
receive any benefit under the Plan in
the event of a Participant's death.
See Section 14.
Break in Service............. A consecutive twelve-month period in
which an Employee has not earned 435
Hours of Service.
Capital Accumulation......... A Participant's vested
(nonforfeitable) interest in his
Accounts under the Plan.
See Section 11.
Cash Account................. The Account of a Participant or
Beneficiary which reflects his
interest under the Plan
attributable to Trust Assets held
as cash and earned interest, if any,
thereon. See Section 6.
Cash Flow From
Operations.............. The sum in any Plan Year of Oremet's
net income, depreciation, deferred
taxes, Plan Contributions and any
other non-cash charges reflected on
Oremet's balance sheet as of the
Anniversary Date with respect to
such Plan Year.
Code......................... The Internal Revenue Code of 1986, as
amended.
Compensation................. The sum of (a) all amounts paid to an
Employee by Oremet in each Plan Year
(including amounts paid under a
nonqualified profit sharing program
established by Oremet for all
employees), for services performed as
reportable on Internal Revenue Service
Form W-2; (b) to the extent includible
in any Employee's gross income, any
amounts paid on account of sickness,
accident or disability and which are
described in Sections 104(a)(3),
105(a), 105(h) of the Code; and (c)
on account of disability described
in Section 105(d) of the code and
any other amounts that may be
included in compensation under
Code Section 415. Amounts in
excess of $200,000 shall be
disregarded. Effective for Plan
Years after
_______________________________________________________________
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<PAGE>
December 31, 1993, amounts in excess
of $150,000, as adjusted for cost of
living increases effective as of
the first day of the Plan Year,
shall be disregarded.
In determining the compensation of an
Employee, the rules of Code Section
414(q)(6) shall apply, except that in
applying such rules, the term "family"
shall include only the spouse of the
Employee and any lineal descendants of
the Employee who have not attained age
19 before the close of the year. If,
as a result of application of such
rules, the $150,000 limitation is
exceeded, the limitation shall be
prorated among the affected
Employees in proportion to each
such Employee's compensation before
application of this limitation.
Directed Investment
Account................. The Account of a Participant which
reflects the Participant's interest in
Trust Assets other than Oremet Stock
or the investment of the Cash
Account. See Section 6.
Discretionary Plan
Contributions........... Plan Contributions made pursuant to
Section 4(a)(4).
Earned Plan Compensation..... Compensation paid contemporaneously
for services actually performed for
Oremet.
Effective Date............... November 16, 1987, pro forma, but for
all purposes under this Plan, the
"Effective Date" shall mean the close
of business on December 11, 1987.
The Amended and Restated Plan shall
be effective January 1, 1989,
except as otherwise stated.
Employee..................... Any person who is employed by Oremet
and is receiving Compensation from
Oremet on the Effective Date or
thereafter. A person who is
considered a leased employee of
Oremet shall not be considered an
employee for purposes of this
___________________________________________________________________________
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<PAGE>
Plan. An employee of an Affiliated
Company shall not be considered an
employee for purposes of this Plan,
nor shall nonresident aliens who
receive no earned income from Oremet
which is income from sources within
the United States.
ERISA........................ The Employee Retirement Income
Security Act of 1974, as amended.
ESOP Administrators.......... The two-person committee appointed
pursuant to Section 17 to administer
the Plan.
Financed Shares.............. Shares of Oremet Stock acquired
under the Plan with the proceeds of
an Acquisition Loan. See Section 5.
Highly Compensated Employee.. A Highly Compensated Employee
includes any active or former
Employee who performs service for
Oremet during the determination
year and who, during the look-back
year: (i) received compensation
from Oremet in excess of $75,000
(as adjusted pursuant to Section
415(d) of the Code); (ii) received
compensation from Oremet in excess of
$50,000 (as adjusted pursuant to
Section 415(d) of the Code) and was
a member of the top-paid group for
such year; or (iii) was an officer of
Oremet and received compensation
during such year that is greater
than 50 percent of the dollar
limitation in effect under Section
415(b)(1)(A) of the Code. The
term Highly Compensated Employee also
includes: (i) Employees who are both
described in the preceding sentence if
the term "determination year" is
substituted for the term "look-back
year" and the Employee is one of
the 100 Employees who received the
most compensation from Oremet
during the determination year; and
(ii) Employees who are 5 percent
owners at any time during the look-
back year or determination year.
___________________________________________________________________________
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<PAGE>
If no officer has satisfied the
compensation requirement of (iii)
above during either a determination
year or look-back year, the highest
paid officer for such year shall be
treated as a Highly Compensated
Employee.
For this purpose, the determination
year shall be the plan year. The
look-back year shall be the twelve-
month period immediately preceding
the determination year.
A Highly Compensated former employee
includes any Employee who separated
from service (or was deemed to have
separated) prior to the determination
year, performs no service for Oremet
during the determination year, and
was a Highly Compensated active
Employee for either the separation
year or any determination year
ending on or after the Employee's
55th birthday.
If an Employee is, during a
determination year or look-back year,
a family member of either a 5 percent
owner who is an active or former
Employee or a Highly Compensated
Employee who is one of the 10 most
Highly Compensated Employees ranked on
the basis of compensation paid for
Oremet during such year, then the
family member and the 5 percent
owner or top-ten Highly Compensated
Employee shall be aggregated. In
such case, the family member and 5
percent owner or top-ten Highly
Compensated Employee shall be
treated as a single Employee receiving
compensation and plan contributions or
benefits equal to the sum of such
compensation and contributions or
benefits of the family member and 5
percent owner or top-ten Highly
Compensated Employee. For purposes of
this section, family member includes
the spouse, lineal ascendants and
descendants of the Employee or former
Employee and the spouses of such
lineal ascendants and descendants.
___________________________________________________________________________
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<PAGE>
The determination of who is a Highly
Compensated Employee, including the
determinations of the number and
identity of Employees in the top-paid
group, the top 100 Employees, the
number of Employees treated as
officers and the compensation that
is considered, will be made in
accordance with Section 414(q)
of the Code and the regulations
thereunder.
Hour of Service.............. (a) In the case of an Employee
covered by the Labor Agreement,
each hour of Service for which such
Employee is paid (or entitled to
payment) for the performance of
duties for Oremet, and each
additional hour of Service for
which back pay (irrespective of
mitigation of damages) is either
awarded or agreed to by Oremet, to
the extent such award or agreement
is intended to compensate an
Employee for periods during which
the Employee would have been
engaged in the performance of duties
for Oremet.
(b) In the case of an Employee not
covered by the Labor Agreement, 10
Hours of Service shall be credited
to such Employee for each day in
which such Employee would be
credited with at least one Hour of
Service under (a) above.
(c) Solely for purposes of
determining an Employee's (i)
eligibility to participate in the
Plan under Section 3(a), and (ii)
vesting under Section 7(b), Hours
of Service shall include Hours
during an approved leave of absence
granted by Oremet to an Employee
on or after August 5, 1993, pursuant
to the Family and Medical Leave Act,
if the Employee returns to work for
Oremet at the end of such leave of
absence.
Initial Contribution......... The contribution made to the Trust by
Oremet as of the Effective Date in
accordance with Section 4.
___________________________________________________________________________
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<PAGE>
Initial Acquisition
Loan.................... The Acquisition Loan entered into by
the Plan on the Effective Date. An
Acquisition Loan is a loan (or other
extension of credit, including an
installment obligation to a party in
interest) used by the Trust to finance
the acquisition of Oremet Stock, which
loan may constitute an extension of
credit to the Trust from a party in
interest (as defined in ERISA Section
3(14)).
Initial Acquisition Loan
Plan Contributions...... Plan Contributions made pursuant to
Section 4(a)(1) for the purpose of
paying all obligations due under the
Initial Acquisition Loan.
Labor Agreement.............. The collective bargaining agreement
between Oremet and the USWA ratified
on December 10, 1987 and any
extensions thereof and the Collective
Bargaining Agreement between Oremet
and the USWA effective on August 1,
1994, and any extensions thereof.
Loan Suspense................ Trust to which Financed Shares are
initially credited prior to release
for allocation to Participants'
Oremet Stock Accounts.
Oremet....................... Oregon Metallurgical Corporation, an
Oregon corporation.
Oremet Stock................. Shares of common stock, par value
$1.00 per share, issued by Oremet.
Oremet Stock
Account................. The Account of a Participant or
Beneficiary that reflects his interest
in Oremet Stock held under the Plan.
See Section 6.
___________________________________________________________________________
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<PAGE>
Participant.................. Any Employee who is participating in
the Plan or any other person with an
account balance under the Plan. See
Section 3(a).
Plan......................... The Oregon Metallurgical Corporation
Employee Stock Ownership Plan.
Plan Administrator........... The ESOP Administrators appointed
pursuant to Section 17 to administer
the Plan.
Plan Compensation............ The Compensation of an Employee with
the following adjustments: (a) the
following amounts shall be excluded:
(1) Compensation paid to an Employee
prior to the time the Employee
becomes a Participant under Section 3
(except where a participant's
eligibility computation period
overlaps two (or more) plan years
as described below); (2) amounts
paid to a Participant after the
Effective Date with respect to
Service prior to the Effective Date,
other than vacation pay; and (3)
amounts paid directly to Employees
to compensate them for the
application of Section 6(d); and (b).
The following amounts shall be
included: (1) amounts paid for
lost time (including workmen's com-
pensation) to an Employee for sickness
or accident leave for up to 1,040
hours of sick leave per occurrence,
even if the occurrence is prior to
the Effective Date, except if the
Employee is absent in connection
with a verifiable on-the-job
injury, amounts paid for lost
time up to 2,080 hours of sick
leave per occurrence, even if the
occurrence is prior to the
Effective Date, and in either case,
an employee's return to work (whether
full or part-time) does not
prohibit the employee from receiving
credit for the balance of lost time
hours remaining for an occurrence,
even if the occurrence is prior to
the Effective Date; and (2) to the
extent permitted by law, amounts paid
by the USWA to an Employee while
working on official union business
related to Oremet; and (3) for
___________________________________________________________________________
PAGE 9 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
the initial year of participation,
for a participant whose eligibility
computation period overlaps two (or
more) plan years, amounts paid since
the date of hire.
Plan Contributions........... Payments, in cash or in kind,
including the forgiveness of
indebtedness, made to the Trustee
by Oremet. See Section 4.
Plan Year.................... The twelve-month period ending on
each December 31; provided that the
first Plan Year shall be the period
beginning on the Effective Date and
ending on the following December 31.
Profit Sharing Plan
Contributions........... Plan Contributions made pursuant to
Section 4(a)(2).
Service...................... Employment with Oremet.
Termination of Service....... Retirement or other termination of an
Employee's employment relationship
with Oremet, including the voluntary
termination of recall rights by an
Employee on lay-off.
Trust........................ The Oregon Metallurgical Corporation
Employee Stock Ownership Trust,
created by the Trust Agreement
entered into between Oremet and the
Trustee.
Trust Agreement.............. The Oregon Metallurgical Corporation
Employee Stock Ownership Trust
Agreement between Oremet and the
Trustee establishing the Trust and
specifying the duties of the Trustee.
Trust Assets................. The Oremet Common Stock and other
assets held in the Trust for the
benefit of Participants. See
Section 5.
___________________________________________________________________________
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<PAGE>
Trustee...................... The Trustee appointed by the Board of
Directors of Oremet to hold and invest
the Trust Assets.
Union or USWA................ The United Steelworkers of America.
Year of Service.............. A consecutive twelve-month period of
service with Oremet in which an
Employee earns at least 870 Hours of
Service. For the purposes of
determining vesting credit under
Section 7 or whether a Participant
has incurred a Break in Service, a
Participant will be credited with up
to 436 Hours of Service if the
Participant is absent by reason of the
pregnancy of the Participant, the
birth of a child of the Participant,
the placement of a child with the
Participant in connection with the
adoption of the child, or for the
purposes of caring for such child
immediately following such birth or
placement.
Section 3. Eligibility and Participation.
_____________________________
(a) Eligibility and Participation.
_____________________________ Each Employee on the Effective
Date shall become a Participant as of that date. Each other Employee shall
become eligible to participate as of the entry date specified upon
completion of the following requirements: (i) attaining 18 years of age;
and (ii) having been employed for a period of 120 calendar days with
Oremet.
After an employee satisfies the eligibility requirements, the employee
shall become a participant as of the following entry date: (i) if the
eligibility computation period does not overlap two plan years, the
employee's date of hire; and (ii) if the eligibility computation period
overlaps two (or more) plan years, the first day of the plan year within
which the employee completes the eligibility requirements.
(b) Rehired Employee.
________________ A former Participant who is re-employed by
Oremet as an Employee shall become a Participant as of the date of his
re-employment.
___________________________________________________________________________
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<PAGE>
(c) Termination of Participation.
____________________________ Participation in the Plan shall
continue until such participation terminates following the complete
distribution of a Participant's Accounts, as provided in Section 13. A
Participant will be eligible for an allocation of Plan Contributions in any
Plan Year in which he has Earned Plan Compensation.
Section 4. Plan Contributions.
__________________
(a) Contributions.
_____________ Plan Contributions shall be made by Oremet to the
Trustee for each Plan Year in cash, by forgiveness of indebtedness, or in
Oremet Stock, equal to the sum of the Initial Acquisition Loan
Contribution, the Profit Sharing Plan Contribution, and the Discretionary
Plan Contribution as follows:
(1) Initial Acquisition Loan Contributions
______________________________________ - For each Plan Year
in which there is an outstanding principal balance on the
Initial Acquisition Loan, Oremet shall make an Initial
Acquisition Loan Contribution in an amount equal to the sum
of the interest accrued on the Initial Acquisition Loan, as
of the end of the Plan Year, plus the amount specified in
Section 4(a)(1)(A), or in Plan Years ending after December
31, 1987, the amount specified in Section 4(a)(1)(B), if
less than the amount specified in Section 4(a)(1)(A).
(A) For the Plan Year ending on December 31, 1987,
one-eighty-fourth of the principal amount of the
Initial Acquisition Loan; for Plan Years ending after
December 31, 1987 but on or before December 31, 1993,
one-seventh of the principal amount of the initial
Acquisition Loan; and for the Plan Year ending on
December 31, 1994, eleven-eighty-fourths of the
principal amount of the Initial Acquisition Loan.
Notwithstanding the foregoing, the amount to
___________________________________________________________________________
PAGE 12 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
be contributed under this Section 4(a)(1)(A) shall be
increased by the difference between (x) the sum of the
amount by which each Initial Acquisition Loan
Contribution for each preceding Plan Year was less than
the amount to be contributed with respect to that Plan
Year under the preceding sentence of this Section
4(a)(1)(A) and (y) the sum of the amount by which each
Initial Acquisition Loan Contribution in each preceding
Plan Year exceeded (by reason of an increase under this
sentence) the amount to be contributed under the
preceding sentence of this Section 4(a)(1)(A).
or
(B) Twenty-five percent of the aggregate Compensation paid
to all Participants with respect to such Plan Year;
(2) Other Acquisition Loans (if any)
________________________________ - "Reserved"
(3) Profit Sharing Plan Contributions
_________________________________ - Subject to Section
4(a)(3), Oremet shall make Profit Sharing Plan Contributions
as follows:
(A) If Oremet's Cash Flow From Operations exceeds
$7,500,000 during Plan Years beginning on January 1, of
1988, 1989, or 1990, Oremet shall contribute cash or
Oremet Stock with a fair market value equal to the sum
of (x) 15% of the amount by which Oremet's Cash Flow
From Operations is in excess of $7,500,000 but less
than $8,500,000; plus (y) 20% of the amount by which
Oremet's Cash Flow from Operations exceeds $8,500,000.
(B) If Oremet's Cash Flow From Operations exceeds
$8,500,000 in any Plan Year beginning on or after
January 1 of 1991, and in which an
___________________________________________________________________________
PAGE 13 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
Initial Acquisition Loan Contribution is made, Oremet
shall contribute cash or Oremet Stock with a fair
market value equal to the sum of (x) 15% of the amount
by which Oremet's Cash Flow from Operations is in
excess of $8,500,000 but less than $9,500,000, plus (y)
20% of the amount by which Oremet's Cash Flow From
Operations exceeds $9,500,000;
(4) Limitation on Profit Sharing Contributions.
__________________________________________ Profit Sharing
Contributions shall be limited in accordance with Section
6(d) of this Plan.
(5) Discretionary Plan Contributions.
________________________________ Such additional amounts
as may be determined by Oremet's Board of Directors.
(b) Due Dates.
_________ Plan Contributions under the Plan for each Plan Year
shall be paid to the Trustee by the Anniversary Date of the Plan Year for
which the Plan Contributions are made or as soon as practicable thereafter,
but not later than the due date for filing Oremet's federal income tax
return for that Plan Year, including any extensions on such due date;
provided, however, that any Acquisition Loan Contributions shall be made at
such times as to enable the Plan to meet its repayment obligations under
the documents governing the Acquisition Loan.
(c) Initial Contribution.
____________________ As of the Effective Date, Oremet shall
make an initial contribution of Oremet Stock to the Trustee with respect to
the first Plan Year equal to the number of Employees who are Participants
on the Effective Date.
(d) Mistake of Fact.
_______________ In the event that Plan Contributions are paid
to the Trustee by reason of a mistake of fact as determined by the Plan
Administrator, such Plan Contributions shall be returned to Oremet by the
Trustee (upon Oremet's request) within one year after the payment to the
Trustee. Earnings attributable to amounts to be returned to Oremet shall
not be returned, and losses shall reduce the amount to be so returned.
___________________________________________________________________________
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<PAGE>
(e) Employee Contributions.
______________________ No Participant shall be required or
permitted to make contributions to the Trust.
Section 5. Investment of Trust Assets.
__________________________
(a) Exclusive Benefit Reversion.
___________________________ The Trust Assets shall be held for
the exclusive benefit of Participants and their Beneficiaries, and shall be
used solely to pay benefits to such persons. The Trust Assets shall not
revert to the benefit of Oremet, except as provided in Sections 4(a)(2) and
4(d).
(b) Investment.
__________ Trust Assets under the Plan shall be invested
primarily in shares of Oremet Stock, as provided in the Trust Agreement and
Section 1, and, as authorized by Treas. Reg. <SUBSECTION> 54.4975-11(b), the
Trustee may also invest a portion of the Trust Assets in other investments
described in Paragraph C of the Trust Agreement, or Trust Assets may be
held in cash in accordance with Paragraph C of the Trust Agreement. All
purchases or sales of Oremet Stock shall be made by the Trustee only as
directed by the ESOP Administrators, and all purchases of shares of Oremet
Stock in a transaction involving a party in interest as defined in Section
3(14) of ERISA shall be made at a price determined by the ESOP
Administrators which does not exceed adequate consideration (as defined in
Section 3(18) of ERISA). The ESOP Administrators may direct the Trustee to
invest and hold up to 100% of the Trust Assets in Oremet Stock.
(c) Acquisition Loans.
_________________ The Acquisition Loans shall be for a specific
term; shall, if required to bear interest, bear a reasonable rate of
interest (as determined by the ESOP Administrators); and shall not be
payable on demand. No event shall constitute a default by the Trust under
any Acquisition Loan from Oremet, except the failure of the Trust to use
Plan Contributions made under Section 4(a)(1) or 4(a)(3) to satisfy the
obligations of the Trust. With
___________________________________________________________________________
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<PAGE>
respect to any Acquisition Loan from a party in interest as defined in
Section 3(14) of ERISA other than Oremet, a default shall occur only upon
the failure of the Trust to make a payment when due under the terms of such
Acquisition Loan. A default under an Acquisition Loan from a party in
interest as defined in Section 3(14) of ERISA shall be only with respect to
such past due payment and shall entitle any person having a right to
payment under the Acquisition Loan only to a transfer of Trust Assets the
value of which is no greater than the amount in default.
All assets acquired with the proceeds of an Acquisition Loan shall be
held in a suspense account and shall be released as of the Anniversary Date
based on the ratio the principal payments made on the respective
Acquisition Loan with respect to the Plan Year bear to the original
principal amount of the respective Acquisition Loan. Such Financed Shares
are to be allocated to Participants' Oremet Stock Accounts as provided in
Section 6. An Acquisition Loan may be secured by a pledge of the Financed
Shares acquired with the proceeds of such Acquisition Loan (or acquired
with the proceeds of a prior Acquisition Loan that is being refinanced).
No other Trust Assets may be pledged as collateral for an Acquisition Loan,
and no lender shall have recourse against Trust Assets other than against
any Financed Shares remaining subject to pledge and any Plan Contributions
made to the Trust to enable the Trust to meet its obligations under the
Acquisition Loan. Financed Shares shall be released from the pledge in the
same proportion and to the same extent as such Financed Shares are released
from the Loan Suspense Account in accordance with Section 6. Repayments of
principal and interest (if any) on any Acquisition Loan shall be made by
the Trustee only from Plan Contributions paid in cash to enable the Trustee
to repay such Acquisition Loan, from earnings attributable to such cash
Plan Contributions, or through the forgiveness of indebtedness.
___________________________________________________________________________
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<PAGE>
(d) Loans to Participants.
_____________________
(1) The ESOP Administrators shall direct the Trustee to make a
loan or loans to Participants from the Directed Investment
Accounts when applied for pursuant to the terms of this
Section. Such loan or loans shall be in an amount or
amounts which does not in the aggregate exceed the amount
set forth in Subsection (d)(2) below. Loans shall be made
on the written application of the Participant and on such
terms and conditions as are set forth in this Section. In
making such loans, the ESOP Administrators shall pursue
uniform policies and shall not discriminate in favor of or
against any Participant or group of Participants.
(2) Maximum Loan Amount.
___________________
(A) In no event shall any loan made pursuant to this
Section be in an amount which shall cause the
outstanding aggregate balance of all loans made under
this Plan to a Participant to exceed the lesser of:
- $50,000, reduced by the excess (if any) of (x) the
highest outstanding balance of loans from the Plan
to the Participant during the one-year period
ending on the day before the date on which the
loan is made, in excess of (y) the outstanding
balance of loans from the Plan to the Participant
on the date on which the loan is made; or
- one-half the total vested portion of the balance
in such Participant's Account (Stock, Cash and
Directed Investment).
___________________________________________________________________________
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<PAGE>
(B) Notwithstanding any of the preceding provisions of this
Subsection (d), in no event shall any loan made under
this Section exceed 100% of the vested portion of the
Participant's Directed Investment Account, and no loan
shall be made in an amount less than $1,000.
(C) For purposes of this Section the balance of an Account
in this Plan shall be determined as of the last
available quarterly valuation of such Accounts made
within the twelve (12) month period preceding the date
on which an application for a loan under this Section
is made, adjusted for distributions or contributions
made after the date of such valuation but not for
earnings, gains or losses subsequent to the date of
such valuation.
(3) Repayment of Loans.
__________________ The principal and interest of each loan
made under this Section shall be payable no less than
quarterly and shall mature and be payable in full within
five years from the date such loan is made, except that a
loan to a Participant used to acquire any dwelling unit that
within a reasonable time after the loan is made is to be
used (determined at the time the loan is made) as the
principal residence of the Participant shall mature and be
payable in full within 15 years from the date such loan is
made or such longer period that the ESOP Administrators
deems reasonable in accordance with any regulations or other
interpretive authority issued by the Internal Revenue
Service or the Department of Labor.
___________________________________________________________________________
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<PAGE>
(4) Terms.
_____
(A) Loans to Participants shall be awarded on the basis of
creditworthiness and made according to the following
terms:
- the security for such loans shall be the vested
portion of the Participant's Directed Investment
Account to the extent of the amount loaned;
- interest shall be charged on the loans at the rate
charged for passbook account secured loans by the
Federal Metals Credit Union of Albany, Oregon,
except that loans used by the Participant to
acquire a personal residence shall bear the same
rate charged for comparable loans by the Federal
Metals Credit Union;
- any processing charge required by the Trustee
shall be paid by the Participant;
- the loans shall be evidenced by such forms of
obligations, and shall be made upon such
additional terms as to default, prepayment,
security and otherwise, including such forms of
application, as the ESOP Administrators shall
determine, and all such forms shall be
incorporated herein by reference;
- written requests shall be received no later than
the last business day of the quarter preceding the
quarter for which the loan is to be made, and
loans will be made as soon as the funds are
readily available; and
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- all payments of interest and principal shall be
allocated to the Directed Investment Account of
the Participant to whom the loan was made and such
payments (which shall not be made less frequently
than quarterly) shall be sufficient to amortize
the principal and interest payable pursuant to the
loan during the term thereof on a substantially
level basis.
(B) The entire unpaid balance of any loan made under this
Subsection (d) and all interest due thereon, including
all arrearage thereon, shall, at the option of the ESOP
Administrators, immediately become due and payable
without further notice or demand, upon the occurrence,
with respect to the borrowing Participant, of any of
the following events of default:
- Any payment of principal and accrued interest on
the loan remains due and unpaid for a period of
ten (10) days after the same becomes due and
payable under the terms of the loan;
- the commencement of a proceeding in bankruptcy,
receivership or insolvency by or against the
borrowing Participant;
- the termination of the employment of the borrowing
Participant with the Company for any reason; or
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- the borrowing Participant attempts to make an
assignment, for the benefit of creditors, of the
Participant's Account under the Plan or of any
other security for the loan.
Any payments of principal and interest of the loan not
paid when due shall bear interest thereafter, to the
extent permitted by law, at the rate specified by the
terms of the loan. The payment and acceptance of any
sum or sums at any time on account of the loan after an
event of default, or any failure to act to enforce the
rights granted hereunder upon an event of default,
shall not be a waiver of the right of acceleration set
forth in this Subsection (d).
(C) If an event of default and an acceleration of the
unpaid balance of the loan and interest due thereon
shall occur, the ESOP Administrators shall have the
right to direct the Trustee to pursue any remedies
available to a creditor at law or under the terms of
the loan, including the right to execute on the
security for the loan, and to apply any amounts
credited to the Directed Investment Account of the
borrowing Participant at the time of execution or at
any time thereafter in satisfaction of the unpaid
balance of the loan and interest due thereon.
Notwithstanding the preceding provisions of this
paragraph, the ESOP Administrators shall have no right
to direct the Trustee to execute on any amounts
credited to the Directed Investment Account of the
borrowing Participant if such amounts have not been
allocated to a Participant's Account for at least two
years, including any period during which the amounts
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<PAGE>
were allocated to an Account of the Participant other
than the Participant's Directed Investment Account;
provided, however, that nothing herein shall preclude
the ESOP Administrators from executing on any amounts
credited to the account of the borrowing Participant
after such time period has expired.
(D) Each such loan shall be a first lien against the
Directed Investment Account of the borrowing
Participant. If (x) any portion of the loan is
outstanding and (y) an event occurs pursuant to which
the Participant, his or her estate, or his or her
Beneficiaries may receive a distribution from the
Participant's Directed Investment Account under the
provisions of the Plan, then the Participant, or the
Participant's Beneficiaries, shall pay to the Trustee
by offset an amount equal to the portion of the loan or
loans then outstanding, including all accrued interest
thereon, and the Participant shall then receive the
full amount of the balance of the distribution under
the provisions of the Plan to which the Participant is
otherwise entitled. No distribution from a Directed
Investment Account shall be made to a Participant, the
Participant's estate, or a Participant's Beneficiaries
in an amount greater than the excess of the portion of
the Participant's Directed Investment Account otherwise
distributable over the aggregate of the amounts owing
with respect to such loan or loans plus interest, if
any, thereon, taking into consideration any portion of
the loan or loans previously paid by the Participant
pursuant to the provisions of this Subsection (D).
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Section 6. Allocations to Participants' Accounts.
_____________________________________
(a) Accounts.
________ Separate Accounts shall be maintained to reflect the
interest of each Participant under the Plan.
(1) Stock Account.
_____________ The Oremet Stock Account maintained for each
Participant shall be credited annually with his allocable
share of Oremet Stock (in whole shares, rounding as
necessary to comply with Section 6(d)) purchased and paid
for by the Trustee or contributed in kind. Financed Shares
shall initially be credited to the Loan Suspense Account
and, except as provided in Section 6(d), shall be allocated
once per year as of each Anniversary Date to the Oremet
Stock Accounts of Participants eligible to receive an
allocation of shares pursuant to Section 3(c) to the extent
that Financed Shares are released from the Loan Suspense
Account. The number of Financed Shares to be released from
the Loan Suspense Account for allocation to Participants'
Oremet Stock Accounts for each Plan Year shall be based upon
the ratio that the payments of principal on the related
Acquisition Loan for that Plan Year bear to the original
principal amount on the related Acquisition Loan.
(2) Cash Account.
____________ The Cash Account maintained for each
Participant shall be credited (or debited) annually with his
share of any net income (or loss) of the Trust, including
any cash dividends declared on shares of Oremet Stock and
the Participant's share of Plan Contributions made in cash.
It shall be debited for its proportionate share of any cash
payments made under the Plan for the purchase of shares of
Oremet Stock or for the repayment of principal on any
Initial Acquisition Loan.
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(3) Directed Investment Account.
___________________________ The Directed Investment
Account shall be established for each Participant who has
sold stock under Plan Section 9(a) or has directed the sale
of any portion of the Participant's Account under Plan
Section 12(c). Proceeds from such sale shall be held in one
or more collective investment funds maintained by the
Trustee, or other fiduciary of this Plan or Trust,
exclusively for investment of assets held in qualified
trusts in accordance with Section C of the Trust Agreement,
or as funds held for borrowing by Participants as allowed by
Plan Section 5(d) and as directed by the Participant in
writing. If the Participant shall fail to give such
direction, the ESOP Administrators shall designate one such
investment fund to hold such proceeds. The ESOP
Administrators shall establish a procedure, to be applied in
a uniform, nondiscriminatory manner, setting forth
permissible investment options as made available by the
Trustee, how often changes between investments may be made,
and any other limitations that the Administrators shall
impose on a Participant's right to direct investments.
In no event shall Plan contributions be allocated
directly to a Participant's Directed Investment Account:
such Account is to serve solely as a repository for
intraplan transfers from the Participant's Stock Account.
(4) Allocations.
___________ The allocations to Participants' Stock and
Cash Accounts for each Plan Year shall be made as described
in the following Subsections of this Section 6.
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(b) Plan Contributions.
__________________ All Plan Contributions under Section 4 and
forfeitures incurred under Section 7(b) with respect to each Plan Year
shall be allocated under this Section 6(b) as of the Anniversary Date of
such Plan Year to Stock Accounts and Cash Accounts (as may be required,
respectively) of Participants entitled to allocations under Section 3(c).
(i) Plan Contributions and forfeitures with respect to the Plan
Year ending on December 31, 1987 shall be allocated to the
Accounts of each Participant in the ratio that the Adjusted
Plan Compensation paid to each such Participant from the
Effective Date to and including December 31, 1987 bears to
the aggregate Adjusted Plan Compensation paid to all such
Participants from the Effective Date to and including
December 31, 1987.
(ii) Plan Contributions and forfeitures with respect to any Plan
Year (other than the Plan Year which ends on December 31,
1987) in which Oremet makes an Initial Acquisition Loan Plan
Contribution shall be allocated to the Accounts of each
Participant in the ratio that the Adjusted Plan Compensation
paid to each such Participant for the respective Plan Year
bears to the aggregate Adjusted Plan Compensation paid to
all Participants for that Plan Year.
(iii) Plan Contributions and forfeitures with respect to any Plan
Year in which Oremet does not make an Initial Acquisition
Loan Plan Contribution shall be allocated to the Accounts of
each Participant in the ratio that the Plan Compensation
paid to each such Participant for the respective Plan Year
bears to the aggregate Plan Compensation paid to all
Participants for that Plan Year.
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<PAGE>
(c) Initial Contribution.
____________________ The Initial Contribution shall be
allocated among Participants' Accounts so that one share of Oremet Stock is
allocated to the Stock Account of each Employee who is a Participant as of
the Effective Date.
(d) Allocation and Contribution Limitations.
_______________________________________ Plan contributions with
respect to any Plan Year shall be determined under Section 4(a).
Notwithstanding Section 4(a) or anything else in this Plan to the contrary,
Plan Contributions shall not be made to the extent amounts cannot be
allocated to any Participant's Account by reason of the limitations in this
Section 6(d) or are in excess of the amounts that may be deducted under
Section 404.
(1) The total amount of Plan Contributions (plus in the first
Plan Year, the Initial Contribution) allocated to the
Accounts of any Participant for each Plan Year may not
exceed the lesser of:
(i) Twenty-five percent (25%) of his Compensation; or
(ii) The dollar amount described in (A) Section 415(c)(1)(A)
of the Code or (B) in Section 415(c)(6)(A) of the Code,
whichever is applicable.
In the event Plan Contributions under Section 4 (including
in the first Plan Year, the Initial Contribution) with
respect to a Plan Year would exceed the limitations
described in this Section 6(d)(1), such Plan Contributions
shall be reduced, first by reducing the amount described in
Section 4(a)(5) above, second by reducing the amount
described in Section 4(a)(3) above and third by reducing the
amount described in Sections 4(a)(1) or 4(a)(2) above to the
extent necessary. The portion reduced shall not be
contributed with respect to that Plan Year or subsequent
Plan Years.
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<PAGE>
(2) In addition, for any Participant who is covered under
another employee-defined benefit plan sponsored by Oremet or
any member of Oremet's controlled group (as defined in
Sections 414(b) and (c) of the Code), Plan Contributions may
not be allocated to his Accounts under this Plan in amounts
which would cause the sum of the defined benefit plan
fraction and the defined contribution plan fraction to
exceed 1.0 for any Plan Year. For this purpose, the terms
"defined benefit plan fraction" and "defined contribution
plan fraction" shall be determined in accordance with
Section 415(e) of the Code. If these limitations would be
exceeded as to any Participant, Plan Contributions shall be
reduced in the manner and order set forth in Section 6(d)(1)
so that it does not exceed the maximum amount permitted.
The portion reduced shall not be made with respect to that
Plan Year or subsequent Plan Years.
(3) If no more than one-third of the Plan Contributions for a
Limitation Year that are deductible as principal or interest
payments on an Acquisition Loan, pursuant to the provisions
of Section 404(a)(9) of the Code, are allocated to Highly
Compensated Employees, then the following shall not be
included as Plan Contributions for purposes of this Section
6(d).
(i) Forfeitures of Company Stock if the Company Stock was
acquired with the proceeds of a Loan, or
(ii) Company Contributions that are deductible as interest
payments on a Loan under Section 404(a)(9)(B) of the
Code and charged against a Participant's Account.
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<PAGE>
(4) If as a result of the allocation of forfeitures, a
reasonable error in estimating a Participant's annual
Compensation, or under other facts and circumstances which
the Commissioner of the Internal Revenue Service finds
justifies the application of the rules set forth in this
subsection, the Annual Additions (as defined in Code
<SUBSECTION> 415(c)(2)) for a particular Participant would
cause the limitations of Code Section 415 for the
Limitation Year (the Plan Year) to be exceeded, the excess
amounts shall not be deemed annual additions in that
Limitation Year, but shall be treated as follows. The
excess amounts in the Participant's Account shall be held
unallocated in the Loan Suspense Account for the
Limitation Year and allocated and reallocated in the next
Limitation Year to all the Participants in the Plan. The
excess amounts must be used to reduce Oremet contributions
for the next Limitation Year (and succeeding Limitation
Years, as necessary) for all of the Participants in the
Plan.
(e) Net Income (or Loss) of the Trust.
_________________________________ The net income (or loss) of
the Trust for each Plan Year will be determined as of the Anniversary Date.
Each Employee's share of the Trust's net income or loss (other than
dividends allocated in accordance with Section 6(f) or earnings or losses
allocated to a Directed Investment Account) (the "Pooled Earnings") will be
allocated to his Cash Account in the ratio which the total balances of his
Stock and Cash Accounts under the Plan on the preceding Anniversary Date
(reduced by the amount of any distribution of Capital Accumulation from
such Stock and Cash Account during the Plan Year) bears to the total of
such Stock and Cash Account balances for all Employees as of that date.
The Directed Investment Account shall not share in Pooled Earnings of the
Trust, but it shall be charged or credited as appropriate with the net
earnings, gains, losses and expenses as well as any appreciation or
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<PAGE>
depreciation in market value during each Plan Year that is attributable to
such earmarked Directed Investment Account. The net income (or loss) of
the Trust includes the increase (or decrease) in the fair market value of
Trust Assets (other than shares of Oremet Stock and assets in the Directed
Investment Accounts), interest income, dividends and other income and gains
(or losses) attributable to Trust Assets (other than any dividends on
shares of Oremet Stock and any gain or loss attributable to assets held in
the Directed Investment Accounts) since the preceding Anniversary Date,
reduced by any expense charged to the Trust Assets (other than expenses
attributable to the Directed Investment Accounts). The computation of net
income (or loss) of the Trust shall not take into account any interest paid
by the Trust on an Acquisition Loan.
(f) Allocation of Dividends.
_______________________ Any cash dividends received on shares
of Oremet Stock allocated to Participants' Oremet Stock Accounts as of the
record date of the dividends shall be allocated to respective Cash Accounts
of the Participants and distributed in accordance with Section 12(a). Any
cash dividends received on unallocated shares of Oremet Stock shall be
allocated to the Cash Accounts of Participants who have Earned Plan
Compensation in the Plan Year to which the dividend relates in the ratio,
as of the day with respect to which the dividend was declared, that each
such Participant's Stock Account bears to the total number of shares of
Oremet Stock allocated to all such Participants' Stock Accounts. Any stock
dividends received on allocated shares of Oremet Stock shall be credited to
the Stock Accounts to which such Oremet Stock was allocated. Any stock
dividends received on unallocated shares of Oremet Stock shall be credited
to the Suspense Account until such time as the stock on which the dividend
was declared is released from the Suspense Account for allocation.
(g) Accounting for Allocations.
__________________________ The ESOP Administrators shall
establish accounting procedures for the purpose of making the allocations
to Participants' Accounts provided for in this Section 6. The ESOP
Administrators shall maintain adequate records of the cost basis of
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<PAGE>
shares of Oremet Stock allocated to each Participant's Oremet Stock
Account. The ESOP Administrators shall also keep separate records of
Financed Shares and of Plan Contributions (and of any earnings thereon)
made for the purpose of enabling the Trust to repay any Acquisition Loans.
From time to time, the ESOP Administrators may modify its accounting
procedures for the purposes of achieving equitable and nondiscriminatory
allocations among the Accounts of Participants, in accordance with the
provisions of this Section 6 and the applicable requirements of the Code
and ERISA.
Section 7. Vesting of Participants' Accounts.
_________________________________
(a) Current Employees.
_________________ All Employees who are eligible to become
Participants on the Effective Date shall be 100% vested in their Accounts
at all times.
(b) Vesting Schedule.
________________ All Employees who are not eligible to become
Participants on the Effective Day shall be 100% vested upon the first to
occur of the Participant's attainment of age 65, the completion of twelve
months of active service, or the completion of two Years of Service. If,
prior to the time a Participant becomes vested in his Accounts upon the
occurrence of any of the events mentioned in the preceding sentence, a
Participant terminates his employment with Oremet, his Accounts shall be
forfeited and reallocated in accordance with Section 6(b). For the
purposes of this Section 7(b), twelve months of active service means 260
days for which an Employee is paid Earned Plan Compensation.
For the purposes of this Section 7, an Employee with recall rights
under the Labor Agreement shall not be considered to have terminated
employment with Oremet until such time as the Employee's recall rights
under the Labor Agreement have expired, or such Employee voluntarily
terminates such rights, and an Employee not subject to the Labor Agreement
shall be deemed to have not terminated service (unless such Participant
submits an application for a
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distribution of his Capital Accumulation under Section 13) for the purposes
of this Section 7, if rehired during an equivalent period of time.
(c) 5-Year Break in Service.
_______________________ In the case of a Participant who incurs
consecutive one-year Breaks in Service prior to becoming vested under this
Section 7 and later becomes an Employee, Years of Service prior to the
Break in Service shall be taken into account for the purposes of this
Section 7 unless the number of consecutive one-year Breaks in Service
equals or exceeds the greater of (i) five or (ii) the aggregate number of
Years of Service before the Break in Service. Accounts forfeited under
Section 7(b) shall be restored out of other forfeitures should the
Participant return to Service before incurring a Break in Service.
Section 8. Expenses of the Plan and Trust.
______________________________
All expenses of administering the Plan and Trust shall be charged to
and paid by Oremet. Payment of expenses by Oremet shall not be deemed to
be Plan Contributions.
[Balance of this page reserved]
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Section 9. Rights with Respect to Voting and Other Stock Dispositions.
__________________________________________________________
The voting, tendering, sale or other disposition of Oremet Stock held
in the Trust (except in connection with a distribution) shall be governed
by this Section 9.
(a) Participant Directions.
______________________
(i) Each Participant or Beneficiary shall have the right, with
respect to Oremet Stock allocated to any of his Accounts, and,
separately, shares allocated to accounts for which the Trustee has not
received timely voting instructions and, if applicable, unallocated
shares, ("Non-Directed Shares"), to direct the Trustee as to the
manner in which (x) to vote such Oremet Stock in any matter put to a
shareholder vote; and (y) to respond to a tender or exchange offer or
any other offer to dispose of stock held in the Trust. As to Non-
Directed Shares, the Trustee shall vote, tender, exchange, sell or
dispose of the Oremet Stock based on the following formula: Total
number of Non-Directed Shares multiplied by a fraction, the numerator
of which is the number of Shares credited to the voting Participant's
Account and the denominator of which is the total number of Shares
credited to the Accounts of all Participants who have provided timely
directions to the Trustee.
(ii) With respect to shares of Company Stock allocated to the
account of a deceased Participant such Participant's Beneficiary, as
Named Fiduciary, shall be entitled to direct the voting of shares of
Oremet Stock as if such Beneficiary were the Participant.
(iii) In the event a tender offer shall be received by the
Trustee and instructions shall be solicited from Participants pursuant
to this Section 9(b) regarding such offer, and prior to termination of
such offer, another offer is received by the Trustee for the
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securities subject to the first offer, the Trustee shall use its best
efforts under the circumstances to solicit instructions from the
Participants to the Trustee (x) with respect to securities tendered
for sale, exchange or transfer pursuant to the first offer, whether to
withdraw such tender, if possible, and, if withdrawn, whether to
tender any securities so withdrawn for sale, exchange or transfer
pursuant to the second offer and (y) with respect to securities not
tendered for sale, exchange or transfer pursuant to the first offer,
whether to tender or not to tender such securities for sale, exchange
or transfer pursuant to the second offer. The Trustee shall follow
all such instructions received in a timely manner from Participants in
the same manner and in the same proportion as provided in Section 9
(b) (i). With respect to any further offer for any Oremet Stock
received by the Trustee and subject to any earlier offer (including
successive offers from one or more existing offerors), the Trustee
shall act in the same manner as described above.
(iv) A participant's instructions to the Trustee to tender or
exchange shares of Oremet Stock will not be deemed a withdrawal or
suspension from the Plan or a forfeiture of any portion of the
Participant's interest in the Plan. Funds received in exchange for
tendered shares will be credited to the account of the Participant
whose shares were tendered and will be used by the Trustee to purchase
Oremet Stock, as soon as practicable. In the interim, the Trustee
will invest such funds in short-term investments permitted under the
Plan, and in the same manner in which forfeited amounts are invested.
(v) In the event Oremet initiates a tender or exchange offer,
the Trustee may, in its sole discretion, enter into an agreement with
Oremet not to tender or exchange any
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<PAGE>
shares of Oremet in such offer, in which event the foregoing pro-
visions of this Section 9 shall have no effect with respect to such
offer, and the Trustee shall not tender or exchange any shares of
Oremet Stock in such offer.
(b) Information.
___________ On any matter in which a Participant (or
Beneficiary) is entitled to direct the Trustee under this Section 9, the
Trustee shall solicit such directions by distributing to each Participant
and Beneficiary to whose Account Oremet Stock has been allocated, such
information as shall be distributed to shareholders of Oremet generally in
connection with a shareholder vote, tender, exchange or other offer,
together with any additional information the Trustee deems appropriate in
order for each Participant (or Beneficiary) to give proper directions to
the Trustee. The directions received from any Participant (or Beneficiary)
shall be held in confidence by the Trustee, and shall not be individually
divulged or released to any person, including officers or employees of
Oremet or the Union. Any costs incurred in connection with obtaining
directions shall be treated as expenses of the Plan for the purposes of
Section 8.
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Section 10. Disclosure to Participants.
__________________________
(a) Summary Plan Description.
________________________ The ESOP Administrators shall furnish
each Participant with the summary plan description of the Plan, as required
by Sections 102(a)(1) and 104(b)(1) of ERISA or the regulations thereunder.
Such summary plan description shall be updated from time to time as
required under ERISA and Department of Labor regulations thereunder.
(b) Summary Annual Report.
_____________________ Within 210 days after each Anniversary
Date, or such later date as is permitted under ERISA and the regulations
thereunder, the ESOP Administrators shall furnish each Participant with the
summary annual report of the Plan required by Section 104(b)(3) of ERISA,
in the form prescribed in regulations of the Department of Labor.
(c) Annual Statement.
________________ As soon as practicable after each Anniversary
Date, the ESOP Administrators shall furnish each Participant with a
statement reflecting the following information:
(i) The balance (if any) in his Accounts as of the beginning of
the Plan Year.
(ii) The amounts of Plan Contributions (including the Initial
Contribution), forfeitures, dividends and net income (or
loss) allocated to his Accounts for the Plan Year.
(iii) The new balance in his Accounts as of that Anniversary Date,
including the number of shares of Oremet Stock allocated and
the present fair market value of Oremet Stock.
(iv) Distribution Allowances, if any, and the date on which each
such Distribution Allowance will be eligible for withdrawal.
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(d) Additional Disclosure.
_____________________ The ESOP Administrators shall make
available for examination by any Participant copies of the Plan, the Trust
Agreement and the latest annual report of the Plan filed (on Form 5500)
with the Internal Revenue Service. Upon written request of any
Participant, the ESOP Administrators shall furnish copies of such
documents, and may make a reasonable charge to cover the cost of furnishing
such copies, as provided in regulations of the Department of Labor.
(e) Rollover Statement.
__________________ Within 60 days after making a distribution
under the Plan, the ESOP Administrators shall provide the recipient of such
distribution with a statement advising him as to whether the distribution
qualifies as a lump sum distribution or may be rolled over to another
qualified plan.
Section 11. Capital Accumulation.
____________________
A Participant's vested (nonforfeitable) interest under the Plan is
called his Capital Accumulation. His Capital Accumulation will be
distributed as provided in Sections 12, 13 and 14.
Section 12. In-Service Distributions.
________________________
(a) Dividends.
_________ Any cash dividends received by the Trust on shares of
Oremet Stock shall be allocated to Participants' Cash Accounts in
accordance with Section 6(f) and shall be paid as soon as possible (but not
later than the time permitted under Section 404(k) of the Code) in cash to
such Participants; provided, however,
________ _______ that the ESOP Administrators may
direct Oremet to pay dividends directly to the Participants entitled to
such a distribution.
___________________________________________________________________________
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<PAGE>
(b) Withdrawal of Distribution Allowance.
____________________________________ Two (2) years after the
release of Common Stock from the Loan Suspense Account as measured from
each Anniversary Date (except that the actual date of allocation shall
commence the two-year holding period with respect to Profit Sharing or
Discretionary Plan Contributions) pursuant to Section 6 and quarterly
thereafter, a Participant currently employed by Oremet may request a
withdrawal of the lesser of (a) 100% of the Oremet Common Stock allocated
to his Stock Account for at least two years; or (b) the total Distribution
Allowances allocated to his Stock Account. A Participant's total
Distribution Allowances shall be accordingly reduced following any
withdrawals from the Participant's Stock Account or intraplan transfers to
a Participant's Directed Investment Account pursuant to Sections 12(b),
12(c) or 12(d).
For the purposes of this Section 12(b), as soon as practical after the
annual allocation of Plan Contributions is made, a Distribution Allowance
shall be designated by the ESOP Administrators with respect to Plan
Contributions to be allocated to the Accounts of Participants with respect
to that Plan Year. The Distribution Allowance designated with respect to
each Participant will be that portion of the Oremet Stock allocated to the
Participant's Account with respect to that Plan Year which bears the same
ratio to the number of shares allocated to the Participant's Account with
respect to the Plan Year that the total Distribution Allowance designated
with respect to all Participants with respect to that Plan Year bears to
the aggregate number of shares of Oremet Stock allocated to the Accounts of
all Participants for that Plan Year. For any Plan Year, the aggregate
Distribution Allowance designated for allocations with respect to all
Participants for such Plan Year shall equal the number of shares of Oremet
Stock, which when added to the total number of shares of Oremet Stock
available for distribution to Participants and Beneficiaries at the time
the designation is made (including previously declared
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Distribution Allowances and Accounts that may be distributed pursuant to
Sections 12(d) and 13) plus 25% of the Oremet Stock held in the Suspense
Account, would, if actually distributed, reduce the total number of shares
held by the Plan to not less than 51% of the outstanding Oremet Stock;
provided, however, that the Distribution Allowances for Plan Years ending
on December 31 of 1987, 1988, 1989, 1990, 1991, 1992, 1993 and 1994 shall
not be less than 25% of the shares of Oremet Stock allocated to the
Accounts of all Participants for the respective Plan Year.
Notwithstanding anything in the second paragraph of Section 12(b) to
the contrary, Participants will have the option to withdraw from their
Oremet Stock Account a Distribution Allowance in an amount, which when
added to prior withdrawals, does not exceed 40% of the Oremet Stock
allocated to the Participant's Account provided, however, that the
cumulative withdrawal cannot exceed the number of allocated shares of
Oremet Stock in which the Participant is vested. The limit on withdrawals
from the Oremet Stock Account will be increased by an additional 10%
effective February 27, 1997, so that the maximum allowable withdrawal limit
becomes 50%.
(c) Diversification Elections.
_________________________ Subject to Section 12(e)(4), and this
Subsection (c), in lieu of making a permitted withdrawal under Plan
Section 12(b), and subject to the processing rules of Subsection (e)(3),
any Participant may direct the Trustee in writing to convert all or any
portion of the Participant's Distribution Allowance with respect to the
Participant's Stock Account into the Participant's Directed Investment
Account, such requests hereinafter referred to an "Conversion Requests."
Conversion Requests shall be made on such form or forms as the ESOP
Administrators deem appropriate.
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With respect to assets held in a Participant's Directed Investment
Account as a result of a Conversion Request a Participant currently
employed by Oremet may request a withdrawal of those assets that have been
held by the Plan and allocated to the Participant's Account for at least
two (2) years. In determining whether assets in a Participant's Directed
Investment Account meet the two-year holding requirement, the ESOP
Administrators shall include periods of time in which the assets were held
in an Account of the Participant other than the Participant's Directed
Investment Account. Requests for withdrawals from a Directed Investment
Account shall be made on such form or forms as the ESOP Administrators deem
appropriate.
(d) Special Withdrawal Rules for Participants Who Meet Age and
__________________________________________________________
Service Requirements.
____________________ In lieu of making a withdrawal under Section 12(b)
or directing the sale of Oremet Common Stock under Section 12(c), any
Participant who has attained age 55 and has 10 years of participation under
the Plan may elect, under this paragraph, to make a withdrawal from his or
her Stock Account or a diversifying intraplan transfer to his or her
Directed Investment Account, which Directed Investment Account shall
provide for at least three investment options. During the six Plan Year
period beginning with the Plan Year in which a Participant has attained age
55 and has 10 years of participation under the Plan (the "Six Plan Year
Period"), the Participant shall be entitled to request, within 90 days
after the close of each Plan Year in the Six Plan Year Period, a withdrawal
from the Participant's Stock Account or a diversifying intraplan transfer
to the Participant's Directed Investment Account in the following
percentages: (i) up to 25% of the Stock Account Balance at the close of
the first Plan Year of the Six Plan Year Period, and 25% of any increases
in the Stock Account Balance during the remainder of the Six Plan Year
Period; and (ii) with respect to the last Plan Year of the Six Plan Year
Period, the preceding limitation shall apply by replacing 25% with 50%.
Withdrawals from the Participant's Account
___________________________________________________________________________
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and diversifying intraplan transfers to the Participant's Directed
Investment Account made pursuant to this Section 12(d) shall be made on
such form or forms as the ESOP Administrators deem appropriate. A
withdrawal under this Section 12(d) will be paid within 90 days following
the 90-day period in which the Participant made his request. The
provisions of this Subsection 12(d) are intended to comply with
Section 401(a)(28) of the Code and shall be interpreted in accordance with
that Section of the Code and any corresponding Treasury Regulations.
Assets in a Participant's Directed Investment Account attributable to
diversifying intraplan transfers under this Section 12(d) may be withdrawn
(i) by Participants who are currently employed by Oremet and (ii) to the
extent the assets have been held by the Plan and allocated to the
Participant's Account for at least two (2) years. In determining whether
assets in a Participant's Directed Investment Account meet the two-year
holding requirement, the ESOP Administrators shall include periods of time
in which the assets were held in an account of the Participant other than
the Participant's Directed Investment Account. Requests for withdrawals
from a Directed Investment Account shall be made on such form or forms as
the ESOP Administrators deem appropriate.
(e) Processing and Form of Withdrawals and Conversion Requests.
__________________________________________________________
(1) All withdrawals under Section 12(d), and all withdrawals
under 12(c) made from the Directed Investment Account, shall
be paid in a lump sum.
(2) Subject to Subparagraph (3) of this Subsection (e),
Distribution Allowance withdrawals from the Stock Account
under Section 12(b) ("Requested Withdrawals") shall be paid
in a lump sum.
(3) The ESOP Administrators shall designate a maximum number of
shares of Oremet Stock (the "Maximum Number") that may be
subject to
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Requested Withdrawals and Conversion Requests (hereinafter
collectively referred to as "Requested Shares") in any
quarter, and in the event such requests exceed the Maximum
Number, then the Maximum Number will be allocated pro rata
to each Participant in the same proportion that a
Participant's Requested Shares bears to the total Requested
Shares of all Participants. The ESOP Administrators shall
designate the Maximum Number prior to the quarter in which
the Requested Shares are available. The limitations of this
Subsection 12(e)(3) shall not apply to withdrawals and
diversifying conversions pursuant to Section 12(d), and the
number of shares withdrawn pursuant to Section 12(d) in any
quarter shall first be used to reduce the maximum number of
Requested Shares under this Subsection 12(e)(3).
(4) Effective September 1, 1995, or such later date as the
revisions to Exchange Act Rule 16b-3 as applied to qualified
plans becomes effective, the ESOP Administrators shall
establish special rules with respect to Exchange Act Section
16 insiders. Such rules shall establish the requirements of
advanced elections or periodic window periods for such
insiders to elect an in-service distribution, or a
Conversion Request, or intra-plan diversification, in a
manner consistent with Exchange Act Rule 16b-3 as finalized.
However, in no event shall such rules established by the
ESOP Administrators conflict with any provision of Code
Section 401.
___________________________________________________________________________
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Section 13. Distribution Following Termination of Participation.
___________________________________________________
(a) Distribution.
____________ A Participant shall be eligible for a distribution
of his Accounts as soon as practicable after the termination of his Service
for Oremet on account of death, disability, retirement or any other reason.
An application for a distribution may be submitted in the ninety days
preceding the date on which he will terminate service or any time
thereafter.
(i) Unless the Participant (or Beneficiary) elects otherwise,
distribution of his Capital Accumulation shall commence within 90
days of the later of the filing of an application for a
distribution or the date of the Participant's Termination of
Service, but in no event later than one year after the close of
the Plan Year in which the Participant terminates Service, except
that no such distribution shall commence if the Participant is
re-employed by Oremet prior to the commencement of the
distribution.
(ii) Notwithstanding the foregoing, unless otherwise elected by a
Participant, distribution of his Accounts shall commence not
later than sixty (60) days after the Anniversary Date coinciding
with or next following the later of (i) his 65th birthday,
(ii) the tenth (10th) anniversary of the date he commenced
participation in the Plan or (iii) the date of his Termination of
Service. Distribution to a terminated Participant shall commence
automatically at age 65 unless the Participant elects to defer
the commencement of the distribution.
(iii) If a Participant elects to defer the commencement of a
distribution, the distribution must commence no later than
April 1 of the calendar year following the calendar year in which
the Participant attains age 70-1/2, except for a Participant who
attained age 70 1/2 before January 1, 1988, or attained age 70
1/2
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<PAGE>
in 1988, which Participant will be subject to the transition
rules of IRS Notice 89-42.
If the distribution of the Participant's Accounts has begun
and the Participant dies before the entire Accounts have been
distributed, the remaining portion of the Participant's Accounts
shall be distributed to the Beneficiary at least as rapidly as
under the method of distribution being used as of the date of the
Participant's death. If the Participant dies prior to the time
the distribution of his Accounts has commenced, his entire
Accounts shall be distributed to the Beneficiary within five
years after the death of such Participant except where the
Participant's interest is payable to a Beneficiary over a period
not extending beyond the life expectancy of such Beneficiary and
such distributions commence not later than one year after the
date of the participant's death. If the Beneficiary is the
surviving spouse of the Participant, the distribution
commencement date may be extended to the date the Participant
would have attained age 70 1/2. If the surviving spouse dies prior
to the time such distributions commence, the surviving spouse
shall be treated as the Participant for purposes of again
applying this subsection.
(iv) If the amount of the Capital Accumulation to which a Participant
is entitled cannot be determined by the date on which such
distribution should commence, or if the Participant cannot be
located, distribution of his Accounts shall commence within sixty
(60) days after the date on which his Capital Accumulation can be
determined or after the date on which the ESOP Administrators
locate the Participant; provided, however,
________ _______ that if the amount of
the Capital Accumulation to
___________________________________________________________________________
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<PAGE>
which a Participant is entitled cannot be determined because the
allocation with respect to the Plan Year in which the Participant
terminates Service has not yet been made, a Participant (or
Beneficiary) may elect to commence distribution prior to the
allocation with respect to that Plan Year is made, with the
portion attributable to such allocation to commence within sixty
days after the allocation is made.
(v) Notwithstanding the foregoing, if the Participant's Capital
Accumulation does not exceed $3,500, and has never exceeded
$3,500, then the Participant's Accounts shall be automatically
distributed to the Participant, provided, however, if the
Participant's Account balances at the time for any distribution
exceed $3,500, then neither such distribution nor any subsequent
distributions shall be made to the Participant at any time before
his 65th birthday without his written consent.
(b) Retained Account.
________________ If any part of a Participant's Accounts is
retained in the Trust after his Termination of Service, his Accounts will
continue to be treated as provided in Section 6. However, such Accounts
will not be credited with any additional Plan Contributions or dividends
with respect to unallocated Oremet Stock.
(c) Deferred Distribution Withdrawal Right.
______________________________________ In the event a
Participant elects to defer distribution of his Capital Accumulation under
this Section 13, the Participant will be nevertheless entitled to make
elections each year to withdraw all or part of his Capital Accumulation in
accordance with Section 12.
(d) Eligible Rollover.
_________________ (i) This subsection 13(d) applies to
distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
distributee's election under this subsection, a distributee may elect, at
the time
___________________________________________________________________________
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<PAGE>
and in the manner prescribed by the ESOP Administrators, to have any
portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the distributee in a Direct Rollover.
(ii) Definitions.
(A) "Eligible Rollover Distribution" is any distribution of all
or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution
does not include: Any distribution that is one of a series
of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint
life expectancies) of the Distributee and the 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
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) "Eligible Retirement Plan" is an individual retirement
account described in Section 408(b) of the Code, an
individual retirement annuity 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.
___________________________________________________________________________
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(C) "Distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's Surviving
Spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of
the Code, are Distributees with regard to the interest of
the spouse or former spouse.
(D) "Direct Rollover" is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
(e) 30-Day Notice.
_____________ Distribution may commence less than 30 days after
the notice requirement under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(A) The ESOP Administration clearly informs the Participant that
the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable,
a particular distribution option); and
(B) The Participant, after receiving the notice, affirmatively
elects a distribution.
Section 14. How Capital Accumulation Will Be Distributed.
____________________________________________
(a) Method.
______ Distribution of a Participant's Stock Account will be
made in whole shares of Oremet Stock. Any balance in a Participant's Cash
Account or Directed Investment Account as of the date of distribution shall
be distributed in cash, unless the Participant elects to receive whole
shares of Oremet Stock, in which case the ESOP Administrators shall direct
the Trustee to use all or any part of the Participant's Cash and Directed
Investment Accounts to
___________________________________________________________________________
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<PAGE>
acquire Oremet Stock and distribute such Stock; provided, however, that
with respect to assets in a Participant's Directed Investment Account
attributable to intra-plan transfers under Section 12(d) that meet the
requirements of Section 401(a)(28) of the Code, the Participant shall not
have the right to demand that such assets be distributed in shares of
Oremet Stock. At the direction of a Participant, the Trustee shall sell
all or part of the Participant's Stock Account and distribute such benefits
in cash. Any cost incurred in selling a Participant's Stock Account, or
converting the Participant's Directed Investment Account, to cash or Oremet
Common Stock (including commissions), shall be charged to the respective
Accounts of the Participant.
(b) Payment.
_______ A Participant eligible for a distribution shall receive
a distribution in a lump sum, except that the Participant may elect within
a reasonable period of time to receive the distribution in equal annual
installments over a period certain to be designated by the Participant, not
longer than the joint life expectancies of the Participant and his spouse.
All distributions from the Trust will be made by the Trustee as directed by
the ESOP Administrators pursuant to the terms of the Plan.
(c) Distributee.
___________ Distribution shall be made to the Participant if
living, and if not, to his Beneficiary. Except as otherwise provided
herein, a Participant's Beneficiary shall be his spouse. A Participant may
designate a Beneficiary (and contingent Beneficiaries) other than his
spouse upon becoming a Participant (and may change such designation at any
time) by filing a written designation with the ESOP Administrators. Such
designation (and any changes in designation) will be valid only if:
(i) the spouse to whom the Participant was married for one year preceding
the Participant's death has consented in writing to the designation of that
Beneficiary; (ii) the consent acknowledges the effect of the designation;
and (iii) the consent is witnessed by a notary or Plan representative.
Changes in Beneficiaries must be accompanied by
___________________________________________________________________________
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a spousal consent that meets the requirements stated above. The ESOP
Administrators or their designee may ask an unmarried Participant (or a
Participant who cannot locate his spouse) to provide proof that such
Participant is unmarried (or cannot locate his spouse, as the case may be)
before accepting a Beneficiary designation.
(d) Withholding.
___________ The Trustee shall withhold income tax from the
distribution, if required, in accordance with Section 3405 of the Code.
Section 15. Rights, Restrictions and Options on Oremet Stock.
_________________________________________________
(a) Put.
___ If Oremet Stock is not readily tradable on an established
market (within the meaning of Section 409(h) of the Code) at the date of
distribution thereof, any Participant receiving a distribution of shares of
Oremet Stock from the Trust shall have the right to require Oremet to
purchase such shares of Oremet Stock at any time during the two following
periods, at the then fair market value, such fair market value to be
determined annually as of the respective Anniversary Date by an independent
appraiser. The first period shall be for sixty (60) days beginning on the
date of distribution of Oremet Stock to the Participant. The second period
shall be for sixty (60) days beginning after written notice to the
Participant of the new determination of the fair market value of Oremet
Stock in the following Plan Year. Oremet may permit the Trustee to
purchase shares of Oremet Stock tendered to Oremet under such right. The
payment for shares of Oremet Stock sold pursuant to such right shall be
made in a lump sum.
(b) Restriction.
___________ Except as otherwise provided in this Section 15, no
shares of Oremet Stock may be subject to a put, call or other option, or
buy-sell or similar arrangement while held by the Trustee or at the time
such shares are distributed by the Trustee. The provisions of this Section
15 shall continue to be applicable to shares of Oremet Stock held or
distributed by the
___________________________________________________________________________
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Trustee even if the Plan ceases to be an employee stock ownership plan
under Section 4975(e)(7) of the Code.
Section 16. No Assignment of Benefits.
_________________________
Except to the extent provided in Section 12, a Participant shall not
receive any payment, withdrawal or distribution under the Plan during his
Service with Oremet; nor may his interest in the Plan as a Participant, or
after his participation has ended, or that of his Beneficiary, be assigned
or alienated by voluntary or involuntary assignment except pursuant to a
"qualified domestic relations order" as determined in accordance with
procedures established by the ESOP Administrators and with Section 414(p)
of the Code. Such procedures shall provide for the segregation in a
separate account of any amounts to be paid to an alternate payee. Any
attempt by a Participant (or Beneficiary) to assign or alienate his
interest under the Plan, or any attempt to subject his interest to
attachment, execution, garnishment or other legal or equitable process,
shall be void.
Section 17. Administration.
______________
The Plan will be administered by the ESOP Administrators, a two-person
committee comprised at all times of one Employee covered by the Labor
Agreement, and one Employee not covered by the Labor Agreement. The ESOP
Administrators shall be appointed by the Board of Directors who shall, to
the extent consistent with its fiduciary responsibilities, appoint as ESOP
Administrators the individuals nominated by the respective employee group.
The ESOP Administrators may be replaced (individually or jointly) at any
time by the Board of Directors, with the consent of the respective employee
group.
___________________________________________________________________________
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Each ESOP Administrator shall be paid reasonable compensation by
Oremet for such service, but only to the extent that the Administrator's
service on ESOP matters results in overtime (including for the Employee-
Administrator not covered by the Labor Agreement, any hours in excess of 40
hours per week payable at a normal hourly overtime rate as if such employee
was not exempt from application of Oregon overtime law) or is otherwise not
compensable by the Administrator's normal wages paid by Oremet, and
verified in a manner acceptable to Oremet. Wages paid for an
Administrator's overtime services shall not be regarded as Compensation
within the meaning of this ESOP. Oremet shall pay expenses properly and
actually incurred by the ESOP Administrators in the performance of their
duties.
The ESOP Administrators shall be named fiduciaries with authority to
control and manage the operation and administration of the Plan and Trust.
Action by the ESOP Administrators will be by unanimous vote at a
meeting or by written proxy; provided, however,
________ _______ that in the event that the
ESOP Administrators are unable to reach unanimity on a matter, the matter
shall be resolved by an arbitrator, selected by the Board of Directors for
this purpose.
The ESOP Administrators shall meet from time to time. Minutes of each
meeting of the ESOP Administrators shall be kept. The ESOP Administrators
shall make such rules (including, but not limited to, procedures for
determining whether a state court order is a qualified domestic relations
order under Section 414(p) of the Code), regulations, computations,
interpretations and decisions, as may be necessary to administer the Plan
in a nondiscriminatory manner for the exclusive benefit of the Participants
(and their Beneficiaries), pursuant to the applicable requirements of the
Code and ERISA. The ESOP Administrators shall direct the Trustee with
regard to all matters which require such directions under the Plan and the
Trust Agreement.
___________________________________________________________________________
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The ESOP Administrators shall establish Stock, Cash and Directed
Investment Accounts for each Participant or Beneficiary under the Plan and
a Suspense Account for any unallocated Oremet Stock obtained with the
proceeds of an Acquisition Loan. The ESOP Administrators shall maintain
separate records showing the amount of each contribution by Oremet, the
number of shares of Oremet Stock purchased or contributed and the cost
basis of such Oremet Stock, forfeitures, and any earnings. Upon receipt of
the Initial Contribution or any Plan Contributions, the ESOP Administrators
shall allocate such contribution to the Stock or Cash Accounts of each
Participant so entitled to an allocation under the Plan. The ESOP
Administrators shall maintain records indicating the balance in each
account, the Anniversary Date with respect to which an allocation was made
to a Participant's Account and each Distribution Allowance (if any)
attributable to each Account. Oremet shall provide the ESOP Administrators
with whatever records are necessary for the ESOP Administrators to make
allocations to Accounts.
The ESOP Administrators may allocate fiduciary responsibilities
between themselves and may designate other persons (including the Trustee,
but only with the Trustee's prior written consent) to carry out fiduciary
responsibilities (other than investment responsibilities) under the Plan.
The ESOP Administrators may delegate to the Trustee, with the Trustee's
prior written consent, the responsibility for maintaining records of
Accounts, for making allocations to Accounts and for investing the Trust
Assets other than Oremet Stock. The ESOP Administrators shall establish a
funding policy and procedure for directing the Trustee to acquire shares of
Oremet Stock and to otherwise invest the Trust Assets for the benefit of
Participants in a manner consistent with the objectives of the Plan and the
requirements of ERISA.
The ESOP Administrators are empowered, on behalf of the Plan and
Trust, to employ investment managers (as defined in Section 3(38) of
ERISA), accountants, legal counsel (for the
___________________________________________________________________________
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ESOP Administrators individually or collectively), and other agents to
assist it in the performance of its duties under the Plan. The ESOP
Administrators may retain an independent party experienced in preparing
valuations of securities for the purpose of preparing an annual valuation
of Oremet Stock. The compensation and expenses of any investment manager,
accountant, legal counsel, valuation expert, agent, or other service
provider retained by the ESOP Administrators shall be paid by Oremet.
Oremet shall secure fidelity bonding for the fiduciaries of the Plan,
as required by Section 412 of ERISA. Oremet shall indemnify each ESOP
Administrator, and shall indemnify the Trustee to the extent that the
Trustee follows directions of the ESOP Administrators, against any personal
liability or expense, except such liability or expense as may result from
willful misconduct. In addition, the Plan may purchase insurance in
accordance with Section 410(b) of ERISA.
The ESOP Administrators shall be the Plan Administrator under Section
414(g) of the Code and under Section 3(16)(A) of ERISA.
Section 18. Claims Procedure.
________________
Distributions and withdrawals of Capital Accumulations under Sections
12, 13 and 14 will only be made upon a Participant's (or Beneficiary's)
application for benefits. No Capital Accumulation with a value in excess
of $3,500 shall be distributed (under Sections 12, 13, or 14) to a
Participant prior to the attainment by the Participant of age 65 or the
death of the Participant without the written consent of the Participant.
A Participant (or Beneficiary) may present a claim to the ESOP
Administrators for any unpaid benefits. All questions and claims regarding
benefits under the Plan shall be acted upon
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by the ESOP Administrators. Each Participant (or Beneficiary) who wishes
to file a claim for benefits with the ESOP Administrators shall do so in
writing, addressed to the ESOP Administrators. If the claim for benefits
is wholly or partially denied, the ESOP Administrators shall notify the
Participant (or Beneficiary) in writing of such denial of benefits within
ninety (90) days after the ESOP Administrators initially received the
benefit claim.
Any notice of a denial of benefits shall advise the Participant (or
Beneficiary) of:
(a) the specific reason or reasons for the denial;
(b) the specific provisions of the Plan on which the denial is based;
(c) any additional material or information necessary for the
Participant (or Beneficiary) to perfect his claim and an
explanation of why such material or information is necessary; and
(d) the steps which the Participant (or Beneficiary) must take to
have his claim for benefits reviewed.
Each Participant (or Beneficiary) whose claim for benefits has been
denied shall have the opportunity to file a written request for a full and
fair review of his claim by the ESOP Administrators, to review all
documents pertinent to his claim and to submit a written statement
regarding issues relative to his claim. Such written request for review of
his claim must be filed by the Participant (or Beneficiary) within sixty
(60) days after receipt of written notification of the denial of his claim.
The ESOP Administrators shall schedule an opportunity for a full and fair
hearing of the issue within the next thirty (30) days. The decision of the
ESOP Administrators will be made within thirty (30) days thereafter and
shall be communicated in writing to the claimant. Such written notice
shall set forth the specific reasons and specific Plan provisions on which
the ESOP Administrators based its decision.
___________________________________________________________________________
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All notices by the ESOP Administrators denying a claim for benefits,
and all decisions on requests for a review of the denial of a claim for
benefits, shall be written in a manner calculated to be understood by the
Participant (or Beneficiary) filing the claim or requesting the review.
Section 19. No Duties or Rights Except as Provided in Plan.
______________________________________________
All benefits under the Plan will be paid only from the Trust Assets,
and neither Oremet, the Trustee, the ESOP Administrators nor any of its
members nor any other person shall have any duty or liability to furnish
the Trust with any funds, securities or other assets, except as expressly
provided in the Plan.
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract of employment between Oremet and any Employee, or to
be in consideration for any employment.
Section 20. "Top-Heavy" Contingency Provision.
_________________________________
(a) Application.
___________ The provisions of this Section 20 are included in
the Plan pursuant to Section 401(a)(10)(B)(ii) of the Code and shall become
applicable only if the Plan becomes a "top-heavy plan" under Section 416(g)
of the Code for any Plan Year.
(b) Top Heavy.
_________ The Plan shall be "top-heavy" only if the total
Account balances of "Key Employees" as of the Determination Date exceed
sixty percent (60%) of the total Account balances for all Participants.
For years in which a "Key Employee" is a Participant in the Plan, the
determination of whether the Plan is top-heavy will be made on the basis of
the Plan's "Required Aggregation Group." In years in which no Key Employee
is a Participant in the Plan, the determination may be made on the basis of
the Plan's "Permissive Aggregation Group."
___________________________________________________________________________
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(c) Operation.
_________ For any Plan Year in which the Plan is "top-heavy,"
each Participant who is an Employee on the Anniversary Date (and who is not
a "Key Employee") shall receive a minimum allocation of Plan Contributions
and forfeitures which is equal to the lesser of:
(1) Three percent (3%) of his Top-Heavy Compensation; or
(2) The same percentage of his Top-Heavy Compensation as the
allocation to the "Key Employee" for whom the percentage is
the highest for that Plan Year.
(d) Two Plans.
_________ For any Plan Year in which the Plan is "top-heavy,"
each Participant who is not a "Key Employee" but is an Employee on the
Anniversary Date and who is also a Participant in a defined benefit plan
sponsored by Oremet or a member of its Controlled Group, shall receive a
minimum allocation of Plan Contributions and forfeitures equal to five
percent (5%) of his Top Heavy Compensation; provided, however,
________ _______ that if such
Participant is entitled to receive a benefit under such defined benefit
plan equal to 2% of such Participant's highest average Top-Heavy
Compensation for up to five (5) top-heavy years, then the Participant shall
receive a minimum allocation as set forth in Section 20(c) above.
(e) Adjustment to Additional Limitation.
___________________________________ For any Plan Year in which
the Plan is top-heavy, the additional limitation provided under Section
6(d) for that Plan Year shall be determined by substituting 1.0 for 1.25 in
the calculation of the defined benefit fraction and the defined
contribution fraction in Section 6.
(f) Definitions.
___________ For the purposes of Section 20, the following
definitions apply:
(1) "Top-Heavy Compensation" will mean the average wages (as
reported on Form W-2) of the Participant not exceeding two
hundred thousand dollars ($200,000), determined using his
five (5) highest consecutive years of
___________________________________________________________________________
PAGE 55 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
Compensation. For the purpose of the preceding sentence,
years beginning after the close of the last Plan Year in
which the Plan was a top-heavy plan will be disregarded.
(2) "Determination Date" means, with respect to the Plan, the
last day of the preceding Plan Year for any Plan Year
subsequent to the first Plan Year. For the first Plan Year
of the Plan, it means the last day of the Plan Year.
(3) "Key Employee" means an individual (and the Beneficiaries of
such individual) who at any time during the Determination
Period had Compensation greater than one hundred fifty
percent (150%) of the amount in effect under Section
415(c)(1)(A) of the Code (as adjusted after 1985 pursuant to
Section 415(d)(1)(B) of the Code) while an officer of a
member of the Controlled Group, an owner (or considered an
owner under Section 318 of the Code) of one of the ten (10)
largest interests in a member of the Controlled Group if
such individual's annual Compensation exceeds the dollar
limitation under Section 415(c)(1)(A) of the Code (as
adjusted after 1985 pursuant to Section 415(d)(1)(B) of the
Code), a five percent (5%) owner of a member of the
Controlled Group, or a one percent (1%) owner of a member of
the Controlled Group who has annual Compensation of more
than one hundred fifty thousand dollars ($150,000).
(4) "Determination Period" means the Plan Year containing the
Determination Date and the four (4) preceding Plan Years.
___________________________________________________________________________
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<PAGE>
(5) "Controlled Group" has the meaning given in Section 414(c)
of the Code and the regulations thereunder.
(6) "Non-Key Employee" means any Employee who is not a "Key
Employee."
(7) "Permissive Aggregation Group" means each plan in the
Required Aggregation Group and any other qualified plan(s)
selected by Oremet and maintained by any member of the
Controlled Group if such group of plans would meet the
requirements of Sections 401(a)(4) and 410 of the Code.
(8) "Required Aggregation Group" means (i) each qualified plan
of a member of the Controlled Group in which at least one
Key Employee participates and (ii) any other qualified plan
of a member of the Controlled Group which enables any plan
described in (i) to meet the requirements of Section
401(a)(4) or 410 of the Code.
(9) "Top-Heavy Ratio" means the fraction used to determine if
the Plan is top-heavy under Section 20(b). It is a
fraction, the numerator of which is the sum of the Key
Employees' Account balances under the applicable defined
contribution plans and the present value of the Key
Employees' accrued benefits under the applicable defined
benefit plans, and the denominator of which is the sum of
all Participants' Account balances under the applicable
defined contribution plans and the present value of all
Participants' benefits under the applicable defined benefit
plans. Both the numerator and the denominator of this
fraction shall be adjusted to include Plan distributions
made to Participants in the five (5) year period ending on
the Determination Date (including distributions under a
terminated plan
___________________________________________________________________________
PAGE 57 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
which, if it had not been terminated, would have been part
of a required aggregation group) and in the case of defined
contribution plans any contributions due but unpaid as of
the Determination Date. The value of account balances and
the present value of accrued benefits will be determined as
of the most recent Valuation Date that falls within or ends
with the twelve (12)-month period ending on the
Determination Date. The Account balances and accrued
benefits of an individual who is not a Key Employee but who
was a Key Employee in a prior year will be disregarded, and
the Account balance of any individual who has not received
any compensation from any employer maintaining a plan to
which this Section 20 applies (other than benefits under
such a plan) at any time during the five (5) years preceding
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 will be made in accordance with Section 416 of the
Code and the Regulations thereunder. When more than one
plan is being considered, the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year.
(10) "Valuation Date" means, for the purpose of valuing Account
Balances under this Section 20, the Anniversary Date falling
in the same year as the Determination Date.
___________________________________________________________________________
PAGE 58 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
Section 21. Future of the Plan.
__________________
The Plan or Trust may be amended by majority vote of the Board of
Directors of Oremet; provided, however,
________ _______ that any amendment that would
result in major substantive changes to the Plan or Trust may be adopted
only upon the approval of two-thirds of the votes cast by Participants,
with each Participant entitled to cast the number of votes equal to the
number of his Years of Service under the Plan. The ESOP Administrators
shall determine whether an amendment is subject to approval by
Participants, provided, however, that an amendment solely to comply with
the technical requirements of the Code or ERISA or to ensure the initial
qualification or continued qualification of the Plan under the Code shall
require only the majority vote of the Board of Directors.
The Plan or the Trust Agreement may be terminated (in whole or in
part) or may be amended to provide a complete discontinuance of
contributions by majority vote of the Board of Directors with the approval
of two-thirds of the votes cast by Participants, with each Participant
entitled to cast the number of votes equal to the number of his Years of
Service under the Plan.
Neither amendment nor termination of the Plan shall retroactively
reduce the vested rights of Participants nor permit any part of the Trust
assets to be diverted or used for any purpose other than for the exclusive
benefit of the Participants (and their Beneficiaries). No amendment shall
decrease a Participant's protected benefits except as allowed under Code
Section 411(d)(6) and applicable Treasury Regulations issued thereunder.
If the Plan is terminated (or partially terminated), participation of
all Participants affected by the termination will end and the Accounts of
such Participants shall become 100% vested and nonforfeitable, to the
extent funded. A complete discontinuance of Plan Contributions shall be
deemed to be a termination of the Plan for this purpose. After termination
of the Plan, the Trust
___________________________________________________________________________
PAGE 59 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
will be maintained until the Accounts of all Participants have been
distributed. Accounts may be distributed following termination of the Plan
or distributions may be deferred as provided in Section 13, as the ESOP
Administrators may determine.
In the event of the merger or consolidation of this Plan with another
plan, or the transfer of Trust Assets (or liabilities) to another plan, the
Account balances of each Participant immediately after such merger,
consolidation or transfer must be at least as great as immediately before
such merger, consolidation or transfer (as if the Plan had then
terminated).
Section 22. Governing Law.
_____________ The provisions of this Plan shall be
construed, administered and enforced in accordance with the laws of the
State of Oregon, to the extent such laws are not superseded by ERISA.
[LFM:T:\EEBENE\OR_ESOP\ESOP-PLN.95/05-08-96]
___________________________________________________________________________
PAGE 60 - OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
IN WITNESS WHEREOF, the undersigned duly authorized officer of Oremet
has caused this document to be executed on the date stated below but
effective as of the Effective Date.
OREGON METALLURGICAL CORPORATION
Dated: _________________, 199__ By ________________________________
Dennis P. Kelly, Vice President,
Finance and Chief Financial Officer
[LFM:T:\EEBENE\OR_ESOP\ESOP-PLN.95/05-08-96]
___________________________________________________________________________
PAGE 61 OREGON METALLURGICAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
OREGON METALLURGICAL CORPORATION
EXHIBIT 11.1
Earnings per share computation
<TABLE>
<CAPTION>
Three Months Ended March 31,
(in thousands except per share data)
1996 1995
____ ____
<S> <C> <C>
Net Income $ 3,345 $ 535
======= =======
Weighted average shares outstanding 11,060 10,894
Weighted average share equivalents assumed
issued from Excess Benefit Plan 108 116
Weighted average share equivalents assumed
issued from exercise of warrants 121 11
Weighted average share equivalents assumed
issued as part of Employee Compensation
policy 38 34
_______ _______
Weighted average share and share equivalents
outstanding 11,327 11,055
======= =======
Net income per share $ 0.30 $ 0.05
======= =======
</TABLE>
Earnings per share computed on both the primary and fully diluted bases are
the same.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,154
<SECURITIES> 0
<RECEIVABLES> 34,220
<ALLOWANCES> (1,182)
<INVENTORY> 71,163
<CURRENT-ASSETS> 110,591
<PP&E> 102,451
<DEPRECIATION> 67,478
<TOTAL-ASSETS> 147,037
<CURRENT-LIABILITIES> 37,864
<BONDS> 30,050
0
0
<COMMON> 11,214
<OTHER-SE> 60,483
<TOTAL-LIABILITY-AND-EQUITY> 147,037
<SALES> 51,309
<TOTAL-REVENUES> 51,309
<CGS> 40,948
<TOTAL-COSTS> 40,948
<OTHER-EXPENSES> 5,132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 634
<INCOME-PRETAX> 4,595
<INCOME-TAX> 1,250
<INCOME-CONTINUING> 3,345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,345
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
