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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from
to
COMMISSION FILE NUMBER 1-10059
STERLING CHEMICALS HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0185186
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1200 SMITH STREET, SUITE 1900
HOUSTON, TEXAS 77002-4312 (713) 650-3700
(ADDRESS OF PRINCIPAL EXECUTIVE (REGISTRANT'S TELEPHONE NUMBER,
OFFICES) INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
COMMISSION FILE NUMBER 333-04343-01
STERLING CHEMICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0502785
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1200 SMITH STREET, SUITE 1900
HOUSTON, TEXAS 77002-4312 (713) 650-3700
(ADDRESS OF PRINCIPAL EXECUTIVE (REGISTRANT'S TELEPHONE NUMBER,
OFFICES) INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
STERLING CHEMICALS, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(A) AND (B) OF FORM 10-K, AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT PROVIDED FOR BY GENERAL INSTRUCTION J(2) OF FORM 10-K
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Indicate by check mark whether each of the registrants (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
--
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of each of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. __
As of December 13, 1996, Sterling Chemicals Holdings, Inc. had 11,140,837
shares of common stock outstanding. As of such date, the aggregate market value
of such common stock held by nonaffiliates, based upon the last sales price of
these shares as reported on the OTC Electronic Bulletin Board maintained by the
National Association of Securities Dealers, Inc., was approximately $128
million. As of December 13, 1996, all outstanding equity securities of Sterling
Chemicals, Inc. were owned by Sterling Chemicals Holdings, Inc.
Portions of the definitive Proxy Statement relating to the 1997 Annual
Meeting of Stockholders of Sterling Chemicals Holdings, Inc. are incorporated by
reference in Part III of this Form 10-K.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business.............................................. 1
Item 2. Properties............................................ 15
Item 3. Legal Proceedings..................................... 16
Item 4. Submission of Matters to Vote of Security Holders..... 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................... 19
Item 6. Selected Financial Data of the Company................ 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 22
Item 8. Financial Statements and Supplementary Data........... 33
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 66
PART III
Item 10. Directors and Executive Officers of the Registrant.... 67
Item 11. Executive Compensation................................ 67
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................ 67
Item 13. Certain Relationships and Related Transactions........ 67
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules
and Reports on Form 8-K............................... 68
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-K, including without
limitation the statements under "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
cyclicality of the Company's industry, current and future industry conditions
and the potential effects of such matters on the Company's business strategy,
results of operations and financial position, are forward-looking statements.
Although the Company believes that the expectations reflected in the forward-
looking statements contained herein are reasonable, no assurance can be given
that such expectations will prove to have been correct. Certain important
factors that could cause actual results to differ materially from
expectations ("Cautionary Statements") are stated herein conjunction with the
forward-looking statements or are included elsewhere in this Form 10-K. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Known Events, Trends, Uncertainties and Risk Factors".
All subsequent written and oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
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PART I
This combined Form 10-K is separately filed by Sterling Chemicals Holdings,
Inc. ("Holdings") and Sterling Chemicals, Inc. ("Chemicals"). Information
contained herein relating to Chemicals is filed by Holdings and separately by
Chemicals on its own behalf. Unless otherwise indicated, Holdings and its
subsidiaries, including Chemicals, are collectively referred to as the
"Company".
ITEM 1. BUSINESS
The Company was organized as a Delaware corporation in 1986 and has its
principal executive offices in Houston, Texas. In connection with the
Company's August 1996 merger with STX Acquisition Corp. (the "Merger"), the
Company recapitalized and reorganized into a holding company whose only
material asset is the capital stock of Chemicals, its wholly owned operating
subsidiary. Through Chemicals and its subsidiaries, the Company manufactures
seven commodity petrochemicals at its Texas City, Texas plant (the "Texas
City Plant"). Additionally, the Company manufactures chemicals for use
primarily in the pulp and paper industry at four plants in Canada and is
currently constructing a fifth plant in Valdosta, Georgia. At its Texas City
Plant, the Company produces styrene, acrylonitrile, acetic acid,
plasticizers, methanol, tertiary butylamine ("TBA") and sodium cyanide. The
Company generally sells its petrochemical products to customers for use in
the manufacture of other chemicals and products, which in turn are used in
the production of a wide array of consumer goods and industrial products.
Sodium chlorate is produced at the four plants in Canada and by the end of
1996 will be produced at the plant in Valdosta, Georgia as well. Sodium
chlorite is produced at one of the Canadian locations. The Company licenses,
engineers and oversees construction of large-scale chlorine dioxide
generators for the pulp and paper industry as part of the pulp chemical
business. These generators convert sodium chlorate into chlorine dioxide at
pulp mills.
The Company's business strategy is to capitalize on its market position to
take advantage of periods of tight supply and high prices and margins for its
primary products, which historically have occurred on a cyclical basis, and
to expand its production capacity to capture future growth opportunities in
the petrochemical and pulp chemical industries. Key elements of this
strategy are to: (i) maintain a competitive cost position in petrochemicals
by investing in new technology and equipment; (ii) pursue low cost expansions
in petrochemicals, such as its recent 30% expansion of acetic acid capacity
and construction of a 150 million gallon per year methanol unit; (iii) pursue
growth opportunities in pulp chemicals through the construction of additional
capacity; (iv) continue to build strong industry partnerships in
petrochemicals through securing long-term supply contracts with key
customers; and (v) implement a focused acquisition strategy, targeting
chemical businesses and assets which will strengthen the Company's existing
market positions, provide upstream or downstream integration or produce
complementary chemical products. The cyclicality of the markets for the
Company's primary products, however, also subjects the Company to periods of
overcapacity accompanied by lower prices and profit margins for such
products. In addition, the instruments governing the debt incurred by the
Company to finance the Merger limit the Company's ability to incur additional
debt to finance acquisitions and other expenditures. These and other factors
may limit the Company's ability to successfully implement its business
strategy.
RECENT DEVELOPMENTS
In fiscal 1995, the Company initiated a three-year, $200 million capital
spending program which is approximately 75% complete. The program includes
modernization of the Company's Texas City Plant, construction of a methanol
unit at the Texas City Plant, a substantial expansion of the Company's acetic
acid capacity, construction of a sodium chlorate plant at Valdosta, Georgia,
debottlenecking projects to add incremental capacity at the Company's
existing sodium chlorate facilities and various other projects. The plant
modernization effort at the Texas City Plant includes a significant capital
commitment for replacing the older control technology in the styrene,
acrylonitrile and acetic acid units with state-of-the-art distributive
control systems, which should result in increased efficiencies and stronger
operating fundamentals.
In August 1996, the Company completed construction of a world-scale, 150
million gallon per year methanol unit at the Texas City Plant as part of its
capital program. During the demonstration period, problems in the unit's
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reformer burners developed. The burners were replaced in October 1996 and
the methanol unit achieved full production in late October 1996. Capital
investment in the unit and production capacity are shared by the Company and
BP Chemicals Inc. ("BP"). Approximately 50% of the methanol production is
used as a raw material in the Company's acetic acid unit, replacing methanol
that was previously purchased from third parties. The remaining methanol
production is available for the merchant market and for BP's worldwide acetic
acid business. The unit was constructed at significantly less than normal
replacement cost because available equipment already at the Company's Texas
City Plant was refurbished and used in the project.
During fiscal 1996, the Company and BP expanded the acetic acid unit's
capacity to nearly 800 million pounds annually, an increase of approximately
30% or 200 million pounds. BP continues to market all of the Company's
acetic acid production.
In a project related to the expanded acetic acid capacity, Praxair Hydrogen
Supply, Inc. ("Praxair") completed in June 1996 a new partial oxidation unit
at the Company's Texas City Plant. The unit supplies carbon monoxide and
hydrogen under a long-term contract to the Company for use in the production
of acetic acid and plasticizers. The unit is owned by Praxair, but
constructed on land owned by the Company and leased to Praxair.
The Company is currently constructing a 110,000 ton per year sodium
chlorate plant in Valdosta, Georgia. The new facility, which will cost
approximately $55 million, will increase the Company's total annual sodium
chlorate capacity by more than 30% to nearly 460,000 tons. Valdosta, Georgia
was selected because of its proximity to existing customers which are
currently being supplied from the Company's Canadian plants, and its
proximity to reliable, competitively priced electricity, the most important
variable in sodium chlorate production costs. The new facility is intended
to meet the growing market demand from the pulp and paper industry in the
Southeastern U.S. and is expected to be on stream by January 1, 1997.
SALES AND MARKETING
The Company primarily sells its petrochemical products pursuant to multi-
year contracts and spot transactions in both the domestic and export markets
through its commercial organization and sales force. This long-term, high
volume focus allows the Company to maintain relatively low selling, general
and administrative expenses related to the marketing of its petrochemical
products. The Company competes on the basis of product price, quality and
deliverability. Prices for the Company's commodity chemicals are determined
by market factors that are largely beyond the Company's control, and, except
with respect to a number of its multi-year contracts, the Company generally
sells its products at prevailing market prices.
Some of the Company's multi-year contracts for its petrochemical products
are structured as conversion agreements, pursuant to which the customer
furnishes raw materials that the Company processes. In exchange, the Company
receives a fee typically designed to cover its fixed and variable costs of
production and to generally provide an element of profit dependent on the
existing market conditions for the product. These conversion agreements
allow the Company to maintain lower levels of working capital and, in some
cases, to gain access to certain improvements in manufacturing process
technology. The Company believes its conversion agreements help insulate the
Company to some extent from the effects of declining markets and changes in
raw material prices while allowing it to share in the benefits of favorable
market conditions for most of the products sold under these arrangements.
The balance of the Company's products are sold by its direct sales force,
which concentrates on the styrene, acrylonitrile, and pulp chemical markets.
The Company sells sodium chlorate primarily in Canada and the U.S.
generally under one to five-year supply contracts, most of which provide for
minimum and maximum volumes or a percentage of requirements at market prices.
In addition, most sales contracts contain certain "meet or release" pricing
clauses and some contain restrictions on the amount of future price
increases. Certain contracts are evergreen and require advance notice before
termination.
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CONTRACTS
The Company's key multi-year contracts and conversion agreements, which
collectively accounted for 30% of the Company's fiscal 1996 revenues are
described below:
Styrene-Bayer
The Company and Bayer Corporation ("Bayer"), a subsidiary of Bayer AG, are
currently operating under a conversion agreement effective through December
21, 2000. Under this agreement, the Company provides Bayer, subject to
specified minimum and maximum quantities, a major portion of Bayer's styrene
requirements for its manufacture of styrene-containing polymers. The
agreement permits Bayer to terminate its obligations upon twelve months'
notice to the Company should Bayer sell its business that uses styrene or
assign the agreement (subject to the Company's consent) to a third-party
purchaser of the business. During fiscal 1996, the Company delivered
approximately 10% of its styrene production pursuant to this agreement.
Styrene-BP Chemicals
Effective April 1, 1994, the Company and BP entered into a styrene sales
and purchase agreement. The term of the agreement initially expires in
December 1996. The Company and BP are currently negotiating an extension of
this agreement. Although the likelihood and terms of any extension are
impossible to predict, at this time management has no reason to believe that
the agreement will not be extended. During fiscal 1996, the Company
delivered approximately 10% of its styrene production to BP pursuant to this
agreement.
Acrylonitrile-Monsanto
The Company and Monsanto Company ("Monsanto") entered into a multi-year
conversion agreement effective January 1, 1994, which superseded a prior
agreement that had been in place since 1986. The initial term of this
agreement will expire at the end of 1998, at which time the agreement will
convert to an "evergreen" contract with successive two-year terms if not
terminated. During fiscal 1996, the Company delivered approximately 25% of
its acrylonitrile production to Monsanto pursuant to this agreement.
Acrylonitrile-BP Chemicals
In 1988, the Company entered into a long-term conversion agreement with BP,
under which BP contributed the majority of the capital expenditures required
for starting the third acrylonitrile reactor train at the Texas City Plant
and has the option to take up to approximately one-sixth of the Company's
total acrylonitrile capacity. BP furnishes the necessary raw materials and
pays the Company a conversion fee for the amount of acrylonitrile it takes.
During fiscal 1996, the Company delivered approximately 15% of its
acrylonitrile production to BP pursuant to this agreement. The acrylonitrile
reactor in which BP invested capital incorporates certain BP technological
improvements under a separate license agreement. The Company has the right
to incorporate these and any future improvements into its other existing
acrylonitrile reactors. BP has a first security interest in the third
reactor and related equipment and in the first acrylonitrile produced in the
three reactor units to the extent of the acrylonitrile which BP is entitled
to purchase under the production agreement. These rights are only to be
exercised upon an event of default by the Company.
Acetic Acid-BP Chemicals
An agreement with BP that has been in effect since August 1986 currently
gives BP the exclusive right to purchase all of the Company's acetic acid
production until August 2016. In exchange for that exclusive right, BP is
obligated to make certain unconditional monthly payments to the Company until
August 2006. BP reimburses the Company for operating costs. In addition,
the Company is entitled to receive annually a portion of the profits earned
by BP from the sale of acetic acid produced by the Company.
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Methanol-BP Chemicals
In fiscal 1996, the Company entered into a long-term production and sales
agreement with BP, under which BP contributed a significant portion of the
capital expenditures required for the reconstruction and capacity increase of
the Company's idle methanol production facility and obtained the right to
receive a substantial portion of the Company's methanol production. During
fiscal 1996, the Company delivered a substantial portion of its methanol
production to BP pursuant to this agreement. The initial term of this
agreement expires July 31, 2016. The output of the methanol facility is
marketed by BP to the Company's acetic acid unit, the merchant market and
BP's worldwide acetic acid business.
Plasticizers-BASF
A product sales agreement has been in effect with BASF Corporation ("BASF")
since August 1, 1986, pursuant to which the Company sells all of its
plasticizers production to BASF. The agreement expires at the end of 1999.
BASF provides certain raw materials to the Company and markets the
plasticizers produced by the Company. BASF pays fees to the Company on a
formula basis designed to reimburse the Company's direct and allocated costs.
In addition, the Company is entitled to a share of profits earned by BASF
attributable to the plasticizers supplied by the Company. BASF retains title
to and has a security interest in the raw materials furnished by it and in
the finished inventory of plasticizers produced by the Company for delivery
to BASF.
No individual customer of the Company's petrochemical or pulp chemical
business accounted for more than 10% of the Company's revenues in fiscal
1996.
For information regarding the Company's export sales and domestic and
foreign operations, see Note 8 of Item 8, ''Notes to Consolidated Financial
Statements'' which is hereby incorporated by reference.
PRODUCTS
At its Texas City Plant, the Company manufactures seven commodity
petrochemicals which are used in the manufacture of other goods or in other
chemical processes. At its four Canadian plants, and by the end of 1996 at
its Valdosta, Georgia plant, the Company manufactures chemicals used
primarily in the bleaching of kraft pulp for paper manufacturing. The
Company also is a supplier of patented and proprietary technology for
chlorine dioxide generators used by certain mills in the kraft pulp bleaching
process.
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PRODUCT SUMMARY
The Company's principal products and their primary end uses and raw
materials are set forth below.
<TABLE>
<CAPTION>
INTERMEDIATE PRIMARY END
COMPANY PRODUCT PRODUCTS PRODUCTS RAW MATERIALS
- --------------- -------------- ------------- ----------------
<S> <C> <C> <C>
Petrochemicals
Styrene Polystyrene Building Ethylene and
ABS/SAN resins products, boat Benzene
Styrene and automotive
butadiene components,
latex disposable cups
Polyester and trays,
resins packaging and
containers,
housewares,
tires, audio and
video cassettes,
luggage,
children's toys,
paper coating,
appliance
parts and carpet
backing
Acrylonitrile Acrylic fibers Apparel, Ammonia, Air
ABS/SAN resins furnishings, and Propylene
upholstery,
household
appliances,
carpets;
plastics for
automotive parts
using ABS and
SAN polymers
Acetic Acid Vinyl acetate Adhesives, Methanol and
monomer cigarette Carbon Monoxide
filters and
surface coatings
Methanol Acetic acid Adhesives, Natural Gas
MTBE cigarette
Formaldehyde filters and
surface
coatings;
gasoline
oxygenate and
octane enhancer;
plywood adhesives
Plasticizers Polyvinyl Flexible Alpha-Olefins,
chloride (PVC) plastics such as Carbon
shower curtains Monoxide,
and liners, Hydrogen,
floor coverings, Orthoxylene and
cable Air
insulation,
upholstery and
plastic molding
TBA NA Pesticides, Isobutylene and
solvents, the
pharmaceuticals acrylonitrile
and synthetic by-product
rubber Hydrogen
Cyanide ("HCN")
Sodium Cyanide NA Electroplating Sodium
and precious Hydroxide and
metals recovery by-product HCN
Pulp Chemicals
Sodium Chlorate Chlorine Bleaching agent Salt, Water and
dioxide for pulp Electricity
production;
Downstream
products include
high quality
office and
coated papers
Sodium Chlorite Chlorine Antimicrobial Sodium Chlorate
dioxide agent for and
municipal water Hydrochloric
treatment, Acid
disinfectant for
fresh produce
Chlorine Dioxide NA Chlorine dioxide NA
Generators for use in the
bleaching of pulp
</TABLE>
PETROCHEMICALS
Styrene. The Company manufactures styrene from ethylene and benzene.
Styrene is principally used in the manufacture of intermediate products such
as polystyrene, acrylonitrile butadiene styrene ("ABS") resins, synthetic
rubbers, SBLatex, unsaturated polyester resins and styrene acrylonitrile
resins ("SAN"). These intermediate products are used to produce various
consumer products, including building products, boat and automotive
components, disposable cups and trays, packaging and containers, housewares,
tires, audio and video cassettes, luggage, children's toys, paper coating,
appliance parts and carpet backing.
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The Company is the third largest North American producer of styrene. The
Company's styrene unit is one of the largest in the world and has an annual
rated production capacity of 1.7 billion pounds, following a recent
debottlenecking, which represents approximately 12% of total North American
capacity. The Company sold approximately 20% of its styrene sales volumes
pursuant to long-term conversion contracts during fiscal 1996. Approximately
40% of the Company's styrene sales volumes were exported in fiscal 1996,
principally to the Far East, either directly or pursuant to arrangements with
large international trading companies.
Acrylonitrile. The Company manufactures acrylonitrile by propylene
ammoxidation. Acrylonitrile is used primarily in the manufacture of
intermediate products such as acrylic fiber and ABS resins. The principal
end uses for acrylonitrile include apparel, furnishings, upholstery,
household appliances, carpets, and plastics for automotive parts.
The Company is the second largest global producer of acrylonitrile. The
Company's acrylonitrile unit has an annual rated production capacity of 740
million pounds, which represents approximately 21% of total North American
capacity. The Company sold approximately 40% of its acrylonitrile sales
volumes pursuant to long-term conversion agreements during fiscal 1996.
Approximately 60% of the Company's acrylonitrile production in fiscal 1996
was exported, principally to the Far East, either directly or pursuant to
arrangements with large international trading companies.
Hydrogen cyanide is a by-product of acrylonitrile manufacturing and is used
by the Company as a raw material for the production of TBA and sodium cyanide
and is also burned as fuel.
Acetic Acid. The Company produces acetic acid from carbon monoxide and
methanol. Acetic acid is primarily used in the manufacture of intermediate
products such as vinyl acetate monomer. These intermediate products are used
to produce various consumer products, including pharmaceuticals, adhesives,
glue, cigarette filters, and surface coatings.
The Company is the third largest North American producer of acetic acid.
Following a 200 million pound capacity expansion completed in June 1996, the
Company's acetic acid unit has an annual rated production capacity of nearly
800 million pounds, which represents approximately 17% of total North
American capacity. All of the Company's production is sold to BP pursuant to
a long-term contract through 2016.
Methanol. In August 1996, the Company completed construction of a world-
scale, 150 million gallon per year methanol unit at the Texas City Plant as
part of its capital program. During the demonstration period, problems in
the unit's reformer burners developed. The burners were replaced in October
1996 and the methanol unit attained full production in late October 1996.
Capital investment in the unit and production capacity are shared by the
Company and BP. Approximately 50% of the methanol production is used as a
raw material in the Company's acetic acid unit, replacing methanol that was
previously purchased from third parties. The remaining methanol is available
for the merchant market and for BP's worldwide acetic acid business. The
methanol unit was constructed at significantly less than normal replacement
cost because available equipment already at the Company's Texas City Plant
was refurbished and used in the project.
In a project related to the expanded acetic acid capacity, Praxair has
constructed a new partial oxidation unit at the Company's Texas City Plant
that will supply carbon monoxide and hydrogen to the Company for use in the
production of acetic acid and plasticizers. The partial oxidation unit began
production in June 1996. The Company's synthesis gas reformer, which was
previously being used to provide feedstock to the acetic acid and
plasticizers units at the Texas City Plant, is currently being used in the
methanol unit.
Plasticizers. The Company manufactures plasticizers employing a series of
processes using alpha-olefins and orthoxylene as the primary raw materials.
Major end-uses for plasticizers include flexible plastics used in shower
curtains and liners, floor coverings, cable insulation, upholstery and
plastic molding. The Company has an agreement with BASF pursuant to which
the Company sells all of its plasticizers production to BASF through 1999.
The Company's plasticizers capacity is 280 million pounds per year.
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TBA. TBA is produced by the addition of hydrogen cyanide to isobutylene in
an acid catalyst reaction. The Company uses a portion of its by-product
hydrogen cyanide from acrylonitrile production in this process. Major end
uses for TBA include pesticides, solvents and synthetic rubber. The Company
sells all of its TBA production to Flexsys America L.P. ("Flexsys") pursuant
to a long-term conversion agreement. The Company's capacity for TBA is
currently 21 million pounds per year.
Sodium Cyanide. At the Texas City Plant, the Company operates a sodium
cyanide unit which is owned by E.I. DuPont de Nemours and Company ("DuPont").
The Company and DuPont have an agreement whereby the Company receives a fee
for operating the facility. The facility uses, as a raw material, hydrogen
cyanide by-product generated by the Company's acrylonitrile manufacturing
process. The capacity of this unit is 100 million pounds per year.
PULP CHEMICALS
Sodium Chlorate. Sodium chlorate is used primarily in the production of
chlorine dioxide which is used chiefly by pulp and paper manufacturers as a
bleaching chemical in the pulp manufacturing process. Bleached pulp is used
to make uncoated paper for commercial printing and for office copiers and
printers, and coated paper for magazines, catalogues, promotional printed
products, packing, tissue and other products. Sodium chlorate is also used
as a raw material to produce sodium chlorite.
Sodium chlorate is manufactured by passing an electric current through an
undivided cell containing a solution of sodium chloride (salt). Electric
power costs typically represent approximately 65% of the variable cost of
production of sodium chlorate. Electric power is purchased by each of the
Company's facilities pursuant to contracts with local electric utilities.
Consequently, the rates charged by local electric utilities are an important
competitive factor among sodium chlorate producers. The Company's electrical
power costs are believed to be competitive with other producers in the areas
in which it operates.
Upon completion of the Valdosta, Georgia plant, the Company will become the
second largest producer of sodium chlorate in North America. The Company's
four Canadian sodium chlorate plants have an aggregate annual rated
production capacity of 350,000 tons. The Valdosta plant will increase the
Company's total annual capacity by 30% to nearly 460,000 tons, representing
approximately 22% of North American sodium chlorate capacity. Valdosta,
Georgia was selected because of its proximity to existing customers currently
being supplied from the Company's Canadian plants and its proximity to
reliable, competitively priced electricity. The new facility is intended to
meet the growing market demand from the pulp and paper industry in the
Southeastern U.S.
Chlorine Dioxide Generators. Through its ERCO Systems Group ("ERCO"), the
Company is the largest worldwide supplier of patented technology for the
generators which certain pulp mills use to convert sodium chlorate into
chlorine dioxide. Each mill that uses chlorine dioxide requires at least one
generator. The Company receives revenue when a generator is sold to a mill
and also receives royalties from the mill after start-up, generally over the
next ten-year period, based on the amount of chlorine dioxide produced by the
generator. The Company has supplied approximately two-thirds of all existing
modern pulp mill generators worldwide.
The research and development group of ERCO works to develop new and more
efficient generators. When pulp mills move to higher levels of substitution
of chlorine dioxide for elemental chlorine, they are usually required to
upgrade generator capacity or purchase new generator technology. Mills may
also convert to a newer generator to take advantage of efficiency advances
and technological improvements. Each upgrade or conversion results in a
licensing agreement which generally provides for payment of an additional
ten-year royalty.
The Company has a representative office in Beijing, China. This office
focuses on the development of opportunities for future sales and licensing of
chlorine dioxide generators. The first generator in China to convert sodium
chlorate to chlorine dioxide was sold by ERCO and commenced operation in
fiscal 1994, and since then several more generators have been sold by ERCO
for use in China.
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Sodium Chlorite. The Company manufactures sodium chlorite at its
Buckingham, Quebec facility. Sodium chlorite is a specialty product used
primarily to produce chlorine dioxide for water treatment and as a
disinfectant for fresh produce. The Company has a rated annual capacity of
approximately 3,500 tons, which represents approximately 40% of total North
American capacity.
RAW MATERIALS FOR PRODUCTS AND ENERGY RESOURCES
For each of the Company's products, the combined cost of raw materials and
utilities is far greater than all other production costs combined. Thus, an
adequate supply of these materials at reasonable prices is critical to the
success of the Company's business. With the exception of methanol, the
Company does not currently produce any of its major raw materials, benzene,
ethylene, propylene, ammonia or natural gas at the Texas City Plant, or
electricity at its pulp chemical facilities. Moreover some of the Company's
competitors are integrated and produce their own raw materials. Although the
Company believes that it will continue to be able to secure adequate supplies
of its raw materials at acceptable prices to meet its requirements, there can
be no assurance that it will be able to do so.
PETROCHEMICALS
Styrene. Styrene is a clear liquid that the Company manufactures from
ethylene and benzene. The Company's conversion agreements require that other
parties furnish the Company with the ethylene and/or benzene necessary to
fulfill its conversion obligations. Approximately 20% of the Company's
fiscal 1996 benzene and ethylene requirements were furnished by customers
pursuant to conversion arrangements. The Company purchases benzene and
ethylene for use in the remainder of its production of styrene for sale to
others. Benzene and ethylene are both commodity petrochemicals and the price
for each can fluctuate widely due to significant changes in the availability
of these products, such as major capacity additions or significant plant
operating problems, and due to variations in the economy and commodity
chemical markets in general. The Company has multi-year arrangements with
several ethylene suppliers that provide for its estimated requirements for
purchased ethylene at generally prevailing and competitive market prices.
Acrylonitrile. The Company produces acrylonitrile by reacting propylene
and ammonia over a solid-fluidized catalyst at low pressure. The Company's
conversion agreements require that other parties furnish to the Company the
propylene and/or ammonia necessary to fulfill its conversion obligations.
Approximately 40% of the Company's fiscal 1996 propylene and ammonia
requirements were furnished by customers pursuant to conversion arrangements.
The Company purchases propylene and ammonia for use in the remainder of its
production of acrylonitrile for sale to others. Propylene and ammonia are
both commodity petrochemicals and the price for each can fluctuate widely due
to significant changes in the availability of these products such as major
capacity additions or significant plant operating problems, and due to
variations in the economy and commodity chemical markets in general. If
various customers for whom the Company now manufactures acrylonitrile under
conversion arrangements were to cease furnishing their own raw materials and
seek only to purchase acrylonitrile from the Company, the Company's
requirements for purchased propylene and ammonia could significantly
increase. The Company believes that both ammonia and propylene will, for the
foreseeable future, remain in adequate supply to meet demand.
Hydrogen cyanide is a by-product of the acrylonitrile manufacturing process
and is used by the Company as a raw material for the production of TBA and
sodium cyanide and is also burned as fuel.
Acetic Acid. Acetic acid is manufactured by the Company primarily from
carbon monoxide and methanol. The acetic acid unit's methanol needs will be
supplied by the Company's methanol unit. In a project related to the
expanded acetic acid capacity, Praxair constructed a partial oxidation unit
at the Company's Texas City Plant in fiscal 1996 that supplies carbon
monoxide to the Company for production of acetic acid.
Methanol. The Company produces methanol by steam reforming of natural gas
to form synthesis gas. The synthesis gas is then converted to methanol under
elevated pressures in the presence of a catalyst. The Company
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obtains its natural gas under various supply contracts and believes that
adequate supplies will be available for the Company's needs in the
foreseeable future.
Plasticizers. The Company manufactures plasticizers using a series of
processes. Primary raw materials are alpha-olefins and orthoxylene, which
are supplied by BASF under its long-term contract with the Company which
expires at the end of 1999. The Company believes that adequate supplies of
raw materials will be available for the Company's needs in the foreseeable
future.
TBA. TBA is produced by the addition of hydrogen cyanide to isobutylene in
an acid catalyst reaction. The Company uses a portion of its by-product
hydrogen cyanide in this process. Flexsys supplies the isobutylene, sulfuric
acid and caustic soda under its long-term conversion agreement with the
Company. The Company believes that supplies of these raw materials will
remain adequate for its needs in the foreseeable future.
Sodium Cyanide. Sodium cyanide is manufactured from the Company's by-
product hydrogen cyanide and caustic soda. DuPont supplies the caustic soda
for sodium cyanide under its long-term contract with the Company.
PULP CHEMICALS
Sodium Chlorate. Sodium chlorate is manufactured by passing an electric
current through an undivided cell containing a solution of sodium chloride
(salt). Electric power costs typically represent approximately 65% of the
variable cost of production of sodium chlorate. Electric power is purchased
by each of the Company's facilities pursuant to contracts with local electric
utilities. Consequently, the rates charged by local electric utilities are
an important competitive factor among sodium chlorate producers. On average,
the Company's electrical power costs are believed to be competitive with
other producers in the areas in which it operates.
The Company also purchases sodium chloride for use in the manufacture of
sodium chlorate. Sodium chloride is purchased under requirements contracts
with major suppliers. The Company believes that sodium chloride will be
available for its needs for the foreseeable future.
TECHNOLOGY AND LICENSING
Petrochemicals
In 1986, Monsanto granted the Company a nonexclusive, irrevocable and
perpetual right and license to use Monsanto's technology and other technology
Monsanto acquired through third-party licenses in effect at the time of the
acquisition of the Texas City Plant. These licenses are used in the
production of styrene, acrylonitrile, methanol, TBA, acetic acid, and
plasticizers. During fiscal 1991, BP Chemicals Ltd. ("BPCL") purchased the
acetic acid technology from Monsanto (subject to the above licenses).
BPCL has granted to the Company a nonexclusive, perpetual, royalty-free
license (except in the case of a breach of the related production agreement)
to use BPCL's acrylonitrile technology at the Texas City Plant as part of the
acrylonitrile expansion project. The Company and BPCL have agreed to cross-
license any technology or improvements relating to the manufacture of
acrylonitrile at the Texas City Plant.
The Company believes that the manufacturing processes that the Company
utilizes at the Texas City Plant are cost effective and competitive.
Although the Company does not engage in alternative process research with
respect to its U.S. operations, it does monitor new technology developments
and when the Company believes it is necessary, it will seek to obtain
licenses for process improvements.
Pulp Chemicals
The Company produces sodium chlorate using state-of-the-art metal cell
technology. The principal technology business of the Company is the design,
sale and technical service of custom-built patented chlorine dioxide
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generators. The ERCO engineering group is involved in the technical support
of the Company's sales and marketing group through joint calling efforts
which define the scope of a project as well as producing technical schedules
and cost estimates. The Company performs detailed design of chlorine dioxide
generators which are then fabricated by contractors. Plant installation,
instrumentation testing and generator start-up are supervised by a joint
engineering/technical service team of the Company. Prior to 1996, the
Company was involved in a number of patent disputes with Akzo Nobel regarding
chlorine dioxide technology. In 1996, the parties reached a settlement of
such disputes that allows licensees of both the Company and Akzo Nobel to
operate their chlorine dioxide generators within the broadest range of
operating conditions, subject to cross licensing and payment of royalties.
The Company's pulp chemical research and development activities are carried
out at its Toronto, Ontario laboratories. Activities include the development
of new or improved chlorine dioxide generation processes and research in new
technologies focusing on electrochemical and membrane technology related to
chlorine dioxide, including improvement of quality and reduction of quantity
of pulp mill effluents and treatment of municipal water supplies.
COMPETITION AND INDUSTRY CONDITIONS
GENERAL
The industry in which the Company operates is highly competitive. Many of
the Company's competitors, particularly in the petrochemical industry, are
larger and have substantially greater financial resources than the Company.
Among the Company's competitors are some of the world's largest chemical
companies that have their own raw material resources. In addition, a
significant portion of the Company's business is based upon widely available
technology. The entrance of new competitors into the industry and the
addition by existing competitors of new capacity may reduce the Company's
ability to maintain profit margins or its ability to preserve its market
share, or both. Such developments could have a negative impact on the
Company's ability to obtain higher profit margins, even during periods of
increased demand for the Company's products.
The Company's primary domestic competitors by product are set forth below:
Styrene Dow Chemical Company, ARCO Chemical Company, Amoco
Chemical Company (a subsidiary of Amoco Corporation),
Chevron Chemical Company (a subsidiary of Chevron
Corporation), Cos-Mar (a joint venture of General
Electric Company and FINA Inc.), and Huntsman Chemical
Corporation
Acrylonitrile BP Chemicals Inc., Cytec Industries Inc., E.I. DuPont de
Nemours and Company, and Monsanto Company
Acetic Acid Hoechst Celanese Corporation, Eastman Chemical Company,
and Millennium Chemicals
Plasticizers Exxon Corporation, Aristech Chemicals, and Eastman
Chemical Company
TBA BASF Corporation and Nitto Chemical Industry Co., Ltd.
Sodium Chlorate Akzo Nobel N.V., CXY Chemicals Ltd., and Kerr-McGee
Corporation
Sodium Chlorite Vulcan Chemicals (a subsidiary of Vulcan Materials Co.)
Historically, petrochemical industry profitability has been affected by
vigorous price competition, which may intensify due to, among other things,
new domestic and foreign industry capacity. The Company's businesses are
subject to changes in the world economy, including changes in currency
exchange rates. In general, weak economic conditions either in the United
States or in the world tend to reduce demand and put pressure on margins.
Operations outside the United States are subject to the economic and
political risks inherent in the countries in which they operate.
Additionally, the export and domestic markets can be affected significantly
by import laws and
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regulations. During fiscal 1996, the Company's export sales were
approximately 34% of total revenues. It is not possible to predict accurately
how changes in raw material costs, market conditions, or other factors will
affect petrochemical industry margins in the future.
PETROCHEMICALS
Styrene. According to Chemical Marketing Associates, Inc. ("CMAI"), the
total North American capacity for styrene is currently 14.4 billion pounds
per year. The Company's rated capacity of 1.7 billion pounds per year
represents approximately 12% of the North American capacity.
From 1991 to 1993, styrene's profitability was depressed because of both
industry overcapacity and global recessionary pressures. By the spring of
1994, however, demand growth resulting from economic expansion had absorbed
much of the excess capacity. As a result, styrene prices and margins
increased substantially in fiscal 1994 and through most of fiscal 1995, and
average industry utilization rates exceeded rated capacity by the third
quarter of fiscal 1995. Shortly thereafter, styrene prices started
decreasing as demand weakened as a result of a general slowdown in the
worldwide economic growth rate, prompting customers to begin utilizing their
available inventories and decreasing purchases of additional product. The
weakening market conditions were accelerated in the fourth quarter of fiscal
1995 by significantly decreased purchases of styrene and styrene derivatives
by China, primarily as a result of changes in China's enforcement of economic
and tax policies and monetary constraints that negatively affected its
imports. China accounts for a significant portion of global purchases of
styrene and styrene derivatives. Average styrene prices declined by over 41%
from fiscal 1995 to fiscal 1996, primarily as a result of weaker market
conditions in the Far East.
According to CMAI, the North American styrene industry operated at
approximately a 98% utilization rate in fiscal 1995, and approximately 93% in
fiscal 1996. Certain styrene producers have announced plans to add
significant production capacity over the next several years, particularly in
the Far East. Current global production capacity for styrene is estimated to
be approximately 40 billion pounds and the Company believes that
approximately 7.2 billion pounds of capacity will be added by competitors in
the next two fiscal years, including an estimated 3.5 billion pounds in
fiscal 1997 and 3.7 billion pounds in fiscal 1998. The Company expects that
prices for styrene will continue at current depressed levels until global
demand for styrene increases sufficiently to absorb such additional
production capacity.
Acrylonitrile. The acrylonitrile market exhibits characteristics in
capacity utilization, selling prices and profit margins similar to those of
styrene. Moreover, as a result of the Company's high percentage of export
acrylonitrile sales, demand for the Company's acrylonitrile is most
significantly influenced by export customers, particularly those that supply
acrylic fiber to China. In recent years, the acrylic fiber market has been
subject to volatility because of fluctuations in demand from the Chinese
market. During most of fiscal 1995, strong demand for acrylic fiber and ABS
resins, particularly in China, increased demand for acrylonitrile. However,
the Company believes that acrylonitrile demand began to weaken in the third
quarter of fiscal 1995 for the same reasons that caused the deterioration in
the styrene market. Demand for acrylonitrile from export customers decreased
significantly in the fourth quarter of fiscal 1995 as a result of these
developments, although export prices and margins did not decrease
significantly until the first quarter of fiscal 1996. Average acrylonitrile
sales prices declined 29% from fiscal 1995 to fiscal 1996 as a result of
weaker market conditions in the Far East.
According to CMAI, the North American acrylonitrile industry operated at
approximately a 97% utilization rate in fiscal 1995 and approximately 93% in
fiscal 1996. The Company believes that during fiscal years 1997 and 1998,
global industry capacity will increase by approximately 940 million pounds or
9%. As a result of the increased global industry capacity in fiscal years
1997 and 1998, industry utilization rates may decline and price competition
may increase during this period.
Acetic Acid. According to CMAI, the total domestic capacity for acetic
acid production is approximately 4.9 billion pounds per year, with the
Company's current rated capacity of approximately 800 million pounds per year
representing approximately 16% of the total domestic capacity.
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Methanol. The Company completed construction of a world-scale, 150 million
gallon per year methanol unit at the Texas City Plant in August 1996.
Capital investment in the unit and production capacity is shared by the
Company and BP. Approximately 50% of the methanol production is used as a
raw material in the Company's acetic acid unit. The remaining methanol
production is available for the merchant market and for BP's worldwide acetic
acid business.
Plasticizers. The Company's capacity for plasticizers is 280 million
pounds per year. The Company has an agreement with BASF pursuant to which
the Company will sell all of its plasticizers production to BASF through
1999.
TBA. The Company operates a TBA production unit with a capacity of 21
million pounds per year. The Company believes that currently there are only
three TBA production units in the world: those operated by the Company (21
million pounds capacity), Nitto Chemical Industries Co., Ltd. (3.3 million
pounds capacity), and BASF (13 million pounds capacity).
Sodium Cyanide. The Company operates a sodium cyanide unit at its Texas
City Plant which is owned by DuPont. The capacity of this unit is 100
million pounds per year.
PULP CHEMICALS
Sodium Chlorate. Historically, sodium chlorate has experienced cycles in
capacity utilization, selling prices and profit margins. From 1990 to 1994,
the industry had been operating well below rated capacity, resulting in
declining product prices, due to significant capacity expansion during the
period from 1990 to 1992. Since the mid-1980s, however, North American
demand for sodium chlorate has grown at an average annual rate of 10% as pulp
mills have accelerated substitution of chlorine dioxide, sodium chlorate's
primary derivative, for elemental chlorine in bleaching applications.
Chlorine dioxide is a powerful and highly selective oxidizing agent suitable
for pulp bleaching. It has the ability to substantially reduce hazardous
substances, including dioxins and furans, in bleach plant effluent, as well
as produce high-brightness pulp with little or no damage to the cellulose
fiber.
Substitution of chlorine dioxide for elemental chlorine is driven primarily
by environmental concerns. Through the end of 1995, approximately 80% to 85%
of Canadian bleach plant capacity and approximately 60% to 65% of U.S. bleach
plant capacity has been converted to chlorine dioxide. The Environmental
Protection Agency ("EPA") has published draft regulations known as "Cluster
Rules" which, if enacted, are likely to mandate the elimination of elemental
chlorine usage in bleaching applications, resulting in increased substitution
of chlorine dioxide for elemental chlorine by the North American pulp and
paper industry.
For information regarding capacity utilization and revenues for each of the
Company's principal products, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
ENVIRONMENTAL AND SAFETY MATTERS
The Company's operations involve the handling, production, transportation,
and disposal of materials classified as hazardous or toxic and are
extensively regulated under environmental and health and safety laws.
Operating permits required for the Company's operations are subject to
periodic renewal and may be revoked or modified for cause or when new or
revised environmental laws or requirements are implemented.
New laws or permit requirements and conditions may affect the Company's
operations, products, or waste disposal. Past or future operations may result
in claims, regulatory action, or liabilities. Expenditures could be required
to upgrade wastewater collection, pretreatment or disposal systems, or other
matters. Some risk of environmental costs and liabilities is inherent in
particular operations and products of the Company, as it is with other
companies engaged in similar businesses.
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The Company conducts environmental management programs to maintain
compliance with applicable environmental laws. As part of these programs,
the Company conducts or commissions reviews of its environmental performance
and addresses issues identified. The Company routinely conducts inspection
and surveillance programs to detect and respond to any leaks or spills of
regulated hazardous substances and to correct any identified regulatory
deficiency. To reduce the risk of offsite consequences from any
unanticipated event, the Company acquired a greenbelt buffer zone adjacent to
the Texas City Plant in 1991. The Company also participates in a regional
air monitoring network to monitor ambient air quality in the Texas City
community. These programs are part of the Company's commitment to
Responsible Care initiatives of the Chemical Manufacturers Association and
Canadian Chemical Producers Association.
During fiscal 1996, the Company was recognized as a 33/50 Environmental
Champion by the EPA for surpassing the emission reduction goals of the 33/50
program at the Texas City Plant faster than the EPA's timetable. The
voluntary 33/50 program targeted 17 high priority chemicals included in the
EPA's Toxic Release Inventory. Six of the 17 chemicals are present at the
Company's Texas City Plant. The goal of the program was a 33% reduction in
air emissions of these compounds by 1992, compared to 1987 levels, and a 50%
reduction by 1995. For the 1995 reporting year, the final year of the 33/50
program, the Company achieved a 71% reduction in the targeted chemicals,
including a 95% reduction in hydrogen cyanide emissions by converting this
by-product into sodium cyanide, an 83% reduction in benzene emissions
primarily by constructing a major wastewater treatment facility, a 66%
reduction in toluene and orthoxylene, and a 13% reduction in chromium and
nickel compounds. In addition to these improvements, the Company has
recently completed an extensive review of the overall environmental condition
at its Texas City Plant and has initiated a groundwater monitoring program.
No assurances can be given that the Company will not incur material
environmental expenditures associated with its facilities, operations, or
products.
Changing and increasingly strict environmental laws and regulations might
affect the manufacture, handling, processing, distribution or use of chemical
products and the release, treatment, storage or disposal of wastes by the
Company. Accordingly, the Company could be required from time to time to
make expenditures to upgrade its wastewater collection, pretreatment, or
disposal systems at the Texas City Plant.
Production of chemical products involves the use, storage, transportation,
and disposal of materials that may be classified as hazardous or toxic under
applicable laws. The Company believes that its procedures for the use,
storage, transportation, and disposal of these materials are consistent with
industry standards and applicable laws and that it takes precautions to
protect its employees and others from harmful exposure to such materials.
However, there can be no assurance that past or future operations will not
result in exposure or injury or to claims of injury by employees or the
public due to the use, storage, transportation, or disposal of these
materials.
Under the Assets Purchase Agreement for the Company's acquisition of the
Texas City Plant from Monsanto, Monsanto agreed to be liable and to indemnify
the Company for certain environmental liabilities. The contractual indemnity
expires upon certain changes of control of the Company. Monsanto has taken
the position that the Merger constitutes such a change of control.
Accordingly, any future claims the Company may have against Monsanto may
necessarily be based upon statutory laws or common law principles, although
there can be no assurance that the Company would prevail against Monsanto
with respect to any such claim. Based on information currently available,
the Company believes the loss of the contractual indemnity will not have a
material adverse effect on its financial condition.
In connection with the Company's purchase of the pulp chemical business in
1992, the seller, Tenneco Canada, Inc. ("Tenneco"), contractually retained
liability for costs, damages, fines, penalties and other losses under claims
by third parties (including employees and authorities) arising from the
ownership or operation of the facilities and businesses prior to the
acquisition. The Company is also indemnified against the breach of
environmental remediation covenants. These covenants oblige the indemnifying
party to do specific remedial work (including decommissioning the old section
of the Vancouver facility, which is underway) at the facilities within set
time periods, and to do any investigation, monitoring or remedial work
required by present or future legislation governing environmental conditions
predating the acquisition. The indemnity also protects the Company against
losses arising from the remediation of pre-acquisition environmental
conditions or from pre-acquisition violations of environmental laws. With
the exception of any third-party claims, the losses against which the Company
is
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indemnified do not include consequential damages or lost profits. The Tenneco
obligations have been assigned to Albright & Wilson UK Ltd. ("Albright &
Wilson") as a result of the sale by Tenneco of certain assets to Albright &
Wilson.
Groundwater data obtained in the course of the acquisition of the pulp
chemical business indicated elevated concentrations of certain chemicals in
the soil and groundwater at the four Canadian sites. The Company conducted a
focused baseline sampling of groundwater conditions beneath its Canadian
facilities in connection with Tenneco's indemnification of the Company for
preclosing conditions which confirmed the previous data. The Company from
time to time has encountered elevated concentrations of chemicals in soils or
groundwater at its Canadian plants which it has addressed or is addressing.
During the course of the acquisition of the pulp chemical facilities by the
Company, air emissions sources were reviewed, and any available dustfall and
vegetation stress studies were considered. This review indicated emission
excursion episodes at specific locations in the scrubber systems at the
Thunder Bay, Buckingham, and Vancouver facilities. The conditions at Thunder
Bay and Vancouver have been addressed and satisfactorily resolved and the
conditions at Buckingham are being addressed. The Company believes that it
is otherwise in compliance in all material respects with permit requirements
under applicable provincial law for operating emissions sources.
The Company's pulp chemical business is sensitive to potential
environmental regulation. The EPA has published draft regulations which, if
enacted, would support substitution of chlorine dioxide, which is produced
from sodium chlorate, for elemental chlorine in the pulp bleaching process.
Certain environmental groups are encouraging passage of regulations which
restrict the amount of AOX (chlorine derivatives) in bleach plant effluent.
Increased substitution of chlorine dioxide for elemental chlorine in the pulp
bleaching process significantly reduces the amount of AOX and chlorine
derivatives in bleach plant effluent. As long as there is not an outright
ban on chlorine containing compounds, regulations restricting AOX or chlorine
derivatives in bleach plant effluent should favor the use of chlorine
dioxide, thus sodium chlorate. Any significant ban on all chlorine
containing compounds could have a material adverse effect on the Company's
financial condition and results of operations.
British Columbia has a regulation in place that would effectively eliminate
the use of chlorine dioxide in the bleaching process by the year 2002. The
pulp and paper industry is working to change this regulation and believes
that a ban of chlorine dioxide in the bleaching process will yield no
measurable environmental or public health benefit. In the event such a
regulation was implemented, the Company would seek to sell its products to
customers in other markets. The Company is not aware of any other laws or
regulations currently in place in North America which would restrict the use
of the product.
Emissions into the air from the Texas City Plant are subject to certain
permit requirements and self-implementing emission limitations and standards
under state and federal law. The Texas City Plant is located in an area that
is classified by the EPA as not having attained the ambient air quality
standards for ozone, which is controlled by direct regulation of volatile
organic compounds ("VOCs") and nitrogen oxide ("NOx"). Additional
requirements were issued in fiscal 1994 and modified in fiscal 1996 by the
Texas Natural Resource Conservation Commission in order to achieve ambient
air quality standards for ozone. These measures may substantially increase
the Company's NOx control costs in the future, although the cost and full
impact, if any, cannot be determined at this time.
Additionally, the Clean Air Act Amendments of 1990 authorize new federal
permit requirements and provisions governing toxic and criteria air
contaminants. The Company has incurred and will incur additional costs to
comply with this law and with requirements issued by the State of Texas to
control VOCs and NOx, as will all other similarly situated organic chemical
manufacturing facilities.
The Company believes that it is in compliance in all material respects with
applicable environmental law. However, there can be no assurance that past
practices or future operations will not result in material claims or
regulatory action or require material environmental expenditures.
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EMPLOYEES
As of September 30, 1996, the Company had approximately 1,200 employees,
including approximately 300 at its facilities in Canada. Approximately 60%
of the employees at the Company's manufacturing facilities are covered by
union agreements. The primary union agreement is with the Texas City, Texas
Metal Trades Council, AFL-CIO, of Galveston County, Texas, and covers all
hourly employees at the Texas City Plant. The Company signed a new labor
agreement in May 1996 which is subject to renegotiation in April 1999. The
new agreement increases the flexibility of work rules which the Company
believes will increase the overall efficiency of the Texas City Plant.
Employees at the Vancouver plant are represented by the Pulp, Paper and
Woodworkers Union. The Vancouver agreement was renegotiated in November 1994
and is subject to further renegotiation in November 1997. Employees at the
Buckingham plant are represented by either the Energy and Chemicals Workers
Union or an office and professional workers union. Both Buckingham
agreements were negotiated in November 1994 and are subject to renegotiation
in November 1997. The Company believes its relationship with its employees
is good.
INSURANCE
The Company currently maintains $500 million of coverage for property
damage to its Texas City Plant and resulting business interruption. Although
the Company carries such insurance, it has only one styrene manufacturing
facility and one acrylonitrile manufacturing facility; thus, a significant
interruption in the operation of either facility could have a material
adverse effect on the Company's financial condition, results of operations or
cash flows. The Company maintains $338 million of combined coverage for
property damage and resulting business interruption for its pulp chemical
operations. The Company also maintains other insurance coverages for various
risks associated with its business. There is no assurance that the Company
will not incur losses beyond the limits of, or outside the coverage of, its
insurance. From time to time various types of insurance for companies in the
chemical industry have been very expensive or, in some cases, unavailable.
There is no assurance that in the future the Company will be able to maintain
its existing coverage or that the premiums will not increase substantially.
ITEM 2. PROPERTIES
The principal executive offices of the Company are located in Houston,
Texas, and are subleased through Citicorp, N.A.
The Company's Texas City Plant is located approximately 45 miles south of
Houston in Texas City, Texas, on a 290-acre site on Galveston Bay near many
other chemical manufacturing complexes and refineries. The Company has
facilities to load its products in trucks, railcars, barges and ocean-going
tankers for shipment to customers. The site offers room for future expansion
and includes a greenbelt around the northern edge of the plant site.
The Company's Texas City Plant comprises seven basic operating units which
can be divided into three groups based on the chemistry involved. One group
of operating units involves synthesis gas chemistry (carbon monoxide and
hydrogen), and its facilities include the acetic acid unit, three plasticizer
units (oxo-alcohol, phthalic anhydride and linear phthalate esters), and the
methanol unit. Carbon monoxide and hydrogen are utilized as feedstocks in
the oxo-alcohol manufacturing process and carbon monoxide and methanol are
utilized as feedstocks to produce acetic acid. As described in Item 1 under
the caption "Recent Developments," a new partial oxidation unit was
constructed by Praxair at the Texas City Plant to supply carbon monoxide and
hydrogen to the Company. The synthesis gas reformer is now used in the
methanol unit. A second group of operating units involves acrylonitrile and
hydrogen cyanide chemistry, and its facilities include the acrylonitrile
unit, the TBA unit, and the sodium cyanide unit. Ammonia and propylene are
used as feedstocks in the acrylonitrile process and hydrogen cyanide, a by-
product of that process, is used as a feedstock for the other units in this
second group and is also burned as fuel. The third operating group is based
on ethylene and benzene chemistry and its facilities comprise the
ethylbenzene and styrene units. Although the styrene unit is independent of
the rest of the Texas City Plant from a feedstock and by-product standpoint,
it is the cornerstone of the Texas City Plant's energy balance as it uses
large quantities of by-product steam generated by the acrylonitrile and
phthalic anhydride units, thus reducing the demands on the
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Company's steam generating facility. In this way, the Texas City Plant's
utilities system links the three operating groups together in an effort to
minimize utility costs. This integration results in cost efficiencies without
significantly compromising the operating flexibility of the individual
product units.
The Company owns or leases all of the real property which comprise its
Texas City Plant and all of the facilities and equipment located there, other
than the sodium cyanide unit which is owned by DuPont, a cogeneration
facility owned by a joint venture between the Company and Praxair Energy
Resources, Inc., and the new partial oxidation unit constructed at the site
by Praxair. Following the expiration of its ten-year lease with BP on July
31, 1996, legal title to the acetic acid unit reverted to the Company. The
Company also owns storage facilities, approximately 200 rail cars and an
acetic acid barge. In addition, the Company subleases approximately 20,000
square feet of office space in Houston, Texas for its corporate headquarters
and leases several storage facilities in the U.S. and Korea.
The Company's pulp chemical business includes four manufacturing plants in
Canada and one in Valdosta, Georgia, currently nearing completion. The
Buckingham, Quebec and Vancouver, British Columbia sites are approximately 20
acres each and are owned by the Company. The Thunder Bay, Ontario and Grande
Prairie, Alberta sites are leased by the Company. The new plant is being
constructed in conjunction with, and will be leased from, the Valdosta-
Lowndes County Industrial Authority. The Company also leases approximately
325 rail cars. Headquarters for the Canadian operations is located in Toronto
in an approximately 50,000 square foot single story office building owned by
the Company. The building is situated on 6.56 acres owned by the Company and
serves as the headquarters for the pulp chemical business and its respective
laboratories.
The Company believes that these properties and equipment are sufficient to
conduct the Company's business.
See Item 1. "Business" for other information required by this item.
ITEM 3. LEGAL PROCEEDINGS
The information set forth under the caption "Legal Proceedings" in Note 7
of the "Notes to Consolidated Financial Statements" is incorporated herein
by this reference. The cause numbers, the styles of the cases, the courts in
which the cases are pending and certain other information with respect to the
matters described in Note 7 are set forth below.
HUNTSMAN LAWSUIT: Sterling Chemicals, Inc. v. Huntsman Chemical
Corporation, Huntsman Styrene Corporation and Huntsman Corporation; Cause No.
95-005256; In the 61st Judicial District Court of Harris County, Texas.
ALLEMAND LAWSUIT: George Allemand and Willa Allemand v. Sterling Chemicals,
Inc., Olin Corporation, Goodyear Tire & Rubber Co., Inc. Marine Fueling
Service, Inc.; le Manufacturier de Granford, Triplex Inc. and Shrieve
Chemical Company, Cause No. A-152,286; In the 58th Judicial District Court of
Jefferson County, Texas.
AMMONIA RELEASE LAWSUITS:
1. Otis Pointer Jr., individually and on behalf of all others similarly
situated, v. Sterling Chemicals, Inc., Paul Saunders and an unknown chemical
operator; Cause No. 94CV0514; In the 56th Judicial District Court of
Galveston County, Texas ("Pointer").
2. Holly Benefiel, et al. v. Sterling Chemicals, Inc.; Cause No. 95CV0246;
In the 56th Judicial District Court of Galveston County, Texas.
3. Lilly Gordon, et al. v. Sterling Chemicals, Inc.; Cause No. 95-36592;
In the 281st Judicial District Court of Harris County, Texas ("Gordon").
4. Versell Allums, et al. v. Sterling Chemicals, Inc., Paul Saunders and
an unknown chemical operator; Cause No. 95CV1017; In the 10th Judicial
District Court of Galveston County, Texas.
5. Maurice Benson, et al. v. Sterling Chemicals, Inc.; Cause No. 95CV1265;
In the 56th Judicial District Court of Galveston County, Texas.
16
<PAGE>
6. Rodney Curry, et al. v. Sterling Chemicals, Inc.; Cause No. 95CV1263;
In the 122nd Judicial District Court of Galveston County, Texas.
7. Jayson Rhodes, et al. v. Sterling Chemicals, Inc.; Cause No. 95CV1266;
In the 10th Judicial District Court of Galveston County, Texas.
8. Darrell Vick, et al. v. Sterling Chemicals, Inc.; Cause No. 95CV1262;
In the 122nd Judicial District Court of Galveston County, Texas.
9. Nathaniel Barron, et al. v. Sterling Chemicals, Inc. and Paul Saunders;
Cause No. 96CV0103; In the 10th Judicial District Court of Galveston County,
Texas.
10. Melton Avie, et al. v. Sterling Chemicals, Inc., BP America, Inc., BP
Chemicals America, Inc., n/k/a BP Chemicals, Inc., Allen Bolen, and Paul
Saunders; Cause No. 96CV0377; In the 56th Judicial District Court of
Galveston County, Texas.
11. Feliciana Cantu, et al. v. Sterling Chemicals, Inc.; Cause No. 664459;
In the County Civil Court at Law No. 4 of Harris County, Texas.
12. Lee Arvie, et al. v. Sterling Chemicals, Inc.; Cause No. 96CV0431; In
the 56th Judicial District Court of Galveston County, Texas.
13. Edwin Laday v. Sterling Chemicals, Inc.; Cause No. 96CV0430; In the
212th Judicial District Court of Galveston County, Texas.
14. Earl Rivas and Rosie Rivas v. Sterling Chemicals, Inc., Sterling
Chemical Company, Sterling Chemical Company, Inc., B.P. Chemicals, Inc., B.P.
Chemicals America, Inc., Paul Saunders, and Allan Bolen; Cause No. 96CV0438;
In the 10th Judicial District Court of Galveston County, Texas.
15. Bertha L. Anderson, et al. v. Sterling Chemicals, Inc.; Cause No.
96CV0440; In the 122nd Judicial District Court of Galveston County, Texas.
16. Carl Terry, et al. v. Sterling Chemicals, Inc. and Paul Saunders;
Cause No. 96CV0436; In the 212th Judicial District Court of Galveston County,
Texas.
17. Phyllis Cormier, et al. v. Sterling Chemicals, Inc.; Cause No. 96-
023195; In the 269th Judicial District Court of Harris County, Texas.
18. Nita Moore, et al. v. Sterling Chemicals, Inc.; Cause No. 96-22420; In
the 270th Judicial District Court of Harris County, Texas.
19. Mattie Moses, et al. v. Sterling Chemicals, Inc.; Cause No. 96CV0458;
In the 56th Judicial District Court of Galveston County, Texas.
20. Prince Ella Green and James Green v. Sterling Chemicals, Inc.; Cause
No. 96CV0454; In the 212th Judicial District Court of Galveston County,
Texas.
21. Jacqueline Lynch, et al. v. Sterling Chemicals, Inc.; Cause No. 43353;
In the County Court at Law No. 2 of Galveston County, Texas.
22. Gloria Cotton, et al. v. Sterling Chemicals, Inc.; Cause No. 96CV0446;
In the 122nd Judicial District Court of Galveston County, Texas.
23. Phyllis Joiner, et al. v. Sterling Chemicals, Inc.; Cause No. 56189;
In the Justice of the Precinct No. 1, Galveston County, Texas.
24. Timothy McClurkin, Sr. v. Sterling Chemicals, Inc.; Cause No.
96CV0451; In the 56th Judicial District Court of Galveston County, Texas.
25. Allen E. Kitchens v. Sterling Chemicals, Inc., et al.; Cause No.
43,352; In the Galveston County Court, Galveston County, Texas.
26. Patricia A. Glover v. Sterling Chemicals, Inc., Paul Saunders, Allen
Bolen, et al.; Cause No. 96CV0459; In the 212th Judicial District Court of
Galveston County, Texas.
27. Wayne R. Lee v. Sterling Chemicals, Inc.; Cause No. 96CV0467; In the
10th Judicial District Court of Galveston County, Texas.
The following ammonia lawsuits against the Company have been dismissed by
voluntary non-suit, however, the plaintiffs in these lawsuits have maintained
their claims against the Company by filing Pleas-in-Intervention in either
Pointer or Gordon referenced above:
1. Bobbie J. Adams, et al. v. Sterling Chemicals, Inc.; Cause No. 94CV0764;
In the 56th Judicial District Court of Galveston County, Texas.
2. Courtney Adomond, et al. v. Sterling Chemicals, Inc.; Cause No.
94CV0947; In the 56th Judicial District Court of Galveston County, Texas.
17
<PAGE>
3. Caroll Allen, et al. v. Sterling Chemicals, Inc.; Cause No. 94CV1147;
In the 212th Judicial District Court of Galveston County, Texas
4. Richard Gayton, individually and as next friend of Ruben Gayton, et al.
v. Sterling Chemicals, Inc., Paul Saunders and an unknown chemical operator;
Cause No. 95-43771; In the 55th Judicial District Court of Harris County,
Texas.
5. Connie Alaniz and Emilio Alaniz, et al. v. Sterling Chemicals, Inc.,
Paul Saunders and Terry Bellard; Cause No. 95CV1011; In the 10th Judicial
District Court of Galveston County, Texas.
6. Anita R. Afriyie, et al. v. Sterling Chemicals, Inc., Paul Saunders and
Terry Bellard; Cause No. 95CV0997; In the 122nd Judicial District Court of
Galveston County, Texas.
7. Beverly D. Mitchell, et al. v. Sterling Chemicals, Inc., et al.; Cause
No. 94CV1312 in the 56th Judicial District Court of Galveston County, Texas.
The following ammonia lawsuit was settled in August 1996:
Guadalupe Trevino v. Sterling Chemicals, Inc.; Cause No. 42634; In the
Probate and County Court of Galveston County, Texas.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 20, 1996, a Special Meeting of the Company's stockholders was
held for the purpose of approving an Amended and Restated Agreement and Plan
of Merger, dated April 24, 1996, pursuant to which, among other things, STX
Acquisition Corp. would be merged with and into the Company, the Company
would become a holding company through the transfer of its assets to an
operating subsidiary, and the existing stockholders of the Company could
elect to either retain their shares of stock (subject to certain limitations)
or receive $12.00 cash per share. The results of the stockholders vote on
the Merger were as follows: 40,618,219 votes for, 1,812,182 votes against or
withheld, 226,727 abstentions, and 13,032,863 shares not voting.
Accordingly, the Merger was approved and was consummated on August 21, 1996.
18
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no established public trading market for Holdings' common stock,
par value $.01 per share ("Common Stock"), although the Common Stock is
traded on the OTC Electronic Bulletin Board maintained by the National
Association of Securities Dealers, Inc. under the symbol "STXX". Prior to
the Merger, the Common Stock was listed on the New York Stock Exchange
("NYSE") under the symbol "STX". The following table sets forth the price
range of the Common Stock during the fiscal years ended September 30, 1996
and September 30, 1995. Information for the fourth quarter of fiscal 1996
reflects high and low sales prices on the NYSE for the period of July 1
through August 21, and high and low sales price information as reported on
the OTC Electronic Bulletin Board for the period of August 22 through
September 30.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- -------- ---------
<S> <C> <C> <C> <C>
1996 High $ 9 1/4 $13 $13 1/8 $12 1/2
Low $ 7 1/2 $ 8 $11 1/8 $10 7/8
1995 High $13 7/8 $14 $13 $12 7/8
Low $ 9 3/4 $10 7/8 $10 1/4 $ 8 1/4
</TABLE>
As of September 30, 1996, there were approximately 280 record holders of
Common Stock.
Holdings has not paid dividends on the Common Stock in any of the last
three fiscal years and does not anticipate paying dividends in the
foreseeable future. Any future determination as to the payment of dividends
will be made at the discretion of the Board of Directors of Holdings and will
depend upon the Company's operating results, financial condition, capital
requirements, general business conditions and such other factors that the
Board of Directors deems relevant. In addition, the payment of dividends on
the Common Stock is restricted by the terms of the indenture governing the
13 1/2% Senior Secured Discount Notes Due 2008 ("Discount Notes"), and
indirectly restricted by the terms of the Chemicals Credit Facility and the
indenture governing the 11 3/4% Senior Subordinated Notes Due 2006
("Subordinated Notes") which restrict the ability of Chemicals to transfer
funds to Holdings.
19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected financial data with respect to the
Company's consolidated financial condition and consolidated results of
operations and should be read in conjunction with the Company's Consolidated
Financial Statements and related notes in Item 8 of this Form 10-K.
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------
1996/(2)/ 1995 1994 1993 1992
---- ---- ---- ---- ----
OPERATING DATA: (In Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Revenues $ 790,465 $1,030,198 $700,840 $518,821 $430,529
Gross profit 111,426 271,618 93,924 40,919 27,882
Net income (loss) 31,604 150,049 19,132 (5,420) (5,890)
Net cash provided by (used in) 63,601 191,838 75,249 48,114 (3,752)
operating activities
Net cash used in investing activities (95,957) (53,962) (9,737) (12,175) (20,424)
Net cash provided by (used in) 7,190 (109,017) (64,874) (37,057) 23,752
financing activities
EBITDA/(1)/ 121,200 281,480 108,600 52,477 40,967
PER SHARE DATA:
Net income (loss) per share 0.62 2.70 0.34 (0.10) (0.11)
Cash dividends - - - 0.06 0.245
BALANCE SHEET DATA:
Working capital $ 76,933 $ 74,620 $ 20,809 $ 30,952 $ 56,787
Total assets 689,684 609,939 580,925 546,754 608,470
Long-term debt (excluding current 714,632 103,581 192,621 263,894 300,220
maturities)
Shareholders' equity (deficiency in (272,439) 239,318 89,734 70,336 87,343
assets)
</TABLE>
__________
/(1)/EBITDA (Earnings before interest, taxes, depreciation, amortization,
stock appreciation rights ("SARs"), and certain merger-related expenses) is
presented to further enhance understanding of the Company's results of
operations and cash flows. It is not intended as an alternative measure of
performance to net income. With certain adjustments, EBITDA is the basis for
payments to employees under the Company's profit sharing plans.
/(2)/See Note 1 of Notes to Consolidated Financial Statements for a
discussion of merger activities and related financing.
20
<PAGE>
SELECTED FINANCIAL DATA FOR CHEMICALS
The following table sets forth selected financial data with respect to
Chemical's consolidated financial condition and consolidated results of
operations and should be read in conjunction with Chemical's Consolidated
Financial Statements and related notes in Item 8 of this Form 10-K.
<TABLE>
<CAPTION>
Period from
May 14, 1996 (Date of Inception)
to September 30, 1996/1/
--------------------------------
(Dollars in Thousands)
OPERATING DATA:
<S> <C> <C>
Revenues $ 83,410
Gross profit 363
Net income 174
BALANCE SHEET DATA:
Working capital $ 77,299
Total assets 685,451
Long-term debt (excluding 619,875
current maturities)
Stockholders' equity (184,302)
(deficiency in assets)
</TABLE>
/1/See Note 1 of Notes to Consolidated Financial Statements for a
discussion of merger activities and related financing. Prior to August 21,
1996, Chemicals had no operating activities, other than those related to
merger activities.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Holdings is a holding company whose only material asset is Chemicals.
Holdings' only material liability is its obligation to repay the Discount
Notes issued in connection with the Merger. Chemicals and its subsidiaries
own substantially all of the consolidated operating assets and are obligated
for substantially all liabilities of the Company other than the Discount
Notes. The Merger that occurred on August 21, 1996 and related financings
were accounted for as a recapitalization, with no change in the basis of the
assets and liabilities of Chemicals. Other than the additional interest
expense associated with the Discount Notes, the results of operations for the
Company are the same as those for Chemicals. Accordingly, the discussion
that follows is applicable to both entities, except as specifically noted. A
separate discussion of the results of operations for Chemicals for the period
ended September 30, 1996, would not, in the opinion of the Company, provide
any additional meaningful information.
The primary markets in which the Company competes, especially styrene and
acrylonitrile, are cyclical and are sensitive to changes in the balance
between supply and demand, the price of raw materials, and the level of
general worldwide economic activity. Historically, these markets have
experienced alternating periods of tight supply and rising prices and profit
margins, followed by periods of large capacity additions resulting in
overcapacity and declining prices and margins. Large global capacity
additions of styrene and acrylonitrile are projected to be completed during
fiscal years 1997 and 1998. For styrene, approximately 7.2 billion pounds of
new capacity is expected, and for acrylonitrile, approximately 940 million
pounds of new capacity is expected. The Company believes that these
announced global capacity additions in styrene and acrylonitrile will result
in overcapacity for these markets in fiscal years 1997 and 1998. The
resulting impact on prices and margins began to negatively affect the
Company's results in the last half of fiscal 1996. Demand growth is
generally driven by new applications and the substitution of petrochemical-
based plastics and fibers for materials, such as metals, paper, glass, wood,
and cotton. Demand from the Far East, particularly China, tends to have a
disproportionate impact on the global markets for styrene and acrylonitrile
due to both volume and volatility of the region's demand. Although direct
sales to China were approximately only 1% of total revenues in fiscal 1996,
much of the Company's Far Eastern petrochemical product demand is ultimately
driven by Chinese demand for downstream products. In fiscal 1996, the
Company's export sales to the Far East and total export sales were
approximately 22% and 34%, respectively, of its total sales.
The Company primarily sells its petrochemical products pursuant to multi-
year contracts and high volume spot transactions in both the domestic and
export markets. This long-term, high volume focus allows the Company to
maintain relatively low selling, general and administrative expenses relating
to product marketing. Prices for the Company's commodity chemicals are
determined by global market factors, including changes in the cost of raw
materials, that are largely beyond the Company's control, and, except with
respect to certain of its multi-year contracts, the Company generally sells
its products at prevailing market prices.
During the past five years, the Company's results of operations have varied
significantly from year to year primarily as a result of cyclical changes in
the markets for its primary products. The Company has attempted to stabilize
these fluctuations by manufacturing two product groups, petrochemicals and
pulp chemicals, which have historically been subject to different market
dynamics, including timing differences in their respective cyclical upturns
and downturns.
Despite this diversification, however, prolonged or severe softness in the
market for any of its principal products, particularly styrene and
acrylonitrile, will adversely affect the Company. Although earnings from
styrene and acrylonitrile are expected to be significantly impacted by the
global petrochemical capacity increases in fiscal years 1997 and 1998, this
impact should be partially offset by the pulp chemical business which is
expected to benefit from growing demand for generators and sodium chlorate
and the 30% increase in the Company's sodium chlorate capacity as a result of
completion of the Valdosta, Georgia plant. There can be no assurance,
however, that such favorable results in the pulp chemical business will be
realized.
In addition, the Company markets substantial volumes of petrochemicals
(approximately 50%, 54% and 51% of total sales volumes in fiscal years 1996,
1995, and 1994, respectively) and generates substantial revenues
22
<PAGE>
(approximately 36%, 30%, and 32% of total revenues in fiscal years 1996,
1995, and 1994, respectively) under conversion agreements. Under these
agreements, the customer furnishes raw materials which the Company processes
in exchange for a fee designed to cover its fixed and variable costs of
production. The conversion agreements allow the Company to maintain lower
levels of working capital and, in some cases, to gain access to certain
improvements in manufacturing process technology. The Company believes that
its conversion agreements help insulate the Company to some extent from the
effects of declining markets and increases in raw material prices while
allowing it to share in the benefits of favorable market conditions for most
of the products sold under these arrangements.
In fiscal 1995, the Company began a three-year, $200 million capacity
expansion and modernization program. Approximately 75% of the capital
expenditures were completed by the end of fiscal 1996, and the balance will
be completed in future periods. Through this program, the Company has
expanded its total annual petrochemical production capacity including
capacity additions of 200 million pounds of styrene, 200 million pounds of
acetic acid, and 150 million gallons of methanol. In addition, the Company
will increase its sodium chlorate production capacity by 30% or 110,000 tons
upon completion of the Valdosta, Georgia plant. Future capital expenditures
are expected to be funded from operating cash flow and borrowings under its
revolving credit facility.
Notwithstanding the anticipated weakness in the styrene and acrylonitrile
markets, the Company believes that cash flow from operations, together with
funds available under its revolving credit facility will be adequate to make
the required payments of principal and interest due in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
On August 21, 1996, in connection with the Merger, the Company completed
debt and equity transactions resulting in a recapitalization of the Company
(collectively, the "Transaction"). The following table sets forth the
sources and uses of funds to effect the Transaction, which was accounted for
as a recapitalization with no impact on the historical basis of the assets
and liabilities of the Company. See Notes 1 and 4 of Notes to Consolidated
Financial Statements for further information on the Transaction and the terms
of the debt instruments, including definitions of certain terms.
<TABLE>
<CAPTION>
Sources of Funds Dollars in Millions
---------------- -------------------
<S> <C>
Revolving credit facility $ 6.4
Term loans 350.0
ESOP term loan 6.5
Subordinated notes 275.0
Discount notes and warrants 100.0
Equity private placement 70.7
Cash from operations 10.3
------
Total $818.9
======
Uses of Funds
-------------
Purchase of common stock $608.3
Purchase of other equity
interests 14.6
Repayment of outstanding debt 142.7
Chemicals ESOP loan 6.5
Transaction expenses and fees 46.8
------
$818.9
======
</TABLE>
As a result of the Transaction, the Company is highly leveraged with
significantly increased cash requirements for debt service. At September 30,
1996, long-term debt (including current maturities) was $726 million and
deficiency in assets was $(272) million as a result of recapitalization
accounting.
23
<PAGE>
The Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions and general corporate
purposes, should it need to do so, will be affected by cash requirements for
debt service. The Credit Agreement and the indentures governing the
Subordinated Notes and the Discount Notes (collectively, the "Indentures")
contain numerous financial and operating covenants, including, but not
limited to, restrictions on the Company's ability to incur indebtedness, pay
dividends, create liens, sell assets, engage in mergers and acquisitions and
refinance existing indebtedness. The Company's ability to comply with the
terms of these various debt agreements (including its ability to comply with
such covenants) and to meet its debt service obligations will depend on the
future performance of the Company. As a result of weaker than expected
market conditions for styrene and acrylonitrile during the first quarter of
fiscal 1997 and costs that were expensed related to the Merger in the fourth
quarter of fiscal 1996, the Company may not be in compliance with its
leverage ratio covenant under the Credit Agreement as of the end of the first
quarter of fiscal 1997. If needed, the Company intends to obtain a waiver to
correct any such noncompliance. The Company expects to be in compliance with
all the other coverage ratios under the Credit Agreement as of December 31,
1996, but there can be no assurance in this regard nor can there be any
assurance that the requisite waiver will be obtained with respect to the
leverage ratio covenant. The Credit Agreement also requires that certain
amounts of Excess Cash Flow (as defined) be used to prepay amounts
outstanding under the Term Loans. The first such mandatory prepayment is not
required to be made until January 1998.
The Company intends to meet its liquidity needs for operating activities
and capital expenditures (other than acquisitions) through internally
generated funds and, to the extent necessary, borrowings under the revolving
credit facility. The Company believes that such sources of funds will be
sufficient to permit the Company to meet its liquidity needs during fiscal
1997.
The Credit Agreement and the indenture for the Subordinated Notes contain
provisions which restrict the payment of advances, loans and dividends from
Chemicals to Holdings. The most restrictive of those covenants limits such
payments during fiscal 1997 to approximately $1.6 million plus any amounts
due to Holdings from Chemicals under the intercompany tax sharing agreement.
Such restriction is not expected to limit Holdings' ability to meet its
obligations in fiscal 1997.
Working Capital. Working capital at September 30, 1996 was $77 million, an
increase of $2 million from September 30, 1995. This increase was the result
of the following changes:
<TABLE>
<CAPTION>
Current Assets Current Liabilities
-------------- -------------------
(In Millions) (In Millions)
<S> <C> <C> <C>
Cash and cash equivalents $(25) Accounts payable $ 5
Inventories (14) Accrued liabilities 2
Accounts receivable 21 Current portion long-term debt 6
Other 7
---- ---
$(11) $13
</TABLE>
( ) - Decrease in assets, increase in liabilities.
Cash Flow. Net cash provided from operations was $64 million for fiscal
1996, a decrease of $128 million compared to fiscal 1995. This decrease
primarily resulted from decreased earnings during fiscal 1996. Net cash flow
used in investing activities was $96 million in fiscal 1996 compared to $54
million in fiscal 1995. The increase was primarily due to additional
expenditures made as a part of the Company's three-year capital spending
program. Net cash flow provided by financing activities was $7 million in
fiscal 1996 compared to net cash flow used of $109 million in fiscal 1995.
In fiscal 1995, net cash flow used in financing activities primarily resulted
from utilizing cash flow from operations to reduce long-term debt.
Capital Expenditures. In fiscal 1995, the Company initiated its three-
year, $200 million capital spending program. As of September 30, 1996, the
Company has spent approximately 75% of the capital program. Capital
24
<PAGE>
expenditures for fiscal 1996 were $96 million compared to $54 million in
fiscal 1995. The fiscal 1996 capital expenditures were primarily for the
expansion of the acetic acid unit, construction of the methanol unit, and
construction of the Valdosta, Georgia sodium chlorate plant. The fiscal 1995
capital expenditures were primarily for plant instrumentation modernization
and process improvements, the acetic acid expansion, and construction of the
methanol unit and the new sodium chlorate plant. The acetic acid expansion
was completed in June 1996, the methanol unit was completed in August 1996,
and the Valdosta plant is expected to be on stream by January 1, 1997.
Capital expenditures are expected to be approximately $33 million in fiscal
1997, with about $18 million dedicated to the petrochemical business and $15
million dedicated to the pulp chemical business. Capital expenditures for
the petrochemical business will be primarily for process modernization in
styrene and acrylonitrile and routine safety, environmental and replacement
capital. Capital expenditures for the pulp chemical business will be
primarily for completion of the Georgia sodium chlorate plant.
The Company's capital expenditures for environmentally-related prevention,
containment and process improvements were $2 million and $3 million for
fiscal years 1996 and 1995, respectively. The Company does not anticipate a
material increase in these types of expenses during fiscal 1997. During both
fiscal years, the Company did not incur any other infrequent or non-recurring
material environmental expenditures which were required under existing
environmental regulations. See "Certain Known Events, Trends and
Uncertainties - Environmental and Safety Matters."
The Company routinely incurs expenses associated with hazardous substance
management and pollution prevention in ongoing operations. These operating
expenses include items such as depreciation on its waste treatment
facilities, outside waste management, fuel, electricity and salaries. The
amounts of these operating expenses were approximately $47 million and $45
million for fiscal years 1996 and 1995, respectively. The Company does not
anticipate a material increase in these types of expenses during fiscal 1997.
The Company considers these types of environmental expenditures normal
operating expenses and includes them in cost of goods sold.
Acquisitions. A part of the Company's business strategy is to implement a
focused acquisition strategy, targeting chemical businesses and assets which
would strengthen the Company's existing market positions, provide upstream or
downstream integration or produce complementary chemical products. As
previously discussed, the Company's ability to consummate acquisitions may be
limited by restrictions in its debt agreements, results of operations and
industry conditions. Though there can be no assurance, the Company currently
believes that, if such acquisition opportunities arise, it will be able to
obtain the necessary approval from its existing lenders and obtain additional
financing, as necessary, to consummate such acquisitions.
Foreign Exchange. The Company enters into forward foreign exchange
contracts to reduce risk due to Canadian dollar exchange rate movements. The
Company does not engage in currency speculation. The forward foreign
exchange contracts have varying maturities with none exceeding 18 months.
The Company makes net settlements of U.S. dollars for Canadian dollars at
rates agreed to at inception of the contracts. The Company had a notional
amount of approximately $30 million and $26 million of forward foreign
exchange contracts outstanding to buy Canadian dollars at September 30, 1996
and 1995, respectively. The deferred gain on these forward foreign exchange
contracts at September 30, 1996 and 1995 was immaterial.
ACCOUNTING CHANGES
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation" in October 1995. Under SFAS No. 123, companies
are permitted to either adopt this new standard and record expenses for stock
options and other stock-based employee compensation plans based on their fair
value at date of grant, or continue to apply its current accounting policy
under Accounting Principles Board ("APB") Opinion No. 25 and increase its
footnote disclosure. The Company will continue to apply APB Opinion No. 25,
and in fiscal 1997 will increase its footnote disclosure to include the pro-
forma impact on net income and earnings per share of the application of the
fair value based method of accounting.
25
<PAGE>
The Company will adopt SFAS No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" in fiscal 1997.
Issued in March 1995, SFAS No. 121 sets forth guidance on how to measure an
impairment of long-lived assets and when to recognize such an impairment.
The adoption of the new standard is not expected to have a material impact on
the Company's financial position or results from operations.
CERTAIN KNOWN EVENTS, TRENDS, UNCERTAINTIES AND RISK FACTORS
Petrochemical Raw Material Prices and Availability. For each of the
Company's petrochemical products, the cost of raw materials and utilities is
far greater than all other costs of production combined. Therefore, an
adequate supply of raw materials at reasonable prices is critical to the
success of the Company's business. The Company does not produce any of its
major raw materials (benzene, ethylene, propylene, ammonia, and natural gas),
although a methanol unit was completed in August 1996 as described above.
This unit supplies the methanol required in acetic acid production.
These materials are all commodity petrochemicals and the price for each can
fluctuate widely for a variety of reasons, including changes in the
availability of these products because of major capacity additions or
significant plant operating problems. Although no assurances can be given,
the Company believes that it will continue to secure adequate supplies of all
its raw materials at acceptable prices.
Cyclical Markets for Products; Capacity Increases on Key Petrochemical
Products. The prices of the Company's petrochemical and pulp chemical
products have been cyclical and sensitive to overall supply relative to
demand and the level of general business activity. Large global capacity
additions of styrene and acrylonitrile are projected to be completed in
fiscal years 1997 and 1998. For styrene, approximately 7.2 billion pounds of
new capacity is expected, and for acrylonitrile, approximately 940 million
pounds of new capacity is expected. The Company believes that these announced
global capacity additions in styrene and acrylonitrile will result in
overcapacity for these markets in fiscal years 1997 and 1998. The resulting
impact on prices and margins began to negatively affect the Company's results
of operations negatively in the last half of fiscal 1996.
Environmental and Safety Matters. The Company's operations involve the
handling, production, transportation and disposal of materials classified as
hazardous or toxic and are extensively regulated under environmental and
health and safety laws. Operating permits which are required for the
Company's operations are subject to periodic renewal and may be revoked or
modified for cause.
At its Texas City Plant, the Company has reduced emissions of targeted
chemicals 71% from 1987 levels under the EPA's voluntary 33/50 program.
These reductions included a 95% reduction in hydrogen cyanide emissions and
an 83% reduction in benzene emissions. Additionally, the Company will
initiate appropriate actions or preventive projects necessary to insure that
the facility continues to operate in a safe and environmentally responsible
manner. No assurances can be given that the Company will not incur material
environmental expenditures associated with its facilities, operations or
products.
The Company's sodium chlorate market is sensitive to potential
environmental regulation. In general, environmental regulations support
substitution of chlorine dioxide, which is produced from sodium chlorate, for
elemental chlorine in the pulp bleaching process. Certain environmental
groups are encouraging passage of regulations which restrict the amount of
Absorbable Organic Halides (AOX) or chlorine derivatives in bleach plant
effluent. Increased substitution of chlorine dioxide for elemental chlorine
in the pulp bleaching process significantly reduces the amount of AOX and
chlorine derivatives in bleach plant effluent. As long as there is not an
outright ban on chlorine-containing compounds, regulations restricting AOX or
chlorine derivatives in bleach plant effluent should favor the use of
chlorine dioxide, thus sodium chlorate. Any significant ban on all chlorine-
containing compounds could have a material adverse effect on the Company's
financial condition and results of operations.
British Columbia has a regulation in place that would effectively eliminate
the use of chlorine dioxide in the bleaching process by the year 2002. The
pulp and paper industry is working to change this regulation and believes
26
<PAGE>
that the ban of chlorine dioxide in the bleaching process will yield no
measurable environmental or public health benefit. The Company is not aware
of any other laws or regulations existing in North America which would
restrict the use of the product.
Legal Proceedings. The information under "Legal Proceedings" in Note 7 of
the "Notes to Consolidated Financial Statements" herein is incorporated by
reference.
High Financial Leverage. As a result of the Merger, the Company had
consolidated indebtedness of $726 million and deficiency in assets of $(272)
million at September 30, 1996. The Company's high degree of leverage could
have important consequences, including the following: (i) the ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes, if
needed, may be restricted; (ii) a substantial portion of cash flow from
operations will be dedicated to cover cash interest requirements, thereby
limiting the funds available for operations and any future business
opportunities; and (iii) the degree of leverage may make the Company more
vulnerable to a downturn in its businesses or the economy generally.
Substantial Restrictions and Covenants. The Company's debt instruments
contain numerous financial and operating covenants, including, but not
limited to, restrictions on the Company's ability to incur indebtedness, pay
dividends, create liens, sell assets, engage in certain mergers and
acquisitions and refinance existing indebtedness. These covenants may limit
the Company's ability to pursue its planned acquisition strategy. In the
event of a change of control, the Company will be required, subject to
certain conditions, to offer to purchase all outstanding Discount Notes and
Subordinated Notes, respectively, at a price equal to 101% of the Accreted
Value with respect to the Discount Notes, and 101% of the principal amount,
with respect to the Subordinated Notes, plus accrued interest. The ability of
the Company to comply with such covenants and other terms of its debt
instruments and to satisfy its other debt obligations will depend on the
future performance of the Company.
Highly Competitive Industry. The industry in which the Company operates is
highly competitive. Many of the Company's competitors, particularly in the
petrochemical industry, are larger and have substantially greater financial
resources than the Company. Among the Company's competitors are some of the
world's largest chemical companies that have their own raw material
resources. In addition, a significant portion of the Company's business is
based upon widely available technology. The entrance of new competitors into
the industry and the addition by existing competitors of new capacity may
reduce the Company's ability to maintain profit margins or its ability to
preserve its market share, or both. Such developments could have a negative
impact on the Company's ability to obtain higher profit margins, even during
periods of increased demand for the Company's products.
Dependence on Texas City Plant. All of the Company's petrochemicals,
including all of its styrene and acrylonitrile, are produced at the Texas
City Plant. Significant unscheduled downtime at the Texas City Plant due to
equipment breakdowns, interruptions in the supply of raw materials, power
failures, natural forces or any other cause, including the normal hazards
associated with the production of petrochemicals, could materially adversely
affect the Company. Although the Company maintains insurance, including
business interruption insurance, that it considers to be adequate under the
circumstances, there can be no assurance that a significant interruption in
the operation of the Texas City Plant would not have a material adverse
effect on the Company's financial condition and results of operations.
Ability to Complete Acquisitions. A significant element of the Company's
business strategy is to pursue strategic acquisitions that either expand or
complement the Company's products. The financing for such acquisitions will
likely affect the Company's capitalization. There can be no assurance that
the Company will be able to identify and make acquisitions on terms favorable
to it or that the Company will be able to obtain financing for such
acquisitions on terms the Company finds acceptable. In addition, the
Indentures and the Credit Agreement substantially limit the Company's ability
to incur additional debt to finance such acquisitions.
Long-Term Contracts and Significant Customers. The Company sells
substantial portions of its styrene and acrylonitrile production under long-
term contracts, and sells all of its acetic acid and plasticizers production
under long-term contracts with single customers. These contracts are
intended to provide some stability if demand for or prices of these products
decline significantly, but also limit the Company's ability to take full
advantage of attractive market
27
<PAGE>
conditions during periods of higher prices for these products. During fiscal
1996, a significant portion of the Company's production from the Texas City
Plant was dedicated to multi-year contracts with Monsanto, Bayer, BP, and
BASF. Under certain market conditions, the loss of one or more of these
customers or a material reduction in the amount of product purchased by one
or more of them could have a material adverse effect on the Company.
Foreign Operations, Country Risks and Exchange Rate Fluctuations.
Approximately 20% of the Company's fiscal 1996 revenues were derived from its
Canadian-based pulp chemical business and approximately 34% were derived from
export sales. International operations and exports to foreign markets are
subject to a number of special risks, including currency exchange rate
fluctuations, trade barriers, exchange controls, national and regional labor
strikes, political risks and risks of increases in duties, taxes and
governmental royalties, as well as changes in laws and policies governing
operations of foreign-based companies. In addition, earnings of foreign
subsidiaries and intercompany payments are subject to foreign income tax
rules that may reduce cash flow available to meet required debt service and
other obligations of the Company.
Since the Company derives most of its pulp chemical revenues from
production and sales by subsidiaries within Canada, the Company has organized
its subsidiary structure and its operations in part based on certain
assumptions about various Canadian tax laws, currency exchange and capital
repatriation laws and other relevant laws. While the Company believes that
such assumptions are correct, there can be no assurance that Canadian taxing
or other authorities will reach the same conclusion. If such assumptions are
incorrect, or if Canada were to change or modify such laws or the current
interpretation thereof, the Company may suffer adverse tax and financial
consequences.
A portion of the Company's expenses and sales are denominated in Canadian
dollars, and accordingly, the Company's revenues, cash flows and earnings may
be affected by fluctuations in the exchange rate between the United States
dollar and the Canadian dollar, which may also have adverse tax consequences.
In addition, because a portion of the Company's sales, cost of goods sold and
other expenses are denominated in Canadian dollars, the Company has a
translation exposure to fluctuations in the Canadian dollar against the U.S.
dollar. These currency fluctuations could have a material impact on the
Company as increases in the value of the Canadian dollar have the effect of
increasing the U.S. dollar equivalent of cost of goods sold and other
expenses with respect to the Company's Canadian production facilities. The
Company enters into forward foreign exchange contracts to hedge such exposure
for periods consistent with its committed exposure, but does not engage in
currency speculation.
28
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth revenues, gross profit and operating income
for the Company's primary product groups for the years ended September 30,
1996, 1995, and 1994.
<TABLE>
<CAPTION>
Year Ended
September 30,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
(Dollars in millions)
REVENUES:
Petrochemicals..... $ 633 $ 886 $ 578
Pulp Chemicals..... 157 144 123
----- ------ -----
$ 790 $1,030 $ 701
===== ====== =====
GROSS PROFIT:
Petrochemicals..... $ 53 $ 225 $ 58
Pulp Chemicals..... 58 47 36
----- ------ -----
$ 111 $ 272 $ 94
===== ====== =====
OPERATING INCOME:
Petrochemicals..... $ 31 $ 212 $ 37
Pulp Chemicals..... 36 31 11
----- ------ -----
$ 67 $ 243 $ 48
===== ====== =====
</TABLE>
COMPARISON OF FISCAL 1996 TO FISCAL 1995
Revenues. Revenues for fiscal 1996 were $790 million compared to revenues
of $1.03 billion for fiscal 1995, a decrease of 23%. The decrease in
revenues resulted primarily from lower average sales prices for styrene and
acrylonitrile and lower acrylonitrile and acetic acid sales volumes, which
was partially offset by increased revenues in the pulp chemical business as a
result of higher average sodium chlorate sales prices.
Petrochemicals. For fiscal 1996, the Company's revenues from its
petrochemical business decreased 29% to $633 million when compared to fiscal
1995 primarily as a result of decreases in styrene and acrylonitrile average
sales prices and lower acrylonitrile and acetic acid sales volumes.
Styrene. Styrene revenues for fiscal 1996 decreased due to average sales
prices decreasing by approximately 41% primarily as a result of weaker market
conditions in the Far East. Fiscal 1996 sales volumes increased by
approximately 18% over fiscal 1995 when two planned shutdowns for scheduled
maintenance restricted production. The second planned shutdown also included
modernization of the styrene unit's control instrumentation with state-of-
the-art distributive control systems. The modernization project completed in
fiscal 1995 increased the Company's annual styrene production capacity to 1.7
billion pounds. The prices of styrene's major raw materials, benzene and
ethylene, were substantially lower during fiscal 1996 compared to fiscal
1995. Benzene prices were approximately 17% lower while ethylene prices were
approximately 25% lower. These decreases offset some of the decrease in
selling prices discussed above, but styrene margins still declined
substantially.
Acrylonitrile. Acrylonitrile revenues for fiscal 1996 decreased as a
result of a decline of approximately 29% in average sales prices and
approximately 11% in sales volumes. Reduced imports of acrylonitrile
derivatives by the Far East market (primarily acrylic fiber and ABS resins)
resulted in lower acrylonitrile average sales prices and sales volumes.
The Company's acrylonitrile unit operated at a reduced rate in 1996 due to
an extended shutdown for most of March 1996 for scheduled maintenance and
installation of the first phase of state-of-the-art distributive control
systems. A second phase of distributive controls was installed in October
1996. The new distributive control
29
<PAGE>
systems are expected to result in increased efficiencies and stronger
operating fundamentals in the future. The prices of propylene and ammonia,
which are the major raw materials used to make acrylonitrile, were
approximately 23% and 22% lower, respectively, in fiscal 1996 than in fiscal
1995. These decreases helped to offset some of the lower average selling
prices discussed above, but margins still declined substantially.
Acetic Acid. Acetic acid revenues in fiscal 1996 decreased primarily as a
result of a 19% decrease in sales volumes related to a shutdown of the acetic
acid unit to expand the unit by nearly 200 million pounds annually and for
installation of new distributive control systems. The expansion of the
acetic acid unit and the related construction of the partial oxidation unit
by Praxair at the Texas City Plant were completed in June 1996. The partial
oxidation unit supplies raw materials to the Company's acetic acid unit.
Other Petrochemical Products. Revenues during fiscal 1996 from the
Company's other petrochemical products (excluding lactic acid revenues)
increased approximately 30% primarily as a result of increases in revenues
from plasticizers. The Company ceased production of lactic acid in May 1996.
In the second and third quarters of fiscal 1996, the Company wrote off the
remaining net book value of the lactic acid unit assets and expensed other
related costs resulting in a $3.7 million charge against earnings before
taxes.
Pulp Chemicals. Revenues from the Company's pulp chemical business for
fiscal 1996 increased by approximately 9% to $157 million compared to fiscal
1995 primarily as a result of an increase in sodium chlorate average sales
prices of approximately 8%, partially offset by an approximately 2% decrease
in sales volumes. Sodium chlorate experienced higher sales prices as a
result of improved demand due to increased chlorine dioxide utilization in
pulp bleaching. Royalty revenues in fiscal 1996 from installed generator
technology were $19 million, the same as fiscal 1995. In addition, the
Company received ten generator contracts including all eight contracts that
were awarded in North America during fiscal 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses for fiscal 1996 totaled $40 million,
compared to $29 million in fiscal 1995. This increase was related to an
increase in SAR expense which was paid as a part of the Merger.
Income from Operations. Income from operations for fiscal 1996 was $67
million (including merger-related expenses of $3.6 million), consisting of
$31 million from petrochemical operations and $36 million from pulp chemical
operations. This amount represented an approximately 72% decrease from
fiscal 1995, primarily as a result of weakness in the markets for styrene and
acrylonitrile discussed above, which resulted in significantly lower margins
during fiscal 1996 compared to the 1995 fiscal year. This weakness was
partially offset by higher operating income from the pulp chemical business
and other petrochemical products. In addition, the Company incurred
approximately $2 million in start-up expenses during fiscal 1996 in
connection with construction of the methanol unit.
Other Expenses. Other expenses in fiscal 1996 consist of the $3.7 million
pre-tax charge against earnings related to the write-off of the Company's
lactic acid unit assets.
Interest and Debt Related Expenses. Interest expense for fiscal 1996
decreased $1 million compared to fiscal 1995 primarily due to lower
outstanding debt for most of fiscal 1996. The Company's average interest
rate per annum increased to 10% on September 30, 1996 from 7% on September
30, 1995 primarily due to the financing in August 1996 related to the
Transaction.
Provision for Income Taxes. Provision for income taxes for fiscal 1996 was
$17 million, with an effective tax rate of 34%, compared to $75 million, with
an effective tax rate of 33% for fiscal 1995. The decrease in the provision
was primarily the result of the significant decrease in the Company's pre-tax
income to $50 million for fiscal 1996 from $228 million in fiscal 1995.
Extraordinary Item. The extraordinary item of $1.9 million relates to the
loss on early extinguishment of debt of $3.0 million (net of taxes of $1.1
million) resulting from the Transaction.
30
<PAGE>
Net Income. Due to the factors described above, net income for fiscal 1996
was $32 million compared to $150 million for fiscal 1995.
COMPARISON OF FISCAL 1995 TO FISCAL 1994
Revenues. The Company's revenues for fiscal 1995 were $1.03 billion, an
increase of $329 million from fiscal 1994. Fiscal 1995 revenues were the
highest in Company history, achieved primarily through higher sales prices
and volumes for styrene and acrylonitrile due to improving conditions in the
commodity chemical markets in 1994 and 1995. The Company's pulp chemical
business also experienced record revenues in fiscal 1995 primarily due to
increased sales prices and volumes of sodium chlorate.
Petrochemicals. The financial performance of the Company's petrochemical
business was significantly better during fiscal 1995 than in fiscal 1994.
Petrochemical revenues increased 53% to $886 million from fiscal 1994,
primarily as a result of increased average styrene and acrylonitrile sales
prices and higher acrylonitrile sales volumes.
Styrene. Styrene revenues increased in fiscal 1995 compared to fiscal 1994
primarily because of a 64% increase in average sales prices. The styrene
unit operated at a slightly higher rate than in fiscal 1994, in spite of two
planned shutdowns for maintenance and catalyst replacement during fiscal 1995
compared to no shutdowns in the prior year. The second planned shutdown,
which occurred in the fourth quarter of fiscal 1995, also included
modernization of the styrene unit's control instrumentation with state-of-
the-art distributive control systems. The average prices for styrene's
primary raw materials, benzene and ethylene, increased approximately 5% and
40%, respectively, in fiscal 1995 compared to fiscal 1994. However, the
Company was able to increase styrene selling prices and thereby margins
through most of the fiscal year until the dramatic fall in prices and margins
in the fourth quarter of fiscal 1995.
Acrylonitrile. Acrylonitrile revenues for fiscal 1995 increased primarily
due to an increase of approximately 70% in average sales prices, peaking at
unprecedented levels in the third quarter of fiscal 1995, and an increase of
approximately 11% in sales volumes. Acrylonitrile revenues from export sales
constituted approximately 93% of the Company's total acrylonitrile revenues
and approximately 81% of its acrylonitrile production for fiscal 1995.
Almost all of the Company's domestic acrylonitrile revenues are from
conversion agreements. Average export acrylonitrile prices and margins were
significantly higher in fiscal 1995 than in fiscal 1994 as a result of the
strong demand during most of the year.
The average prices of acrylonitrile's primary raw materials, propylene and
ammonia, increased substantially in fiscal 1995 compared to fiscal 1994.
Average propylene prices were approximately 70% higher and average ammonia
prices increased by approximately 35%. However, the Company was able to
substantially improve margins for acrylonitrile during most of the year due
to increases in acrylonitrile sales prices, until the downturn in the fourth
quarter that negatively affected sales prices and margins.
Acetic Acid. Acetic acid revenues for fiscal 1995 increased approximately
24% from fiscal 1994. The increase in revenues was related to an increase in
passed through raw material costs, specifically methanol, during the period.
Other Petrochemical Products. Revenues in fiscal 1995 from plasticizers,
lactic acid, TBA and sodium cyanide decreased approximately 3% compared to
fiscal 1994. The decline was primarily attributable to lower lactic acid
revenues.
Pulp Chemicals. Revenues from the Company's pulp chemical business
increased by approximately 17% to $144 million in fiscal 1995. The increase
in revenues resulted primarily from (i) an approximately 14% increase in
sodium chlorate sales volumes, due to the substitution of chlorine dioxide
for elemental chlorine in the bleaching process, and (ii) an approximately
11% increase in average selling prices. Royalty revenues from installed
generator technology increased by approximately 15% to $19 million in fiscal
1995 as a result of higher customer operating rates and additional installed
capacity. Sales of generator technology were approximately the same in
fiscal 1995 as the previous year.
31
<PAGE>
The increased sodium chlorate sales volumes in fiscal 1995 resulted in
increased capacity utilization, which contributed to lower per unit cost and
increased margins.
Selling, General and Administrative Expenses. The Company's SG&A expenses
in fiscal 1995 were $29 million compared to $46 million in fiscal 1994. A
$25 million decrease in the expense related to the SAR program, resulting
from an approximately 50% decrease in the number of SARs outstanding and a
decrease in the Company's stock price at the end of fiscal 1995 compared to
the end of fiscal 1994, was partially offset by a $4 million increase in
employee profit sharing, which was directly related to the Company's improved
earnings in fiscal 1995.
Income from Operations. Income from operations for fiscal 1995 was $243
million, consisting of $212 million from petrochemical operations and $31
million from pulp chemical operations. This amount represented an
approximately 406% increase from fiscal 1994. The increase was primarily the
result of strength in the markets for styrene and acrylonitrile discussed
above, which resulted in significantly higher margins and volumes during
fiscal 1995 compared to fiscal 1994.
Interest and Debt Related Expenses. Interest expense decreased $7.5
million in fiscal 1995 primarily due to the Company's repayment of $105
million of debt during the year. The Company's average interest rates
decreased to 7% per annum on September 30, 1995 from 8% per annum on
September 30, 1994 primarily due to the refinancing in April 1995.
Provision for Income Taxes. Provision for income taxes for fiscal 1995 was
$75 million, with an effective tax rate of 33%, compared to $9 million, with
an effective tax rate of 32% for fiscal 1994. The increase was primarily due
to the significant increase in the Company's pre-tax income of $228 million
for fiscal 1995 from $28 million in fiscal 1994, which was largely the result
of higher earnings from the petrochemical business.
Net Income. Due to the factors described above, net income for fiscal 1995
was $150 million compared to $19 million for fiscal 1994.
32
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
STERLING CHEMICALS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
-------- ----------- ---------
<S> <C> <C> <C>
Revenues.................................................... $790,465 $1,030,198 $700,840
Cost of goods sold.......................................... 679,039 758,580 606,916
-------- ---------- --------
Gross profit................................................ 111,426 271,618 93,924
Selling, general and administrative expenses................ 40,305 28,856 46,150
Merger related expenses..................................... 3,633 -- --
Write-off of assets......................................... 3,706 -- --
Interest and debt related expenses, net of interest income.. 13,380 14,604 22,126
Gain on sale of assets...................................... -- -- (2,606)
-------- ---------- --------
Income before taxes and extraordinary item.................. 50,402 228,158 28,254
Provision for income taxes.................................. 16,898 75,005 9,122
-------- ---------- --------
Income before extraordinary item............................ 33,504 153,153 19,132
Extraordinary item, loss on early extinguishment of debt,
net of tax (Note 3)........................................ 1,900 3,104 --
-------- ---------- --------
Net income.................................................. $ 31,604 $ 150,049 $ 19,132
======== ========== ========
Per share data:
Income before extraordinary item............................ $ .66 $ 2.76 $ .34
Extraordinary item.......................................... .04 .06 --
-------- ---------- --------
Net income per share........................................ $ .62 $ 2.70 $ .34
======== ========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
33
<PAGE>
STERLING CHEMICALS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 5,609 $ 30,882
Accounts receivable.................................................................. 133,399 112,102
Inventories.......................................................................... 53,720 67,867
Prepaid expenses..................................................................... 9,076 3,878
Deferred income tax benefit.......................................................... 7,214 5,622
--------- --------
Total current assets................................................................. 209,018 220,351
Property, plant and equipment, net..................................................... 365,765 309,084
Other assets........................................................................... 114,901 80,504
--------- --------
Total assets......................................................................... $ 689,684 $609,939
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Current liabilities:
Accounts payable..................................................................... $ 66,562 $ 72,016
Accrued liabilities.................................................................. 53,898 55,858
Current portion of long-term debt.................................................... 11,625 17,857
--------- --------
Total current liabilities............................................................ 132,085 145,731
Long-term debt......................................................................... 714,632 103,581
Deferred income tax liability.......................................................... 46,933 40,297
Deferred credits and other liabilities................................................. 68,473 81,012
Common stock held by ESOP.............................................................. 6,500 --
Less: unearned compensation........................................................... (6,500) --
Commitments and contingencies (Note 7)
Stockholders' equity (Deficiency in assets):
Common stock, $.01 par value, 150,000 shares authorized, 10,599 shares issued and
outstanding at September 30, 1996; 60,327 shares issued, 55,674 shares outstanding
at September 30, 1995............................................................... 106 603
Additional paid-in capital........................................................... (560,077) 33,269
Retained earnings.................................................................... 306,656 275,052
Pension adjustment................................................................... -- (1,556)
Accumulated translation adjustment................................................... (19,124) (17,307)
Deferred compensation................................................................ -- (129)
--------- --------
(272,439) 289,932
Treasury stock, at cost, 4,653 shares at September 30, 1995.......................... -- (50,614)
--------- --------
Total stockholders' equity (deficiency in assets).................................... (272,439) 239,318
--------- --------
Total liabilities and stockholders' equity (deficiency in assets).................... $ 689,684 $609,939
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
34
<PAGE>
STERLING CHEMICALS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL ACCUMULATED
----------------------- PAID-IN RETAINED PENSION TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT
----------- -------- ----------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993..... 60,325 $ 603 $ 34,708 $105,871 $(1,297) $(16,184)
Net income...................... -- -- -- 19,132 -- --
Translation adjustment.......... -- -- -- -- -- (1,138)
Common stock issued............. 2 -- 6 -- -- --
Treasury stock transactions..... -- -- (1,482) -- -- --
Amortization of deferred
compensation................... -- -- -- -- -- --
Pension adjustment.............. -- -- -- -- 347 --
------- ----- --------- -------- ----------- -----------
Balance, September 30, 1994..... 60,327 603 33,232 125,003 (950) (17,322)
Net income...................... -- -- -- 150,049 -- --
Translation adjustment.......... -- -- -- -- -- 15
Treasury stock transactions..... -- -- 37 -- -- --
Amortization of deferred
compensation................... -- -- -- -- -- --
Pension adjustment.............. -- -- -- -- (606) --
------- ----- --------- -------- ----------- -----------
Balance, September 30, 1995..... 60,327 603 33,269 275,052 (1,556) (17,307)
Net income...................... -- -- -- 31,604 -- --
Redemption of common stock...... (50,690) (507) (616,892) -- -- --
Common stock issued in
Transaction................... 5,349 54 64,084 -- -- --
Employee stock purchase......... 250 2 3,000 -- -- --
Stock warrants.................. -- -- 6,900 -- -- --
Translation adjustment.......... -- -- -- -- -- (1,817)
Treasury stock transactions..... (4,637) (46) (50,438) -- -- --
Amortization of deferred
compensation.................. -- -- -- -- -- --
Pension adjustment.............. -- -- -- -- 1,556 --
------- ----- --------- -------- ----------- -----------
Balance, September 30, 1996..... 10,599 $ 106 $(560,077) $306,656 $ -- $(19,124)
======= ===== ========= ======== =========== ===========
DEFERRED TREASURY
COMPENSATION STOCK
------------- ---------
<S> <C> <C>
Balance, September 30, 1993..... $ (164) $ (53,201)
Net income...................... -- --
Translation adjustment.......... -- --
Common stock issued............. -- --
Treasury stock transactions..... -- 2,437
Amortization of deferred
compensation................... 96 --
Pension adjustment.............. -- --
------- ---------
Balance, September 30, 1994..... (68) (50,764)
Net income...................... -- --
Translation adjustment.......... -- --
Treasury stock transactions..... -- 150
Amortization of deferred
compensation................... (61) --
Pension adjustment.............. -- --
------- ---------
Balance, September 30, 1995..... (129) (50,614)
Net income...................... -- --
Redemption of common stock...... -- --
Common stock issued in
Transaction................... -- --
Employee stock purchase......... -- --
Stock warrants.................. -- --
Translation adjustment.......... -- --
Treasury stock transactions..... -- 50,614
Amortization of deferred
compensation.................. 129 --
Pension adjustment.............. -- --
------- ---------
Balance, September 30, 1996..... $ -- $ --
======= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
35
<PAGE>
STERLING CHEMICALS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
---------- ------------ ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers.......................................... $ 874,253 $1,159,192 $ 709,026
Miscellaneous cash receipts........................................... 17,758 14,007 10,618
Cash paid to suppliers and employees.................................. (804,414) (893,324) (614,856)
Interest paid......................................................... (9,492) (14,811) (20,443)
Interest received..................................................... 1,114 2,540 60
Income taxes paid..................................................... (15,618) (75,766) (9,156)
--------- ---------- ---------
Net cash provided by operating activities............................... 63,601 191,838 75,249
Cash flows from investing activities:
Capital expenditures.................................................. (95,957) (53,962) (12,343)
Proceeds from sale of assets.......................................... - - 2,606
--------- ---------- ---------
Net cash used in investing activities................................... (95,957) (53,962) (9,737)
Cash flows from financing activities:
Proceeds from long-term debt.......................................... 800,350 217,000 -
Repayment of long-term debt........................................... (196,285) (322,282) (65,517)
Redemption of common stock............................................ (616,160) - -
Purchase of other equity interests.................................... (14,587) - -
Issuance of common stock.............................................. 64,040 - -
Sale of warrants...................................................... 6,900 - -
Debt issuance costs................................................... (33,070) - -
Other merger fees..................................................... (3,709) - -
Other................................................................. (289) (3,735) 643
--------- ---------- ---------
Net cash provided by (used in) financing activities..................... 7,190 (109,017) (64,874)
Effect of U.S./Canadian exchange rate on cash........................... (107) 10 23
--------- ---------- ---------
Net increase (decrease) in cash and cash equivalents.................... (25,273) 28,869 661
Cash and cash equivalents - beginning of year........................... 30,882 2,013 1,352
--------- ---------- ---------
Cash and cash equivalents - end of year................................. $ 5,609 $ 30,882 $ 2,013
========= ========== =========
Reconciliation of net income to cash provided by operating activities:
Net income.............................................................. $ 31,604 $ 150,049 $ 19,132
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization......................................... 42,702 43,033 40,953
Loss (gain) on disposal/write off of assets........................... 3,706 - (2,606)
Extraordinary item.................................................... 1,900 3,104 -
Deferred tax expense (benefit)........................................ 4,172 4,280 (4,817)
Accrued compensation including SARs................................... 8,984 (2,638) 21,941
Merger related expenses............................................... 3,633 - -
Discount notes amortization........................................... 1,656 - -
Other................................................................. (3,766) 1,058 1,426
Change in assets/liabilities:
Accounts receivable................................................... (18,297) 22,540 (52,304)
Inventories........................................................... 14,147 1,921 (9,493)
Prepaid expenses...................................................... (5,173) (1,183) 2,649
Other assets.......................................................... (8,900) (4,075) (1,437)
Accounts payable...................................................... (5,454) (4,117) 34,083
Accrued liabilities................................................... (7,018) (21,447) 17,604
Other liabilities..................................................... (295) (687) 8,118
--------- ---------- ---------
Net cash provided by operating activities............................... $ 63,601 $ 191,838 $ 75,249
========= ========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
36
<PAGE>
STERLING CHEMICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 14, 1996
(DATE OF INCEPTION)
TO SEPTEMBER 30, 1996/1/
-------------------------
<S> <C>
Revenues...................................... $83,410
Cost of goods sold............................ 83,047
-------
Gross profit.................................. 363
Selling, general and administrative expenses.. 3,426
Interest and debt related expenses............ 1,615
Interest income from parent................... (5,236)
-------
Income before taxes........................... 558
Provision for income taxes.................... 384
-------
Net Income.................................... $ 174
=======
</TABLE>
/ 1/See Note 1 of Notes to Consolidated Financial Statements for a
discussion of merger activities and related financing. Prior to August 21,
1996, Chemicals had no operating activities, other than those related to
merger activities.
The accompanying notes are an integral part of the consolidated financial
statements.
37
<PAGE>
STERLING CHEMICALS, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents.......................................... $ 5,581
Accounts receivable................................................ 135,635
Inventories........................................................ 53,720
Prepaid expenses................................................... 9,076
Deferred income tax benefit........................................ 7,214
---------
Total current assets............................................... 211,226
Property, plant and equipment, net................................... 365,765
Other assets......................................................... 108,460
---------
Total assets....................................................... $ 685,451
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Current liabilities:
Accounts payable................................................... $ 66,562
Accrued liabilities................................................ 55,740
Current portion of long-term debt.................................. 11,625
---------
Total current liabilities.......................................... 133,927
Long-term debt....................................................... 619,875
Deferred income tax liability........................................ 47,478
Deferred credits and other liabilities............................... 68,473
Commitments and contingencies (Note 7)
Stockholders' equity (deficiency in assets):
Common stock, $.01 par value....................................... -
Additional paid-in capital......................................... (165,352)
Retained earnings.................................................. 174
Accumulated translation adjustment................................. (19,124)
---------
Total stockholders' equity (deficiency in assets).................. (184,302)
---------
Total liabilities and stockholders' equity (deficiency in assets).. $ 685,451
=========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
38
<PAGE>
STERLING CHEMICALS, INC.
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED
COMMON STOCK PAID-IN RETAINED PENSION TRANSLATION
--------------
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT
------ ------ ----------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 14,1996 - $ - $ - $ - $ - $ -
Common stock issued.......... 1 - 1 - - -
Capital transfer, net........ - - (165,353) - (1,556) (20,194)
Net income................... - - - 174 - -
Pension adjustment........... - - - - 1,556 -
Translation adjustment....... - - - - - 1,070
------ ------ --------- -------- ---------- --------
Balance, September 30, 1996.. 1 $ - $(165,352) $ 174 $ - $(19,124)
====== ====== ========= ======== ========== ========
</TABLE>
39
<PAGE>
STERLING CHEMICALS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 14, 1996
(DATE OF INCEPTION)
TO SEPTEMBER 30, 1996/1/
-------------------------
<S> <C>
Cash flows from operating activities:
Cash received from customers............................... $ 102,900
Miscellaneous cash receipts................................ 1,749
Cash paid to suppliers and employees....................... (92,800)
Interest paid.............................................. (3,129)
Interest received.......................................... 474
Income taxes paid.......................................... (4,950)
---------
Net cash provided by operating activities.................... 4,244
Cash flows from investing activities:
Capital expenditures....................................... (6,398)
---------
Net cash used in investing activities........................ (6,398)
Cash flows from financing activities:
Proceeds from long-term debt............................... 637,900
Debt issuance costs........................................ (27,939)
Distribution from parent................................... (609,961)
Repayment of long-term debt................................ (6,400)
Distribution to parent..................................... 14,165
---------
Net cash provided by financing activities.................... 7,765
Effect of U.S./Canadian exchange rate on cash................ (30)
---------
Net increase in cash and cash equivalents.................... 5,581
Cash and cash equivalents - beginning of period.............. -
---------
Cash and cash equivalents - end of year...................... $ 5,581
=========
Reconciliation of Net Income to
Cash Provided by Operating Activities
Net income................................................... $ 174
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 4,801
Deferred tax expense....................................... 1,457
Other...................................................... (511)
Change in assets/liabilities:
Accounts receivable........................................ 164
Inventories................................................ (468)
Prepaid expenses........................................... (2,428)
Other assets............................................... 784
Accounts payable........................................... 7,025
Accrued liabilities........................................ (4,460)
Other liabilities.......................................... (2,294)
---------
Net cash provided by operating activities.................... $ 4,244
=========
</TABLE>
/1/See Note 1 of Notes to Consolidated Financial Statements for a
discussion of merger activities and related financing. Prior to August 21,
1996, Chemicals had no operating activities, other than those related to
merger activities.
The accompanying notes are an integral part of the consolidated financial
statements.
40
<PAGE>
STERLING CHEMICALS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MERGER ACTIVITIES
Sterling Chemicals, Inc. (prior to the Merger, "Sterling") and STX
Acquisition Corp. ("STX Acquisition"), a Delaware Corporation formed in April
1996 by an investor group led by The Sterling Group, Inc. ("TSG") and the
Unicorn Group L.L.C. ("Unicorn"), entered into an Amended and Restated
Agreement and Plan of Merger dated April 24, 1996 (the "Merger Agreement").
On August 20, 1996, the Merger Agreement was approved by a majority of the
shares outstanding, and on August 21, 1996, STX Acquisition merged with and
into Sterling, changing its name to Sterling Chemicals Holdings, Inc.
("Holdings"), and continuing as the surviving corporation (the "Merger"). In
connection with the Merger, Holdings transferred all of its operating assets
and liabilities (excluding the Discount Notes) to a wholly owned subsidiary,
STX Chemicals Corp., which at the time of the Merger, changed its name to
Sterling Chemicals, Inc. and continued as the surviving company (after the
Merger, "Chemicals"). Holdings has no direct subsidiaries other than
Chemicals. As used in these notes, the term "Company" refers to Sterling and
its subsidiaries prior to the consummation of the Merger and, following the
Merger, to Holdings and its subsidiaries, including Chemicals.
Each share of the Company's common stock outstanding immediately prior to
the Merger was converted (at the election of the holder thereof) into either
$12.00 cash or the right to retain shares of the Company's common stock
("Rollover Shares"), with the aggregate number of Rollover Shares limited to
5.0 million. As a result of the Merger, on August 21, 1996, the former STX
Acquisition stockholders held approximately 5.3 million shares (49%),
stockholders with Rollover Shares held approximately 5.0 million shares (46%)
and the Company's newly formed ESOP held approximately 542,000 shares (5%) of
the Company's outstanding common stock.
The Merger was financed by the proceeds of bank term loans of $356.5
million, including an ESOP term loan of $6.5 million, amounts drawn against a
revolving credit facility of $6.4 million, an offering of $275.0 million
Subordinated Notes, an offering of $191.8 million (initial proceeds of $100
million) representing 191,751 Units, with each unit consisting of one
Discount Note and one Warrant to purchase three shares of Holding's common
stock for $0.01 per share beginning in August 1997, equity raised by STX
Acquisition of approximately $70.7 million, and cash on hand of $10.3
million. These proceeds were used to redeem Sterling's common stock other
than Rollover Shares ($608.3 million), purchase other equity interests -
primarily stock appreciation rights ("SARs") ($14.6 million), repay debt
outstanding prior to the Merger ($142.7 million), loan monies to the new ESOP
($6.5 million) and pay fees and expenses ($46.8 million).
The Company has accounted for the Merger and related financing as a series
of debt and equity transactions representing a recapitalization.
Accordingly, the historical basis of the Company's assets and liabilities
have not been impacted by the Merger and related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company operates petrochemical facilities in Texas City, Texas, and
pulp chemical facilities throughout Canada. Construction of a new sodium
chlorate plant is nearing completion in Valdosta, Georgia. The significant
accounting policies of the Company are described below.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all wholly
owned and majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated. The Company's
41
<PAGE>
investment in a cogeneration joint venture of a 50% equity interest is
accounted for under the equity method with the Company's share of earnings
from the joint venture recorded as a reduction of cost of goods sold.
The consolidated financial statements include the accounts of all wholly
owned and majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated. The Company's investment in a
cogeneration joint venture of a 50% equity interest is accounted for under
the equity method with the Company's share of earnings from the joint venture
recorded as a reduction of cost of goods sold.
CASH EQUIVALENTS
The Company considers all investments purchased with a remaining maturity
of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market; cost is determined
on the first-in, first-out ("FIFO") basis except for stores and supplies,
which are valued at average cost.
The Company enters into agreements with other companies to exchange
chemical inventories in order to minimize working capital requirements and to
facilitate distribution logistics. Balances related to quantities due to or
payable by the Company are included in inventory.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Major renewals and
improvements which extend the useful lives of the equipment are capitalized.
Major planned maintenance expenses are accrued for during the periods prior
to the maintenance, while routine repair and maintenance expenses are charged
to operations as incurred. Disposals are removed at carrying cost less
accumulated depreciation with any resulting gain or loss reflected in
operations. Depreciation is provided using the straight-line method over
estimated useful lives ranging from 5 to 25 years with the predominant life
of the plant and equipment being 15 years. The Company capitalizes interest
costs which are incurred as part of the cost of constructing major facilities
and equipment. The amount of interest capitalized for the fiscal years 1996,
1995 and 1994 was $4.1 million, $1.0 million and $145,000, respectively.
PATENTS AND ROYALTIES
The cost of patents is amortized on a straight-line basis over their
estimated useful lives which approximates ten years. The Company capitalized
the value of the chlorine dioxide generator technology acquired in fiscal
1992 based on the net present value of all estimated remaining royalty
payments associated with the technology. The resulting intangible amount is
included in other assets and is amortized over an average life for these
royalty payments of ten years.
DEBT ISSUE COSTS
Debt issue costs relating to long-term debt are amortized using the
effective interest method and are included in other assets.
42
<PAGE>
INCOME TAXES
Deferred income taxes are recorded to reflect the tax effect of the
temporary differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities at enacted rates.
REVENUE RECOGNITION
The Company generates revenues through sales in the open market, raw
material conversion agreements and long-term supply contracts. In addition,
the Company has entered into shared profit arrangements with respect to
certain petrochemical products. The Company recognizes revenue from sales in
the open market, raw material conversion agreements, and long-term supply
contracts as the products are shipped. Revenues from shared profit
arrangements are estimated and accrued monthly. Deferred credits are
amortized over the life of the contract which gave rise to them. The Company
also generates revenues from the construction and sale of chlorine dioxide
generators which are recognized using the percentage of completion method.
The Company also receives prepaid royalties which are recognized over a
period which is typically ten years.
FOREIGN EXCHANGE
Assets and liabilities denominated in Canadian dollars are translated into
U.S. dollars at year-end exchange rates and revenues and expenses are
translated at the average monthly exchange rates. Translation adjustments
are reported as a separate component of stockholders' equity while
transaction gains and losses are included in operations when incurred.
The Company's Canadian subsidiaries enter into forward foreign exchange
contracts to minimize the short-term impact of Canadian dollar fluctuations
on certain of its Canadian dollar denominated commitments. Gains or losses
on these contracts are deferred and are included in operations in the same
period in which the related transactions are settled.
EARNINGS PER SHARE
Income per share for fiscal years 1996, 1995 and 1994 has been computed
using a weighted average shares outstanding of 50,700,000, 55,674,000, and
55,606,000, respectively. The weighted average shares outstanding used in
the computation of earnings per share are net of the shares held by the ESOP
that are not allocated to the employees.
ENVIRONMENTAL COSTS
Environmental costs are expensed unless the expenditures extend the
economic useful life of the assets. Costs that extend the economic life of
the assets are capitalized and depreciated over the remaining life of such
assets.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
In preparing disclosures about the fair value of financial instruments,
the Company has assumed that the carrying amount approximates fair value for
cash and cash equivalents, receivables, short-term borrowings, accounts
payable and certain accrued expenses because of the short maturities of those
instruments. The fair values of long-term debt instruments are estimated
based upon quoted market values (if applicable), or on the current interest
rates available to the Company for debt with similar terms and remaining
maturities. Considerable judgment is required in developing these estimates
and, accordingly, no assurance can be given that the estimated values
presented herein are indicative of the amounts that would be realized in a
free market exchange.
43
<PAGE>
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported periods. Actual results could differ from these estimates.
RECLASSIFICATION
Certain amounts reported in the financial statements for the prior periods
have been reclassified to conform with the current financial statement
presentation with no effect on net income or stockholders' equity.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---------- ---------
(Dollars in Thousands)
<S> <C> <C>
Inventories:
Finished products...................... $ 31,868 $ 44,802
Raw materials.......................... 9,499 16,506
--------- ---------
Inventories at FIFO cost................. 41,367 61,308
--------- ---------
Inventories under exchange agreements.. 722 (4,783)
Stores and supplies.................... 11,631 11,342
--------- ---------
$ 53,720 $ 67,867
========= =========
Property, plant and equipment:
Land................................... $ 11,720 $ 11,775
Buildings.............................. 27,448 26,955
Plant and equipment.................... 468,647 422,479
Construction in progress............... 85,490 49,782
Less: accumulated depreciation........ (227,540) (201,907)
--------- ---------
$ 365,765 $ 309,084
========= =========
Other assets:
Patents and technology, net............ $ 34,902 $ 40,971
Estimated insurance recoveries......... 15,600 10,315
Intangible pension asset............... -- 3,733
Deferred catalyst...................... 8,288 4,357
Debt issue costs....................... 34,025 3,370
Other.................................. 22,086 17,758
--------- ---------
$ 114,901 $ 80,504
========= =========
Accrued liabilities:
Repairs................................ $ 11,417 $ 9,021
Income taxes........................... 1,190 2,250
Interest............................... 3,869 574
Estimated contract adjustments......... -- 1,536
Property taxes......................... 6,772 6,179
Litigation contingency................. -- 6,000
Accrued compensation................... 5,646 10,019
Other.................................. 25,004 20,279
--------- ---------
$ 53,898 $ 55,858
========= =========
Deferred credits and other liabilities:
Deferred revenue....................... $ 17,720 $ 21,969
Accrued postretirement benefits........ 27,143 24,722
Additional minimum pension liability... -- 6,127
Accrued compensation................... -- 2,922
Litigation contingency................. 16,000 10,315
Other.................................. 7,610 14,957
--------- ---------
$ 68,473 $ 81,012
========= =========
</TABLE>
44
<PAGE>
4. LONG-TERM DEBT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1996 1995
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Revolving credit facilities................... $ -- $ 902
Term loans.................................... 350,000 120,536
ESOP term loan................................ 6,500 --
Subordinated notes............................ 275,000 --
Discount notes................................ 94,757 --
-------- --------
Total debt outstanding...................... 726,257 121,438
======== ========
Less:
Current maturities.......................... (11,625) (17,857)
-------- --------
Total long-term debt.......................... $714,632 $103,581
======== ========
</TABLE>
TERM LOANS, REVOLVER AND ESOP LOANS
In connection with the Merger financing, Chemicals entered into a credit
agreement (the "Credit Agreement") with Texas Commerce Bank National
Association, as agent bank for a syndicate of lenders, and Credit Suisse and
Chase Securities, Inc. as co-arrangers. Funding under the Credit Agreement
occurred August 21, 1996, upon the consummation of the Merger. The Credit
Agreement provides for facilities consisting of a six and one-half year
revolving credit facility providing for up to $100 million (subject to a
monthly borrowing base calculation) in revolving loans (the "Revolver"), a
term loan facility consisting of a six and one-half year $200 million Tranche
A term loan and an eight-year $150 million Tranche B term loan (the "Term
Loans"), and a four-year $6.5 million ESOP Term Loan (the "ESOP Loan").
The Term Loans, the ESOP Loan and the Revolver borrowings bear interest, at
Chemicals' option, at an annual rate of either the Eurodollar Rate or the
Base Rate plus an Applicable Margin ranging from 0% to 3%, depending upon the
Company's leverage ratio. The Base Rate is equal to the greater of the Prime
Rate as announced from time to time by the agent bank, the Federal Funds
Rate plus 1/2%, or the Base CD Rate plus 1%. The Credit Agreement also
requires Chemicals to pay a commitment fee in the amounts of 3/8% or 1/2%
of the unused commitment under the Revolver depending on the Company's
leverage ratio (as defined in the Credit Agreement).
The Credit Agreement requires the principal amount of the Term Loans to be
amortized in quarterly installments beginning with the fiscal quarter ending
December 31, 1996, plus additional mandatory prepayments based upon
consolidated Excess Cash Flow (as defined in the Credit Agreement). The ESOP
Loan will be amortized in 16 equal quarterly installments of $406,250 during
its four-year term. Advances under the Revolver will be subject to a
borrowing base consisting of 85% of eligible accounts receivable and 65% of
eligible inventory with an inventory cap of 50% of the borrowing base.
Chemicals' obligations under the Credit Agreement are secured by a first
priority lien on the capital stock of Chemicals' domestic subsidiaries, 65%
of the capital stock of its foreign subsidiaries and substantially all of the
domestic assets of Chemicals, including without limitation, accounts
receivable, inventory, intangibles and fixed assets and assignments of
certain material leases, licenses, and contracts. In addition, the Credit
Agreement is secured by a pledge by Holdings of all of the capital stock of
Chemicals.
The Credit Agreement contains numerous financial and operating covenants,
including, but not limited to, restrictions on Chemicals' ability to incur
indebtedness, pay dividends, create liens, sell assets, engage in mergers and
acquisitions, and refinance existing indebtedness. The Credit Agreement also
requires Chemicals to satisfy certain financial covenants and tests. As a
result of weaker than expected market conditions in styrene and acrylonitrile
during the first quarter of fiscal 1997 and costs that were expensed related
to the Merger in the fourth quarter of fiscal 1996, the Company may not be in
compliance with its leverage ratio under the Credit Agreement as of the end
of the first quarter of fiscal 1997. The Company intends to obtain a waiver
to correct any noncompliance.
45
<PAGE>
The Company expects to be in compliance with all other coverage ratios under
the Credit Agreement as of December 31, 1996, but there can be no assurance
in this regard nor can there be any assurance that the requisite waiver will
be obtained with respect to the leverage ratio covenant. In addition, the
Credit Agreement includes various circumstances that will constitute, upon
occurrence and subject in certain cases to notice and grace periods, an event
of default thereunder.
At September 30, 1996, Chemicals had indebtedness of $350 million under the
Term Loans and $6.5 million under the ESOP Loan. Additionally, the Company
had $470,000 in letters of credit under the Revolver, thereby reducing the
available commitment to $99.5 million. Available credit under the Revolver
for loans and letters of credit is subject to a monthly borrowing base and at
September 30, 1996, the borrowing base did not limit such available credit.
At September 30, 1995, indebtedness under former credit agreements dated
April 1995 totaled $120.5 million in term loans and $902,000 drawn against a
$150 million revolving credit facility and a Cdn $20 million revolving credit
facility. All amounts outstanding under these agreements were repaid in the
current year as part of the Merger financing and such agreements were
terminated and replaced with the new Credit Agreement upon consummation of
the Merger financing. Interest under the former credit agreements was based
on the Base Rate (the greater of the Prime Rate or the Federal Funds Rate
plus 1/2%) or the Eurodollar Rate (the Eurodollar Interbank Rate plus a
margin ranging from 0.65% to 1 1/4%). The variable rate on the term loan
under the former credit agreements was fixed at approximately 7% per annum
with an interest swap agreement.
On September 28, 1995, Chemicals entered into a seven-year credit agreement
(the "Chlorate Plant Credit Agreement") to finance the construction of the
Georgia sodium chlorate plant. The borrowing margins under the Chlorate
Plant Credit Agreement were similar to those contained in the former credit
agreements. During fiscal 1996, Chemicals borrowed $39 million under this
agreement to finance the construction of the Georgia sodium chlorate plant.
The entire amount was repaid as a part of the Merger financing.
In connection with arranging the Credit Agreement, the Company incurred
fees of approximately $16 million which are being amortized over the term of
the loans under the effective interest method. Unamortized debt issue costs
related to the retired loans of approximately $3 million, before tax effect
of $1.1 million, were expensed in August 1996 and recorded as an
extraordinary loss from early extinguishment of debt.
DISCOUNT NOTES AND SUBORDINATED NOTES
As part of the Merger financing, Chemicals also issued $275 million in
aggregate principal amount of senior subordinated notes (the "Subordinated
Notes") maturing on August 15, 2006 and Holdings issued $191.8 million ($100
million initial proceeds) representing 191,751 Units, with each Unit
consisting of one 13 1/2% senior subordinated discount note due 2008 (the
"Discount Notes") and one warrant to purchase three shares of Holding's
common stock for $.01 per share (the "Warrants").
The Subordinated Notes bear interest at the annual rate of 11 3/4%, payable
semi-annually on February 15 and August 15 of each year commencing February
15, 1997. The Discount Notes will accrete interest until August 15, 2001,
with no interest payable in cash until February 15, 2002 at an annual rate of
13 1/2%. Commencing in 2002, interest will be payable semi-annually on
February 15 and August 15 of each year until maturity.
The Subordinated Notes may not be redeemed by Chemicals prior to August 15,
2001, and from thereon through August 15, 2004, the Subordinated Notes may be
redeemed at a premium varying between 105.875% to 101.958%. Subsequent to
August 15, 2004, Chemicals may redeem the Subordinated Notes at their face
value plus accrued interest. Prior to August 15, 1999, Chemicals may redeem
in the aggregate up to 35% of the original principal amount of the
Subordinated Notes with the proceeds of one or more public equity offerings
following which there is a public market. Such redemptions may be made at a
redemption price of 111 3/4% of the face value plus accrued interest to the
redemption date. After such redemption, at least $178.8 million aggregate
principal amount of the Subordinated Notes must remain outstanding.
46
<PAGE>
The Discount Notes may not be redeemed by Holdings prior to August 15,
2001, and from thereon through August 15, 2006, the Discount Notes may be
redeemed at a premium varying between 106.75% to 101.35%. Subsequent to
August 15, 2006, the Company may redeem the Discount Notes at their Accreted
Value (as defined in the indenture) plus accrued interest. Prior to August
15, 1999, Holdings may redeem in the aggregate up to 35% of the Accreted
Value of the Discount Notes with the proceeds of one or more public equity
offerings following which there is a public market. Such redemptions may be
made at a redemption price of 113 1/2% of the face value plus accrued
interest to the redemption date. After such redemption, at least $124.6
million aggregate principal amount of the Discount Notes must remain
outstanding.
The indentures for both Subordinated Notes and Discount Notes contain
numerous financial and operating covenants, including, but not limited to,
restrictions on Chemicals' or Holdings' ability to incur indebtedness, pay
dividends, create liens, sell assets, engage in mergers and acquisitions, and
refinance existing indebtedness. In addition, the indentures includes
various circumstances that will constitute, upon occurrence and subject in
certain cases to notice and grace periods, an event of default thereunder.
The Credit Agreement and the indenture for the Subordinated Notes contain
provisions which restrict the payment of advances, loans and dividends from
Chemicals to Holdings. The most restrictive of the covenants limits such
payments during fiscal 1997 to approximately $1.6 million, plus any amounts
due to Holdings from Chemicals under the intercompany tax sharing agreement.
As of September 30, 1996, Chemicals had a deficiency in net assets of $184.3
million.
DEBT MATURITIES
The estimated remaining principal payments on the outstanding Term Loans,
Revolver, and ESOP Loan are as follows:
YEAR ENDING PRINCIPAL
SEPTEMBER 30, PAYMENTS
------------- ---------
(Dollars in Thousands)
1997...................................... $ 11,625
1998...................................... 26,625
1999...................................... 26,625
2000...................................... 31,625
2001...................................... 40,000
Thereafter................................ 220,000
--------
Total Term Loans, Revolver and ESOP Loan.. $356,500
========
5. INCOME TAXES:
A reconciliation of federal statutory income taxes to the Company's
effective tax provision (benefit) before extraordinary item follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1996 1995 1994
-------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Provision for federal income tax at the statutory rate.. $17,641 $79,855 $9,772
Foreign sales corporation............................... (700) (7,991) --
State and foreign income taxes.......................... 1,529 2,862 90
Estimated income tax settlement and other............... (1,572) 279 (740)
------- ------- ------
Effective tax provision................................. $16,898 $75,005 $9,122
======= ======= ======
</TABLE>
47
<PAGE>
The provision (benefit) for income taxes is composed of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1996 1995 1994
-------- ------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
From operations:
Current federal.... $12,084 $67,393 $18,618
Deferred federal... (3,249) 1,075 (7,809)
Deferred foreign... 7,421 3,489 (1,687)
Current state...... 642 2,947 --
Deferred state..... 101 --
------- ------- -------
Total tax provision.. $16,898 $75,005 $ 9,122
======= ======= =======
</TABLE>
The components of the Company's deferred income tax assets and liabilities
are summarized below:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
(Dollars in Thousands)
<S> <C> <C>
Assets:
Accrued liabilities......................... $10,348 $10,475
Accrued postretirement cost................. 9,544 8,719
Tax loss and credit carryforward and other.. 5,817 7,470
------- -------
Total deferred tax assets................... 25,709 26,664
------- -------
Less: current deferred income tax benefit.. 7,214 5,622
------- -------
Noncurrent deferred tax assets.............. $18,495 $21,042
======= =======
Liabilities:
Property, plant and equipment............... $61,304 $57,466
Accrued pension cost........................ 2,525 2,471
Other....................................... 1,599 1,402
------- -------
Total deferred tax liabilities.............. $65,428 $61,339
------- -------
Net deferred tax liability.................. $46,933 $40,297
======= =======
</TABLE>
The Company has approximately Cdn. $13.2 million in Canadian tax loss
carryforwards which will expire from 1999 through 2001 and approximately Cdn.
$15.1 million in Canadian tax credit carryforwards which will expire from
2000 through 2004.
6. EMPLOYEE BENEFITS:
The Company has established the following benefit plans:
RETIREMENT BENEFIT PLANS
The Company has non-contributory pension plans in the United States and
employer and employee contributory plans in Canada which cover all salaried
and wage employees. The benefits under these plans are based primarily on
years of service and employees' pay near retirement. For those Company
employees who were employed by the Company as of September 30, 1986 and were
previously employed by Monsanto, the Company recognizes their Monsanto
pension years of service for purposes of determining benefits under the
Company's plans. For those Company employees who were employed by the
Company on August 21, 1992 and were previously employed by Tenneco Inc., the
Company recognizes their Tenneco Inc. pension years of service for purposes
of determining benefits under the Company's plans. The Company's funding
policy is consistent with the funding requirements of federal law and
regulations. Plan assets consist principally of common stocks and government
and corporate securities.
48
<PAGE>
The Company has recorded its additional minimum liability in accordance
with Statement of Financial Accounting Standards No. 87 "Employers'
Accounting for Pensions." In recognizing the additional pension liability at
September 30, 1995, the Company recorded a liability of $6.1 million, an
intangible asset of $3.7 million, which is included with other assets, and a
reduction of stockholders' equity of $1.6 million, net of deferred tax of
$838,000. There were no additional pension liabilities to recognize at
September 30, 1996.
The components of pension expense for the years ended September 30, 1996,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost (for benefits earned during the period)....................... $ 3,664 $ 3,288 $ 3,386
Interest cost on projected benefit obligation.............................. 5,044 4,471 3,891
Actual return on plan assets and contributions............................. (6,001) (5,825) 617
Deferral of asset gain (loss).............................................. 1,050 1,909 (3,997)
Net amortization of unrecognized amounts................................... 926 871 848
------- -------- -------
Pension expense............................................................ $ 4,683 $ 4,714 $ 4,745
======= ======== =======
</TABLE>
Assumptions used in determining the projected benefit obligation and
pension cost for the periods were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Discount rates............................................................. 7.75% 7.5% 8.0%
Rates of increase in salary compensation level............................. 5.5% 5.5% 5.5%
Expected long-term rate of return on assets................................ 9.0% 9.0% 9.0%
</TABLE>
The funded status of the Company's pension plans for which assets exceed
accumulated benefits and plans for which accumulated benefits exceed
assets as of the actuarial valuation dates of August 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefits based on service
to date and present pay levels:
Vested benefit obligation.................................................. $52,053 $ 525 $ 26,222 $21,743
Non-vested benefit obligation.............................................. 2,064 2 1,029 1,293
Accumulated benefit obligation............................................. 54,117 527 27,251 23,036
Plan assets at fair value.................................................. 65,443 -- 33,540 21,134
Plan assets in excess of (less than) accumulated
benefit obligation........................................................ 11,326 (527) 6,289 (1,902)
Additional amounts related to projected salary
increases................................................................. 16,568 177 16,431 658
Plan assets less than total projected benefit
obligation................................................................ (5,242) (704) (10,142) (2,560)
Unrecognized net (gain) loss resulting from plan
experience and changes in actuarial assumptions........................... 3,688 (107) 5,995 2,579
Unrecognized prior service cost............................................ 3,376 -- 2 3,689
Unrecognized transition obligation......................................... 2,486 7 2,716 156
Prepaid (accrued) pension cost before additional
minimum liability......................................................... 4,308 (804) (1,429) 3,864
Additional minimum liability............................................... -- -- -- (6,127)
Total prepaid (accrued) pension obligation................................. $ 4,308 $ (804) $ (1,429) $(2,263)
</TABLE>
49
<PAGE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care benefits and life insurance
benefits for retired employees. Substantially all of the Company's employees
become eligible for these benefits at normal retirement age. The Company
accrues the cost of these benefits during the period in which the employee
renders the necessary service.
Health care benefits are provided to employees who retire from the Company
with ten or more years of service except for Canadian employees covered by
collective bargaining agreements. All of the Company's employees are
eligible for postretirement life insurance. Postretirement health care
benefits for U.S. employees are provided for under a contributory,
comprehensive plan while all other plans are non-contributory. Benefit
provisions for most hourly and some salaried employees are subject to
collective bargaining. In general, the plans stipulate that retiree health
care benefits are paid as covered expenses are incurred. For U.S. employees,
postretirement medical plan deductibles are assumed to increase at the rate
of the long-term consumer price index. The components of postretirement
benefits cost other than pensions for the years ended September 30, 1996,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost (for benefits earned during the period).. $1,155 $1,084 $1,064
Interest cost on projected benefit obligation......... 1,985 1,835 1,688
Amortization of plan amendments....................... 243 29 29
------ ------ ------
$3,383 $2,948 $2,781
====== ====== ======
</TABLE>
Actuarial assumptions used to determine fiscal years 1996, 1995 and 1994
costs and benefit obligations for postretirement benefit plans other than
pensions include an average discount rate of 7.5% and an average rate of
future increases in benefit compensation of 5.5%. The assumed composite rate
of future increases in per capita cost of health care benefits (health care
cost trend rate) was 7.8% for fiscal 1996, exclusive of demographic changes,
decreasing gradually to 5.5% by the year 2028.
These trend rates reflect current cost performance and the Company's
expectation that future rates will decline. Increasing the health care cost
trend rate by one percentage point would increase the accumulated
postretirement benefit obligation by $1.5 million and would increase annual
aggregate service and interest costs by $187,000.
The following sets forth the plan's funded status reconciled with amounts
reported in the Company's consolidated balance sheet at September 30, 1996
and 1995.
Accumulated postretirement benefit obligation (APBO):
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Dollars in Thousands)
<S> <C> <C>
Retirees.................................. $ 7,896 $ 7,315
Fully eligible active plan participants... 8,301 7,690
Other active plan participants............ 12,906 11,956
------- -------
Total APBO.............................. 29,103 26,961
Plan assets at fair value................. -- --
Unrecognized loss......................... (1,737) (1,987)
Unrecognized prior service cost........... (223) (252)
------- -------
Accrued postretirement benefit liability.. $27,143 $24,722
======= =======
</TABLE>
POSTEMPLOYMENT BENEFITS
During the first quarter of fiscal 1993, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" ("SFAS 112"). SFAS 112 requires
accrual accounting for benefits provided to former or inactive employees
after employment but before retirement. The Company implemented the
provisions of SFAS 112 in fiscal 1995 and the effect of adoption on the
Company's financial position and results of operations was not material.
50
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN 250,000 SHARES
In fiscal 1996, the Company established the 1996 Employee Stock Purchase
Plan. This plan authorized up to 250,000 shares of common stock to be issued
to key employees and management at an issue price of $12 per share. This
plan became effective as of September 19, 1996 and terminated on September
30, 1996. All authorized shares were issued by the end of fiscal 1996.
EMPLOYEE STOCK OWNERSHIP TRUST
The original Employee Stock Ownership Trust ("old ESOT") was formed to
invest primarily in the Company's common stock and includes only participants
contributing to the Company's Savings and Investment Plan (the "Savings
Plan"). The Company's contribution to the old ESOT was 60% of the
participant's Savings Plan contributions to the extent that such
participant's contributions did not exceed 7.5% of the employee's eligible
earnings. The Company's contributions were subject to a 20% per year vesting
schedule commencing after one year of service. The Company's contributions
to the old ESOT for the years ended September 30, 1996, 1995 and 1994 were
$1.7 million per year.
An application for determination has been filed with the Internal Revenue
Service to terminate the old ESOT and distribute assets to participants.
In connection with the Merger, a new Employee Stock Ownership Trust ("new
ESOT") was established which will cover substantially all employees. The
new ESOT primarily invests in shares of Holdings' common stock and has
borrowed $6.5 million from Chemicals pursuant to the Chemicals ESOP Loan to
purchase approximately 542,000 shares of Holdings' common stock. As more
fully described in Note 4, the ESOP Loan is payable in 16 quarterly
installments during the period beginning December 31, 1996 and ending
September 30, 2000. The shares of Holdings' common stock purchased by the
ESOT has been pledged as security for the ESOP Loan and such shares will be
released and allocated to the ESOT participants' account as the ESOP Loan is
discharged. Until the ESOP Loan is paid in full, contributions to the ESOT
will be used to pay the outstanding principal and interest on the ESOP Loan.
Allocations will be made annually to participants.
SAVINGS AND INVESTMENT PLAN
The Savings Plan covers substantially all employees, including executive
officers. The Savings Plan is qualified under Section 401(k) of the Internal
Revenue Code (the "Code"). Each participant has the option to defer taxation
of a portion of his or her earnings by directing the Company to contribute a
percentage of such earnings to the Savings Plan. A participant may direct up
to a maximum of 15% of eligible earnings to the Savings Plan, subject to
certain limitations set forth in the Code for "highly compensated"
participants, as defined in Section 414(q) of the Code. A participant's
contributions become distributable upon the termination of his or her
employment.
PROFIT SHARING PLANS
The Company is currently planning the establishment of new profit sharing
plans for the benefit of salaried and hourly employees meeting certain
eligibility requirements. Under the Company's previous profit sharing plans,
expense for the years ended September 30, 1996, 1995 and 1994 was $2.8
million, $13.0 million and $3.8 million, respectively.
51
<PAGE>
OMNIBUS STOCK AND INCENTIVE PLAN
The Company had an Omnibus Stock and Incentive Plan ("Omnibus Plan"), under
which the Company could grant to key employees incentive and nonincentive
stock options, stock appreciation rights, restricted stock, performance units
and performance shares. The terms and amounts of the awards were determined
by the Compensation Committee of the Board of Directors. Upon a change of
control of the Company, all awards granted under the plan were to become
fully vested and all performance based awards were to be paid at the higher
of performance goals or actual performance to date. 3,000,000 shares of the
Company's stock were reserved under the plan when it was established. At
September 30, 1995, 263,000 shares had been issued.
In fiscal 1993, the Company granted SARs to certain key employees and
directors. Total expense (benefit) is determined based on 3.6 million SARs
granted, the vesting period (five years beginning September 1992) and the
appreciation of the Company's stock price above $4 per share, which was the
fair market value of the Company's common stock on the date of grant of the
SARs. In October 1994, the Company amended the SAR program by modifying the
vesting periods and limiting the amount of appreciation for each SAR during
each vesting period, thereby limiting the Company's aggregate future
expenses. The Company recorded expense (benefit) for the years ended
September 30, 1996, 1995 and 1994 of 8.5 million, $(2.8) million and $21.8
million, respectively, and paid $8.3 million in October 1994, $5.8 million in
September 1995 and $13.8 million in August 1996 pursuant to the SARs, as
amended. The expense (benefit) for the SARs is included in selling, general
and administrative expenses in the Company's income statement.
In fiscal 1995, the Company granted 82,500 stock options to certain
officers of the Company with an exercise price of $13.50 per share. The
options were exercisable from the third through the tenth anniversary of the
date of the grant. All existing stock options were terminated in connection
with the Merger.
Upon consummation of the Merger, the Omnibus Plan was terminated. However,
the Company is expected to establish a new stock option plan.
7. COMMITMENTS AND CONTINGENCIES:
PRODUCT CONTRACTS
The Company has certain long-term agreements which provide for the
dedication of 100% of the Company's production of acetic acid, plasticizers,
TBA and sodium cyanide, each to one customer. The Company also has various
sales and conversion agreements which dedicate significant portions of the
Company's production of styrene monomer and acrylonitrile to various
customers. These agreements generally provide for cost recovery plus an
agreed margin or element of profit based upon market price.
LEASE COMMITMENTS
The Company has entered into various long-term noncancellable operating
leases. Future minimum lease commitments at September 30, 1996 are as
follows: fiscal 1997 -- $2.5 million; fiscal 1998 -- $2.4 million; fiscal
1999 -- $2.2 million; fiscal 2000 -- $2.1 million; fiscal 2001 -- $1.3
million; and $4.9 million thereafter. Rent expense for fiscal years 1996,
1995 and 1994 was not material.
ENVIRONMENTAL AND SAFETY MATTERS
The Company's operations involve the handling, production, transportation
and disposal of materials classified as hazardous or toxic and are
extensively regulated under environmental and health and safety laws.
Operating permits which are required for the Company's operations are subject
to periodic renewal and may be revoked or modified for cause.
52
<PAGE>
New laws or permit requirements and conditions may affect the Company's
operations, products or waste disposal. Past or future operations may result
in claims or liabilities. Expenditures could be required to upgrade
wastewater collection, pretreatment or disposal systems or other matters.
The Company routinely incurs expenses associated with hazardous substance
management and pollution prevention in ongoing operations. These operating
expenses include items such as depreciation on its waste treatment
facilities, outside waste management, fuel, electricity and salaries. The
amounts of these operating expenses were approximately $47 million and $45
million for fiscal years 1996 and 1995, respectively. The Company does not
anticipate a material increase in these types of expenses during fiscal 1997.
The Company considers these types of environmental expenditures normal
operating expenses and includes them in cost of goods sold.
At its Texas City Plant, the Company has reduced emissions of targeted
chemicals 71% from 1987 levels under the EPA's voluntary 33/50 program.
These reductions included a 95% reduction in hydrogen cyanide emissions and
an 83% reduction in benzene emissions. Additionally, the Company will
initiate appropriate actions or preventive projects necessary to insure that
the facility continues to operate in a safe and environmentally responsible
manner. No assurances can be given that the Company will not incur material
environmental expenditures associated with its facilities, operations or
products.
The Company's sodium chlorate market is sensitive to potential
environmental regulations. In general, environmental regulations support
substitution of chlorine dioxide, which is produced from sodium chlorate, for
elemental chlorine in the pulp bleaching process. Certain environmental
groups are encouraging passage of regulations which restrict the amount of
Absorbable Organic Halides (AOX) or chlorine derivatives in bleach plant
effluent. Increased substitution of chlorine dioxide for elemental chlorine
in the pulp bleaching process significantly reduces the amount of AOX and
chlorine derivatives in bleach plant effluent. As long as there is not an
outright ban on chlorine-containing compounds, regulations restricting AOX or
chlorine derivatives in bleach plant effluent should favor the use of
chlorine dioxide, thus sodium chlorate. Any significant ban on all chlorine-
containing compounds could have a material adverse effect on the Company's
financial condition and results of operations.
British Columbia has a regulation in place that would effectively eliminate
the use of chlorine dioxide in the bleaching process by the year 2002. The
pulp and paper industry is working to change this regulation and believes
that the ban of chlorine dioxide in the bleaching process will yield no
measurable environmental or public health benefit. The Company is not aware
of any other laws or regulations currently in place which would restrict the
use of the product.
LEGAL PROCEEDINGS
PETROCHEMICALS
HUNTSMAN LAWSUIT: On January 30, 1995, the Company filed a lawsuit against
Huntsman Chemical Corporation and certain affiliates seeking a declaratory
judgment in connection with an alleged agreement arising from discussions,
previously suspended by the Company, relating to possible future capacity
rights for a significant portion of the Company's styrene monomer unit at its
Texas City Plant. In the lawsuit, the Company requested a judicial
determination that, among other things, there was no enforceable agreement
between the Company and any of the defendants. In response, the defendants
filed a counterclaim demanding a jury trial and asserting that a contractual
agreement existed, that the Company breached the alleged agreement, and that
as a result the defendants incurred an unspecified amount of "massive
damages". Subsequently, the Company filed a motion for summary judgment.
On November 30, 1995, the trial court granted the Company's motion for
summary judgment establishing that as a matter of law, no enforceable
contract or agreement ever existed between the Company and the defendants.
The court's order of summary judgment also moots the defendants' counterclaim
against the Company for damages resulting from breach of the alleged
contract. The defendants have appealed from that judgment. The Company
53
<PAGE>
and the defendants have filed their principal briefs before the Court of
Appeals, but oral argument has not been set and the Court of Appeals has not
rendered any decision.
The Company believes a loss with respect to this matter is not probable and
is unable to quantify a reasonably possible loss estimate (as defined in
Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies") at this time.
ALLEMAND LAWSUIT: On June 19, 1995, a lawsuit was filed against the
Company and several other corporate defendants asserting personal injury and
mental anguish resulting from an incident occurring on June 16, 1995 in which
a hose being used to unload a barge of sulfuric acid at the Company's Texas
City Plant ruptured, spraying sulfuric acid on an employee of Marine Fueling
Service, Inc. ("Marine Fueling"). The plaintiffs' claims against the Company
in this lawsuit have been settled. The Company, however, remains a defendant
in the lawsuit by virtue of a maritime law cross-claim asserted by Marine
Fueling against the Company and the other defendants in the lawsuit for
recovery of a portion of the settlement money Marine Fueling previously paid
to the plaintiffs. The amount sought in Marine Fueling's claim against the
Company is not a material amount.
AMMONIA RELEASE LAWSUITS: On May 8, 1994, an ammonia release occurred at
the Company's Texas City Plant while a reactor in the acrylonitrile unit was
being restarted after a shutdown for routine maintenance. A total of 52
lawsuits and interventions, involving approximately five thousand five
hundred plaintiffs, have been filed against the Company seeking an
unspecified amount of money for alleged damages from the ammonia release.
Many of these lawsuits were filed in April and early May 1996, presumably in
anticipation of the expiration of the two-year statute of limitations
applicable to this release.
Approximately two thousand six hundred of the plaintiffs agreed to submit
their damage claims to binding arbitration. Each of the plaintiffs who
agreed to participate in the arbitration waived any right of recovery for
punitive or exemplary damages. Pursuant to the agreement to arbitrate, a
two-week evidentiary proceeding was conducted in July 1996 before a three
judge panel which will make a determination of the amount of damages.
Currently, the Company anticipates that the results of this arbitration will
be rendered in early February 1997.
The Company continues to vigorously defend the claims of the approximately
two thousand nine hundred plaintiffs who did not participate in the July 1996
arbitration.
OTHER LAWSUITS. The Company is subject to various other claims and legal
actions that arise in the ordinary course of its business.
LITIGATION CONTINGENCY
In accordance with Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies" and Financial Accounting Standards Board
Interpretation No. 39 "Offsetting of Amounts Related to Certain Contracts",
the Company has made estimates of the reasonably possible range of liability
with regard to its outstanding litigation for which it may incur liability.
These estimates are based on the Company's judgments using currently
available information as well as consultation with the Company's insurance
carriers and outside legal counsel. A number of the claims in these
litigation matters are covered by the Company's insurance policies or by
third-party indemnification of the Company. The Company therefore has also
made estimates of its probable recoveries under insurance policies or from
third-party indemnitors based on its understanding of its insurance policies
and indemnifications, discussions with its insurers and indemnitors and
consultation with outside legal counsel, in addition to the Company's
judgments. Based on the foregoing as of September 30, 1996, the Company has
accrued approximately $16.0 million as its estimate of aggregate contingent
liability for these matters, and has also recorded aggregate receivables from
its insurers and third-party indemnitors of approximately $15.6 million. In
addition, the Company estimates that at present, the reasonably possible
range of loss is from $0 to $44.8 million. The Company believes that it is
insured or indemnified for this additional reasonably possible loss, except
for a portion which is not material.
54
<PAGE>
While the Company has based its estimates on its evaluation of available
information to date and the other matters described above, much of the
litigation remains in the discovery stage and it is impossible to predict
with certainty the ultimate outcome. The Company will adjust its estimates
as necessary as additional information is developed and evaluated. However,
the Company believes that the final resolution of these contingencies will
not have a material adverse impact on the financial position, results of
operations, or cash flows of the Company.
The timing of probable insurance and indemnity recoveries, and payment of
liabilities, if any, is not expected to have a material adverse effect on the
financial position, results of operations, or cash flows of the Company.
55
<PAGE>
8. SEGMENT AND GEOGRAPHIC INFORMATION:
Sales to individual customers constituting 10% or more of total revenues
and sales by geographic region were as follows (there were no sales to
individual customers constituting 10% or more of total revenues in fiscal
1996):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1996 1995 1994
--------- ----------- ---------
(Dollars in Thousands)
<S> <C> <C> <C>
Major Customers:
British Petroleum plc and subsidiaries.......................................... * $ 169,944 $103,637
Mitsubishi International Corporation............................................ * $ 129,812 $ 69,920
Export Sales:
Export revenues................................................................. $267,153 $ 534,067 $324,930
Percentage of total revenues.................................................... 34% 52% 46%
Export revenues (as a percent of total exports) by geographical area:
Asia........................................................................... 66% 64% 80%
Europe......................................................................... 34% 36% 16%
Other.......................................................................... - - 4%
</TABLE>
*DOES NOT COMPRISE 10% OF TOTAL REVENUE FOR 1996 AND, THEREFORE, NOT REPORTED.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
-------- ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Geographic Segment Information:
Revenues:
United States................................................................. $633,754 $ 886,247 $578,295
Canada........................................................................ 156,711 143,951 122,545
-------- ---------- --------
Total........................................................................... $790,465 $1,030,198 $700,840
Income before taxes and extraordinary item:
United States................................................................. $ 27,540 $ 210,320 $ 27,106
Canada........................................................................ 22,862 17,838 1,148
-------- ---------- --------
Total........................................................................... $ 50,402 $ 228,158 $ 28,254
Net Income:
United States................................................................. $ 18,330 $ 140,382 $ 17,979
Canada........................................................................ 13,274 9,667 1,153
-------- ---------- --------
Total........................................................................... $ 31,604 $ 150,049 $ 19,132
Assets:
United States................................................................. $457,273 $ 405,324 $376,594
Canada........................................................................ 232,411 204,615 204,331
-------- ---------- --------
Total........................................................................... $689,684 $ 609,939 $580,925
Selling, general and administrative expenses:
United States................................................................. $ 14,570 $ 14,535 $ 10,232
Canada........................................................................ 17,195 17,088 14,075
SARs.......................................................................... 8,540 (2,767) 21,843
-------- ---------- --------
Total........................................................................... $ 40,305 $ 28,856 $ 46,150
</TABLE>
56
<PAGE>
9. FINANCIAL INSTRUMENTS
FOREIGN EXCHANGE
The Company enters into forward foreign exchange contracts to hedge
Canadian dollar currency transactions on a continuing basis for periods
consistent with its committed exposures. The forward foreign exchange
contracts have varying maturities with none exceeding 18 months. The Company
makes net settlements of U.S. dollars for Canadian dollars at rates agreed to
at inception of the contracts.
The Company enters into forward foreign exchange contracts to reduce risk
due to Canadian dollar exchange rate movements. The Company does not engage
in currency speculation. The Company had a notional amount of approximately
$30 million and $26 million of forward foreign exchange contracts outstanding
to buy Canadian dollars at September 30, 1996 and 1995, respectively. The
deferred gain on these forward foreign exchange contracts at September 30,
1996 and 1995 was immaterial.
CONCENTRATION OF CREDIT RISK
The Company sells its products primarily to companies involved in the
petrochemical and pulp and paper manufacturing industries. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral for accounts receivable. However, letters of credit are
required by the Company on many of its export sales. The Company's credit
losses have been minimal.
The Company maintains cash deposits with major banks which from time to
time may exceed federally insured limits. The Company periodically assesses
the financial condition of the institutions and believes that any possible
loss is minimal.
INVESTMENTS
It is the policy of the Company to invest its excess cash in investment
instruments or securities whose value is not subject to market fluctuations
such as certificates of deposit, repurchase agreements, or Eurodollar
deposits with domestic or foreign banks or other financial institutions.
Other permitted investments include commercial paper of major U.S.
corporations with ratings of A1 by Standard & Poor's Ratings Group or P1 by
Moody's Investor Services, Inc., loan participation of major U.S.
corporations with a short term credit rating of A1/P1 and direct obligations
of the U.S. Government or its agencies. In addition, not more than $5
million will be invested with any single bank, financial institution, or U.S.
corporation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At September 30, 1996, the fair market value of all of the Company's
financial instruments approximated the book value, except as stated below.
Book Value Fair Value
---------- ----------
(Dollars in Thousands)
Discount Notes $ 94,757 $121,302
Subordinated Notes 275,000 289,273
The fair values of the Discount Notes and the Subordinated Notes are based
on quoted market prices.
57
<PAGE>
10. RELATED PARTY TRANSACTIONS
In connection with the Merger, the Company paid TSG and Unicorn one-time
transaction fees of approximately $8.4 million and $4.4 million,
respectively. Investment banking fees of approximately $3.3 million were
paid to Lazard Freres & Company ("Lazard"). A member of the former Board of
Directors is a Limited Managing Director of Lazard. However, the Board
member agreed not to receive any compensation from Lazard related to the
Merger.
Also in connection with the Merger, CS First Boston Corporation served as
managing underwriter for the Public Offering and provided certain financial
advisory services to STX Acquisition and Chemicals, for which such firm
received underwriting discounts and commissions and financial advisory fees
totaling approximately $20 million. John L. Garcia, a director and
stockholder of the Company, is a Managing Director of CS First Boston
Corporation.
Koch Capital Services, Inc. formerly known as Koch Equities, Inc., a
subsidiary of Koch Industries, Inc. ("Koch Industries") owns approximately 9%
of the outstanding capital stock of Holdings. The Company and affiliates of
Koch Industries have ongoing commercial relationships, including, from time
to time, supply of raw materials or sales of petrochemicals. For fiscal
1996, sales to and purchases from Koch Industries and its affiliates
represented less than 1% of the Company's revenues.
58
<PAGE>
STERLING CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Notes to the Company's Consolidated Financial
Statements are incorporated herein by reference insofar as they relate to
Chemicals.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH FLOWS
On August 21, 1996, Holdings transferred all of its operating assets and
liabilities (net $422.8 million) to Chemicals. At the same time, Chemicals
transferred $610 million in cash to Holdings.
INCOME TAXES
Chemicals is included in the consolidated Federal tax return filed by its
parent, Holdings. A tax sharing agreement between Holdings and Chemicals
defines the computation of Chemicals' obligations to Holdings. Chemicals'
provision for income taxes is computed as if Chemicals and its subsidiaries
file their annual tax return on a separate company basis. Deferred income
taxes are recorded to reflect the tax effect of the temporary differences
between the financial reporting basis and the tax basis of Chemicals' assets
and liabilities at enacted rates.
EARNINGS PER SHARE
All issued and outstanding shares of Chemicals are held by Holdings, and
accordingly, earnings per share are not computed.
2. INCOME TAXES
A reconciliation of federal statutory income taxes to Chemicals' effective
tax provision (benefit) before extraordinary item follows:
<TABLE>
<CAPTION>
PERIOD FROM MAY 14, 1996
-------------------------
TO SEPTEMBER 30, 1996
-------------------------
(Dollars in Thousands)
<S> <C>
Provision for federal income tax at the statutory rate.................. $ 195
Foreign sales corporation............................................... (116)
State and foreign income taxes.......................................... 115
Other................................................................... 190
-------
Effective tax provision................................................. $ 384
=======
</TABLE>
The provision (benefit) for income taxes is composed of the following:
<TABLE>
<CAPTION>
PERIOD FROM MAY 14, 1996
-------------------------
TO SEPTEMBER 30, 1996
-------------------------
(Dollars in Thousands)
<S> <C>
From operations:
Current federal........................................................ $(1,001)
Deferred federal....................................................... 1,457
Deferred foreign....................................................... 90
Current state.......................................................... (162)
-------
Total tax provision.................................................... $ 384
=======
</TABLE>
59
<PAGE>
The components of Chemicals' deferred income tax assets and liabilities are
summarized below:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
(Dollars in Thousands)
<S> <C>
Assets:
Accrued liabilities......................... $ 9,803
Accrued postretirement cost................. 9,544
Tax loss and credit carryforward and other.. 5,817
-------
Total deferred tax assets................... 25,164
-------
Less: current deferred income tax benefit.. 7,214
-------
Noncurrent deferred tax assets.............. $17,950
=======
Liabilities:
Property, plant and equipment............... $61,304
Accrued pension cost........................ 2,525
Other....................................... 1,599
-------
Total deferred tax liabilities.............. $65,428
-------
Net deferred tax liability.................. $47,478
=======
</TABLE>
Chemicals has approximately Cdn. $13.2 million in Canadian tax loss
carryforwards which will expire from 1999 through 2001 and approximately Cdn.
$15.1 million in Canadian tax credit carryforwards which will expire from
2000 through 2004.
60
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Sterling Chemicals Holdings,
Inc.
We have audited the consolidated balance sheet of Sterling Chemicals
Holdings, Inc. and subsidiaries as of September 30, 1996, and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency in assets) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sterling
Chemicals Holdings, Inc. and subsidiaries as of September 30, 1996 and the
consolidated results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
December 6, 1996
Houston, Texas
61
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of Sterling Chemicals, Inc.
We have audited the consolidated balance sheet of Sterling Chemicals, Inc.
and subsidiaries as of September 30, 1996, and the related consolidated
statements of operations, changes in stockholders' equity (deficiency in
assets) and cash flows for the period from May 14, 1996 (date of
incorporation) to September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sterling
Chemicals, Inc. and subsidiaries as of September 30, 1996 and the
consolidated results of their operations and their cash flows for the period
from May 14, 1996 (date of incorporation) to September 30, 1996 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
December 6, 1996
Houston, Texas
62
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Sterling Chemicals Holdings,
Inc.
We have audited the consolidated balance sheet of Sterling Chemicals
Holdings, Inc. (formerly Sterling Chemicals, Inc.) and subsidiaries as of
September 30, 1995, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for each of two years in the
period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sterling
Chemicals Holdings, Inc. and subsidiaries as of September 30, 1995 and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended September 30, 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
October 25, 1995
Houston, Texas
63
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the preparation and content of the financial
statements and other information included in this annual report. The
financial statements have been prepared in conformity with generally accepted
accounting principles appropriate under the circumstances to reflect, in all
material respects, the substance of events and transactions that should be
included. The financial statements reflect management's judgments and
estimates as to the effects of events and transactions that are accounted for
or disclosed.
Management maintains accounting systems which are supported by internal
accounting controls that provide reasonable assurance that assets are
safeguarded and that transactions are executed in accordance with
management's authorization and recorded properly to permit the preparation of
financial statements in accordance with generally accepted accounting
principles. The concept of reasonable assurance is based on the recognition
that the cost of a system of internal accounting controls should not exceed
the benefits. Internal audits have been conducted to test compliance with
internal controls. Results of audit efforts and actions are communicated to
appropriate members of management and to the Audit Committee of the Board of
Directors.
Deloitte & Touche LLP and Coopers & Lybrand LLP performed a separate
independent audit of the Company's financial statements for fiscal years 1996
and 1995, respectively, for the purpose of determining that the statements
are presented fairly and in accordance with generally accepted accounting
principles. The independent auditors are appointed by the Board of Directors
and meet regularly with the Audit Committee of the Board. The Audit
Committee of the Board of Directors is composed solely of outside directors.
The Audit Committee meets periodically with the Company's senior officers and
independent accountants to review the adequacy and reliability of the
Company's accounting, financial reporting and internal controls.
Robert W. Roten
President and Chief Executive Officer
Jim P. Wise
Vice President - Finance and Chief Financial Officer
December 6, 1996
64
<PAGE>
STERLING CHEMICALS HOLDINGS, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL FIRST SECOND THIRD FOURTH
YEAR QUARTER QUARTER QUARTER QUARTER
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues 1996 $191,542 $190,879 $218,371 $189,673
1995 240,622 303,954 298,491 187,131
Gross Profit 1996 29,395 29,398 33,250 19,383
1995 48,354 93,530 103,504 26,230
Income (loss) before extraordinary item 1996 12,787 6,427 16,420 (2,130)
1995 22,259 56,077 59,767 15,050
Net income (loss) 1996 12,787 6,427 16,420 (4,030)
1995 22,259 56,077 56,663 15,050
Per Share Data:
Income (loss) before extraordinary item 1996 $ .23 $ .12 $ .29 $ (.06)
1995 .40 1.01 1.08 .27
Net income (loss) 1996 .23 .12 .29 (.11)
1995 .40 1.01 1.02 .27
Cash dividends per common share 1996 -- -- -- --
1995 -- -- -- --
Price range of common stock 1996 High 9 1/4 13 13 1/8 12 1/2
1996 Low 7 1/2 8 11 1/8 10 7/8
1995 High 13 7/8 14 13 12 7/8
1995 Low 9 3/4 10 7/8 10 1/4 8 1/4
</TABLE>
There is no established public trading market for the Holdings' Common
Stock, although the Common Stock is traded on the OTC Electronic Bulletin
Board under the symbol "STXX". Prior to the Merger, the Common Stock was
listed on the New York Stock Exchange ("NYSE") under the symbol "STX". The
table above sets forth the price range of the Common Stock during the fiscal
years ended September 30, 1996 and September 30, 1995. Information for the
fourth quarter of fiscal 1996 reflects high and low sales prices on the NYSE
for the period of July 1 through August 21, and high and low sales price
information as reported on the OTC Electronic Bulletin Board maintained by
the National Association of Securities Dealers, Inc. ("NASD") for the period
of August 22 through September 30.
As of September 30, 1996, there were approximately 280 record holders of
the Common Stock.
Holdings has not paid dividends on the Common Stock in any of the last
three fiscal years and does not anticipate paying dividends in the
foreseeable future. Any future determination as to the payment of dividends
will be made at the discretion of the Board of Directors of Holdings and will
depend upon the Company's operating results, financial condition, capital
requirements, general business conditions and such other factors that the
Board of Directors deems relevant. In addition, the payment of dividends on
the Common Stock is restricted by the terms of the indenture governing the
Discount Notes and indirectly restricted by the terms of the Chemicals Credit
65
<PAGE>
Agreement and the indenture governing the Subordinated Notes which restrict
the ability of Chemicals to transfer funds to Holdings.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Termination of Coopers & Lybrand L.L.P. On October 25, 1995, the Audit
Committee of the Board of Directors of the Company recommended and the Board
of Directors of the Company approved the engagement of the firm of Arthur
Andersen LLP ("Andersen") as its independent auditors for the year ending
September 30, 1996, to replace the firm of Coopers & Lybrand L.L.P.
("Coopers"). The termination by the Company of the engagement of Coopers was
effective upon the completion of the audit for the year ended September 30,
1995, and the filing of the Company's Annual Report on Form 10-K for such
year. The appointment of Andersen as the Company's independent auditors for
the fiscal year ending September 30, 1996 was ratified by the stockholders at
the 1996 Annual Meeting of Stockholders.
During the two previous fiscal years and the subsequent period through
December 18, 1995, the date of filing of the Company's Annual Report on Form
10-K, there were no disagreements with Coopers on any matter of accounting
principles or practices, financial statement disclosure, or audit scope or
procedures, which disagreements, if not resolved to their satisfaction, would
have caused them to make reference in connection with their report to the
subject matter of the disagreement.
During the two previous fiscal years and the subsequent period through
December 18, 1995, the date of filing of the Company's Annual Report on Form
10-K, the Company was not advised by Coopers of any of the reportable events
listed in Item 304(a)(1)(v)(A) through (D) of SEC Regulation S-K and during
such period of the Company did not consult with Andersen regarding any matter
referenced under Item 304(a)(2) of the SEC Regulation S-K.
The audit reports of Coopers on the consolidated financial statements of
the Company as of and for the fiscal years ended September 30, 1995 and 1994,
did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting
principles, except for an explanatory paragraph noting that the Company
changed its method of accounting for income taxes effective October 1, 1993.
The Company requested that Coopers furnish a letter addressed to the SEC
stating whether Coopers agreed with the above statements. A copy of the
Coopers letter to the SEC stating that such firm agreement with the above
statements, dated December 18, 1995, was filed as Exhibit 16 to the Company's
Form 8-K, dated December 18, 1995.
Resignation of Arthur Andersen LLP. On August 21, 1996, Andersen resigned
effective immediately in connection with the Merger. The Company engaged
Deloitte & Touche LLP ("Deloitte") as its independent auditors for the fiscal
year ended September 30, 1996. Deloitte served as independent auditors of
STX Acquisition prior to the Merger.
Andersen did not perform an audit of the Company's financial statements for
any period. During the period of the engagement of Andersen, there were no
disagreements with Andersen on any matter of accounting principles or
practices or financial statement disclosure. The Company has not been
advised by Andersen of any of the reportable events listed in Item
304(a)(1)(v)(A) through (D) of Regulation S-K.
The Company requested that Andersen furnish a letter, addressed to the SEC,
stating whether Andersen agreed with the above statements. A copy of the
letter of Andersen to the SEC stating that such firm agreed with the above
statements, dated August 28, 1996, was filed as Exhibit 16.1 to the Company's
Form 8-K, dated August 21, 1996.
66
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information beginning on page 4 and the information beginning on page
18 of the Proxy Statement for the Company's 1997 Annual Meeting of
Stockholders is incorporated herein by reference in response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information beginning on page 7 of the Proxy Statement for the
Company's 1997 Annual Meeting of Stockholders is incorporated herein by
reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information beginning on page 16 of the Proxy Statement for the
Company's 1997 Annual Meeting of Stockholders is incorporated herein by
reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information beginning on page 12 of the Proxy Statement for the
Company's 1997 Annual Meeting of Stockholders is incorporated herein by
reference in response to this item.
67
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. Consolidated Financial Statements
<TABLE>
<CAPTION>
PAGE OF
THIS 10-K
---------
<S> <C>
Sterling Chemicals Holdings, Inc. Consolidated
Statements of Operations for the fiscal years
ended September 30, 1996, 1995 and 1994............ 33
Sterling Chemicals Holdings, Inc. Consolidated
Balance Sheet as of September 30, 1996 and 1995.... 34
Sterling Chemicals Holdings, Inc. Consolidated
Statement of Changes in Stockholders' Equity
(Deficiency in Assets) for the fiscal years ended
September 30, 1996, 1995 and 1994.................. 35
Sterling Chemicals Holdings, Inc. Consolidated
Statement of Cash Flows for the fiscal years ended
September 30, 1996, 1995 and 1994.................. 36
Sterling Chemicals, Inc. Consolidated Statement of
Operations for the period from May 14, 1996 to
September 30, 1996................................. 37
Sterling Chemicals, Inc. Consolidated Balance Sheet
as of September 30, 1996........................... 38
Sterling Chemicals, Inc. Consolidated Statement of
Changes in Stockholders' Equity (Deficiency in
Assets) for the period from May 14, 1996 to
September 30, 1996................................. 39
Sterling Chemicals, Inc. Consolidated Statement of
Cash Flows for the period from May 14, 1996 to
September 30, 1996................................. 40
Notes to Consolidated Financial Statements........... 41
Reports of Independent Accountants................... 61
Report of Management................................. 64
</TABLE>
2. All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission are not required under the related
instruction or are inapplicable and, therefore, have been omitted.
68
<PAGE>
3. Exhibits
The following exhibits are filed as part of this Form 10-K:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
2.1 --Amended and Restated Agreement and Plan of Merger between STX
Acquisition Corp. and Sterling Chemicals, Inc. dated as of
April 24, 1996, incorporated by reference from the Company's
Current Report on Form 8-K dated April 24, 1996 as amended by Form
8-K/A.
**3.1 --Restated Certificate of Incorporation of Sterling Chemicals
Holdings, Inc.
**3.2 --Certificate of Incorporation of Sterling Chemicals, Inc., as
amended.
**3.3 --Restated Bylaws of Sterling Chemicals Holdings, Inc.
3.4 --Bylaws of Sterling Chemicals, Inc., incorporated by reference from
Exhibit 3.4 to the Registration Statement on Form S-1 of STX
Acquisition Corp. and STX Chemicals Corp.
(Registration No. 333-04343).
4.1 --Form of Warrant Agreement, incorporated by reference from Exhibit
4.4 to the Registration Statement on Form S-1 of STX Acquisition
Corp. and STX Chemicals Corp. (Registration No. 333-04343).
4.2 --Form of Indenture governing the 13 1/2% Senior Secured Discount
Notes Due 2008 of the Company, incorporated by reference from
Exhibit 4.5 to the Registration Statement on Form S-1 of STX
Acquisition Corp. and STX Chemicals Corp. (Registration
No. 333-04343).
4.3 --Form of Indenture governing the 11 3/4% Senior Subordinated Notes
Due 2006 of Sterling Chemicals, Inc. (formerly known as STX
Chemicals Corp.), incorporated by reference from Exhibit 4.7 to the
Registration Statement on Form S-1 of STX Acquisition Corp. and STX
Chemicals Corp. (Registration No. 333-04343).
4.4 --Credit Agreement among Sterling Chemicals, Inc. (formerly known as
STX Chemicals Corp.), Texas Commerce Bank as Agent, Credit Suisse
and Chase Securities, Inc. as co-arrangers and the lenders named
therein, incorporated by reference from Exhibit (a) to the
Company's Schedule 13E-3, Commission File No. 5-40034.
4.5 --Stockholders Agreement, incorporated by reference from Exhibit 4.10
to the Registration Statement on Form S-1 of STX Acquisition Corp.
and STX Chemicals Corp. (Registration No. 333-04343).
4.6 --Registration Rights Agreement, incorporated by reference from
Exhibit 4.11 to the Registration Statement on Form S-1 of STX
Acquisition Corp. and STX Chemicals Corp. (Registration
No. 333-04343).
4.7 --Voting Agreement, incorporated by reference from Exhibit 4.12 to the
Registration Statement on Form S-1 of STX Acquisition Corp. and STX
Chemicals Corp. (Registration No. 333-04343).
4.8 --Tag-Along Agreement, incorporated by reference from Exhibit 4.13
to the Registration Statement on Form S-1 of STX Acquisition Corp.
and STX Chemicals Corp. (Registration No. 333-04343).
4.9 --Intercreditor Agreement, incorporated by reference from Exhibit 4.14
to the Registration Statement on Form S-1 of STX Acquisition Corp.
and STX Chemicals Corp. (Registration No. 333-04343).
4.10 --Security Agreement (Pledge) between STX Acquisition Corp. and Texas
Commerce Bank, incorporated by reference from Exhibit 4.15 to the
Registration Statement on Form S-1 of STX Acquisition Corp. and STX
Chemicals Corp. (Registration No. 333-04343).
+10.1 --Assets Purchase Agreement dated August 1, 1986, between Monsanto
Company and the Company, incorporated by reference from Exhibit 10.1
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1992.
10.2 --Sterling Chemicals, Inc. Salaried Employees' Pension Plan (Restated
as of October 1, 1993), incorporated by reference from Exhibit 10.6
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993.
10.2(a)--Supplement to the Sterling Chemicals, Inc. Salaried Employee's
Pension Plan (Restated as of January 1, 1994), incorporated by
reference from Exhibit 10.6(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1994.
69
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.2(b)--First and Second Amendments to the Sterling Chemicals, Inc. Salaried
Employees' Pension Plan dated April 27, 1994 and September 23, 1994,
respectively, incorporated by reference from Exhibit 10.6(b) to
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994.
10.3 --Sterling Chemicals, Inc. Hourly Paid Employees' Pension Plan
(Restated as of October 1, 1993), incorporated by reference from
Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993.
10.3(a)--Supplement to the Sterling Chemicals, Inc. Hourly Paid Employee's
Pension Plan (Restated as of January 1, 1994), incorporated by
reference from Exhibit 10.8(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1994.
10.3(b)--First Amendment to the Sterling Chemicals, Inc. Hourly Paid
Employees' Pension Plan dated April 27, 1994, incorporated by
reference from Exhibit 10.8(b) to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1994.
**10.3(c)--Sterling Chemicals, Inc. Amended and Restated Hourly Paid
Employees' Pension Plan (Effective as of May 1, 1996).
10.4 --Sterling Chemicals, Inc. Amended and Restated Savings and
Investment Plan, incorporated by reference from Exhibit 10.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993.
10.4(a)--Supplements to the Sterling Chemicals, Inc. Savings and Investment
Plan for Hourly Paid Employees and Salaried Employees, incorporated
by reference from Exhibit 10.10(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1994.
10.4(b)--First and Second Amendments to the Sterling Chemicals, Inc. Amended
and Restated Savings and Investment Plan dated April 27, 1994 and
October 26, 1994, respectively, incorporated by reference from
Exhibit 10.10(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994.
10.5 --Sterling Chemicals, Inc. Pension Benefit Equalization Plan,
incorporated by reference from Exhibit 10.10 to the Company's
Registration Statement on Form S-1 (Registration No. 33-24020).
**10.6 --Sterling Chemicals Employee Stock Ownership Plan (ESOP).
10.7 --Sterling Chemicals, Inc. Amended and Restated Employee Stock
Ownership Plan, incorporated by reference from Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993.
10.7(a)--First Amendment to the Sterling Chemicals, Inc. Amended and Restated
Employees' Stock Ownership Plan dated April 27, 1994, incorporated
by reference from Exhibit 10.12(a) to the Company's Annual Report
on Form 10-K for the for the fiscal year ended September 30, 1994.
+10.8 --Styrene Monomer Conversion Contract dated November 3, 1995, between
Monsanto Company (subsequently assigned to Bayer Corporation, a
subsidiary of Bayer AG) and the Company, incorporated by reference
from Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1995.
+10.9 --Acrylonitrile Exchange Contract dated January 1, 1994, between the
Company and Monsanto Company, incorporated by reference from
Exhibit 10.19 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994.
+10.10 --Production Agreement dated April 15, 1988 between BP Chemicals
Americas Inc. and the Company and First and Second Amendment
thereto, incorporated by reference from Exhibit 10.21 to the
Company's Registration Statement on Form S-1 (Registration No.
33-24020).
+10.11 --Agreement dated May 2, 1988, between E.I. du Pont de Nemours and
Company and the Company, incorporated by reference from Exhibit
10.22 to the Company's Registration Statement on Form S-1
(Registration No. 33-24020).
10.12 --License Agreement dated April 15, 1988, between BP Chemicals
Americas Inc. and the Company, incorporated by reference from
Exhibit 10.23 to the Company's Registration Statement on Form S-1
(Registration No. 33-24020).
+10.13 --Product Sales Agreement dated August 1, 1986, between BASF
Corporation and the Company, incorporated by reference from Exhibit
10.22 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1992.
70
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
+10.13(a)--Amendment No. 3 to Product Sales Agreement as of January 1,1994,
between BASF Corporation and the Company, incorporated by reference
from Exhibit 10.22(a) to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994.
10.14 --License Agreement dated August 1, 1986, between Monsanto Company
and the Company, incorporated by reference from Exhibit 10.25 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-24020).
+10.15 --Amended Lease and Production Agreement dated August 8, 1994, between
BP Chemicals Americas Inc. and the Company, incorporated by
reference from Exhibit 10.21 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994.
10.16 --Form of Indemnity Agreement executed between the Company and each
of its officers and directors prior to the Merger, incorporated by
reference from Exhibit 10.30 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994.
**10.17 --Form of Indemnity Agreement executed between the Company and each
of its officers and directors.
10.18 --Amended and Restated Sterling Chemicals, Inc. Hourly Employees'
Profit Sharing Plan, incorporated by reference from Exhibit
10.32 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1993.
10.19 --Amended and Restated Sterling Chemicals, Inc. Salaried Employee's
Profit Sharing Plan, incorporated by reference from Exhibit 10.31
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993.
10.20 --Sterling Chemicals, Inc. Amended and Restated Supplemental Employee
Retirement Plan, incorporated by reference from Exhibit 10.34 to
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1989 (Commission File Number 1-10059).
10.21 --Sterling Chemicals, Inc. Deferred Compensation Plan, incorporated by
reference from Exhibit 10.35 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1989 (Commission
File Number 1-10059).
**10.22 --Articles of Agreement between the Company, its successors and
assigns, and Texas City, Texas Metal Trades Council, AFL-CIO Texas
City, Texas, May 1, 1996 to May 1, 1999.
10.23 --Conditional Performance Guaranty dated as of August 20, 1992, by
Albright & Wilson, Ltd. in favor of Sterling Pulp Chemicals, Ltd.,
Sterling Canada, Inc. and the Indemnities identified in Section 10.2
of the Purchase Agreement, incorporated by reference from Exhibit
10.38 to the Company's Current Report on Form 8-K dated September
3, 1992.
10.24 --Performance Guaranty dated as of August 20, 1992, by the Company in
favor of Tenneco Canada Inc., Rio Linda Chemical Co., Albright
& Wilson Americas, Inc. and the Indemnities identified in Section
10.3 of the Purchase Agreement, incorporated by reference from
Exhibit 10.39 to the Company's Current Report on Form 8-K dated
September 3, 1992.
10.25 --Lease dated March 1, 1990, between Procter & Gamble, Inc. and
Tenneco Canada Inc., as amended by a Lease Modification Agreement
dated August 9, 1991, and Consent and Assignment Agreement dated as
of August 21, 1992, among 982174 Ontario Limited, Sterling Pulp
Chemicals, Ltd., Proctor & Gamble, Inc., Tenneco Canada Inc. and The
Bank of Nova Scotia, incorporated by reference from Exhibit 10.45 to
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1992.
10.26 --Lease dated July 1, 1977 between Canadian National Railway Company
and ERCO Industries Limited, and Consent and Assignment Agreement
dated as of August 21, 1992, among Tenneco Canada Inc., Sterling
Pulp Chemicals, Ltd., Canadian National Railway Company and The Bank
of Nova Scotia, incorporated by reference from Exhibit 10.46 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1992.
+10.27 --Sales and Purchase Agreement dated April 1, 1994, between BP
Chemicals Ltd. and the Company, incorporated by reference from
Exhibit 10.48 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994.
+10.28 --Contract for Sale and Purchase of Ethylene dated October 28, 1988,
between Phillips 66 Company and the Company, incorporated by
reference from Exhibit 10.49 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994.
71
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.29 --Agreement between Sterling Pulp Chemicals Ltd. North Vancouver
British Columbia and Pulp, Paper and Woodworkers of Canada Local 5
British Columbia effective December 1, 1994 to November 30, 1997,
incorporated by reference from Exhibit 10.50 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1994.
10.30 --Agreement between Sterling Pulp Chemicals Ltd. Buckingham, Quebec
and the Energy and Chemicals Workers Union effective November 30,
1994 to November 30, 1997, incorporated by reference from Exhibit
10.53 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995.
10.31 --Agreement between Sterling Pulp Chemicals Ltd. Buckingham, Quebec,
and the Office and Professional Employees International Union
effective June 25, 1995 to November 14, 1997, incorporated by
reference from Exhibit 10.54 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1995.
+10.32 --Product Supply Agreement dated May 15, 1995, between Praxair
Hydrogen Supply, Inc. and the Company, incorporated by reference
from Exhibit 10.55 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1995.
++10.33 --Methanol Production Agreement between BP Chemicals Inc. and the
Company dated September 26, 1996.
**10.34 --Consulting Agreement dated April 23, 1996, among The Sterling Group,
Inc. STX Acquisition Corp. and STX Chemicals Corp.
**21.1 --Subsidiaries of Sterling Chemicals Holdings, Inc.
**27.1 --Financial Data Schedule - Sterling Chemicals Holdings, Inc.
- -------------
** Filed herewith.
+ Confidential treatment has been requested with respect to portions of
this Exhibit, and such request has been granted.
++ Filed herewith and confidential treatment has been requested with respect
to portions of this Exhibit.
(b) Reports on Form 8-K.
On August 28, 1996, the Company filed a Current Report on Form 8-K
reporting under Items 1, 2, 4, and 5 of such Form.
72
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANTS HAVE DULY CAUSED THIS REPORT TO BE
SIGNED ON THEIR BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
STERLING CHEMICALS HOLDINGS, INC.
STERLING CHEMICALS, INC.
(Registrants)
By /s/ ROBERT W. ROTEN
-------------------------------------
(Robert W. Roten)
President and Chief Executive Officer
DATE: DECEMBER 18, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS REPORT HAS
BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF EACH OF THE
REGISTRANTS AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ FRANK P. DIASSI Chairman of the Board of December 18, 1996
- ------------------------------------------ Directors
(Frank P. Diassi)
/s/ ROBERT W. ROTEN President, Chief Executive December 18, 1996
- ------------------------------------------ Officer and Director
(Robert W. Roten) (principal executive officer)
/s/ JIM P. WISE Vice President--Finance and December 18, 1996
- ------------------------------------------ Chief Financial Officer
(Jim P. Wise) (principal financial officer)
/s/ PAUL G. VANDERHOVEN Controller December 18, 1996
- ------------------------------------------ (principal accounting officer)
(Paul G. Vanderhoven)
/s/ J. VIRGIL WAGGONER Vice Chairman of the Board of December 18, 1996
- ------------------------------------------ Directors
J. Virgil Waggoner)
/s/ FRANK J. HEVRDEJS Director December 18, 1996
- ------------------------------------------
(Frank J. Hevrdejs)
/s/ T. HUNTER NELSON Director December 18, 1996
- ------------------------------------------
(T. Hunter Nelson)
/s/ JOHN L. GARCIA Director December 18, 1996
- ------------------------------------------
(John L. Garcia)
Director December 18, 1996
- ------------------------------------------
(Allan R. Dragone)
/s/ GEORGE B. GREGORY Director December 18, 1996
- ------------------------------------------
(George B. Gregory)
/s/ ROBERT B. CALHOUN Director December 18, 1996
- ------------------------------------------
(Robert B. Calhoun)
</TABLE>
73
<PAGE>
CORPORATE INFORMATION
ANNUAL MEETING STOCK LISTING
Date: January 22, 1997 OTC Electronic Bulletin Board
Time: 9:00 a.m. Ticker Symbol - STXX
Place: Texas Commerce
Center Auditorium
601 Travis
Houston, Texas 77002
LEGAL COUNSEL STOCK TRANSFER AGENT
Andrews & Kurth L.L.P. AND REGISTRAR
600 Travis, Suite 4200 Society National Bank
Houston, Texas 77002 c/o KeyCorp Shareholder Services, Inc.
(713) 220-4200 700 Louisiana, Suite 2620
Houston, Texas 77002-2729
INDEPENDENT CORPORATE HEADQUARTERS
ACCOUNTANTS Sterling Chemicals Holdings, Inc.
Deloitte & Touche LLP 1200 Smith, Suite 1900
333 Clay, Suite 2300 Houston, Texas 77002-4312
Houston, Texas 77002 (713) 650-3700
(713) 756-2000
<PAGE>
EXHIBIT 3.1
[State of Delaware
Secretary of State
Division of Corporations
Filed 09:50 AM 08/21/1996
960243742-2090990]
CERTIFICATE OF MERGER
MERGING
STX ACQUISITION CORP.
INTO
STERLING CHEMICALS, INC.
(Pursuant to Section 251 of the General Corporation Law of the State of
Delaware)
STERLING CHEMICALS INC., a Delaware corporation ("Sterling"), hereby
certifies that:
1. STX Acquisition Corp., a Delaware corporation ("Acquisition"), and Sterling
are the constituent corporations to the merger of Acquisition with and into
Sterling (the "Merger").
2. An Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement") in connection with the Merger has been approved, adopted, certified,
executed and acknowledged by each of Acquisition and Sterling in accordance with
the provisions of Section 251 of the General Corporation Law of the State of
Delaware.
3. Sterling shall be the surviving corporation of the Merger (in such
capacity, the "Surviving Corporation").
4. As set forth in Section 2.05(a) of the Merger Agreement, upon the filing of
this Certificate of Merger, the Certificate of Incorporation of the Surviving
Corporation shall be amended to read in its entirety as set forth in Exhibit A
attached hereto and incorporated herein by reference.
5. The executed Merger Agreement is on file at the principal place of business
of the Surviving Corporation, 1200 Smith Street, Suite 1900, Houston, Texas
77002-4312.
6. A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of Acquisition or
Sterling.
IN WITNESS WHEREOF, the Surviving Corporation has executed this Certificate
of Merger this 21 day of August, 1996.
STERLING CHEMICALS, INC.
By: /s/ J. Virgil Waggoner
---------------------------------
J. Virgil Waggoner, President
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION OF
STERLING CHEMICALS HOLDINGS, INC.
---------------------------------
(Attached)
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
STERLING CHEMICALS HOLDINGS, INC.
ARTICLE I
Name, Registration and Purpose
------------------------------
Section 1.01. Name. The name of the Corporation is "Sterling Chemicals
Holdings, Inc.".
Section 1.02. Registered Office and Registered Agent. The registered
office of the Corporation in the State of Delaware is located at Corporation
Trust Center, 1209 Orange Street in the City of Wilmington, County of New
Castle. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.
Section 1.03. Purpose. The purpose for which the Corporation is organized
is to engage in any lawful acts and activities for which corporations may be
organized under the General Corporation Law of the State of Delaware ("DGCL"),
and the Corporation shall have the power to perform all lawful acts and
activities.
ARTICLE II
Capitalization
--------------
Section 2.01. Authorized Capital. (a) The total number of shares of stock
that the Corporation shall have the authority to issue is 22,000,000 shares of
capital stock, consisting of (i) 2,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"), and (ii) 20,000,000 shares of common
stock, par value $0.01 per share (the "Common Stock").
(b) Subject to the provisions of this Certificate of Incorporation and the
Preferred Stock Designation (as defined below) creating any series of Preferred
Stock, the Corporation may issue shares of its capital stock from time to time
for such consideration (not less than the par value thereof) as may be fixed by
the Board of Directors of the Corporation (the "Board of Directors"), which is
expressly authorized to fix the same in its absolute discretion subject to the
foregoing conditions. Shares so issued for which the consideration shall have
been paid or delivered to the Corporation shall be deemed fully paid stock and
shall not be liable to any further call or assessment thereon, and the holders
of such shares shall not be liable for any further payments in respect of such
shares.
<PAGE>
(c) The right to cumulate votes for the election of directors as provided
in Section 214 of the DGCL shall not be granted and is hereby expressly denied.
Section 2.02. Preferred Stock. (a) The Preferred Stock may be issued
from time to time in one or more series. Authority is hereby expressly granted
to and vested in the Board of Directors to authorize from time to time the
issuance of Preferred Stock in one or more series. With respect to each series
of Preferred Stock authorized by it, the Board of Directors shall be authorized
to establish by resolution or resolutions, and by filing a certificate pursuant
to the applicable law of the State of Delaware (a "Preferred Stock
Designation"), the following to the fullest extent now or hereafter permitted by
the DGCL:
(i) the designation of such series;
(ii) the number of shares to constitute such series;
(iii) whether such series is to have voting rights (full, special or
limited) or is to be without voting rights;
(iv) if such series is to have voting rights, whether or not such series is
to be entitled to vote as a separate class either alone or together with the
holders of the Common Stock or one or more other series of Preferred Stock;
(v) the preferences and relative, participating, optional, conversion or
other special rights (if any) of such series and the qualifications, limitations
or restrictions (if any) with respect to such series;
(vi) the redemption rights and price(s), if any, of such series, and whether
or not the shares of such series shall be subject to the operation of retirement
or sinking funds to be applied to the purchase or redemption of such shares for
retirement and, if such retirement or sinking funds or funds are to be
established, the periodic amount thereof and the terms and provisions relative
to the operation thereof;
(vii) the dividend rights and preferences (if any) of such series,
including, without limitation, (A) the rates of dividends payable thereon, (B)
the conditions upon which and the time when such dividends are payable, (C)
whether or not such dividends shall be cumulative or noncumulative and, if
cumulative, the date or dates from which such dividends shall accumulate and (D)
whether or not the payment of such dividends shall be preferred to the payment
of dividends payable on the Common Stock or any other series of Preferred Stock;
(viii) the preferences (if any), and the amounts thereof, which the holders
of such series shall be entitled to receive upon the voluntary or involuntary
liquidation, dissolution or winding-up of, or upon any distribution of the
assets of, the Corporation;
-2-
<PAGE>
(ix) whether or not the shares of such series, at the option of the
Corporation or the holders thereof or upon the happening of any specified event,
shall be convertible into or exchangeable for (A) shares of Common Stock, (B)
shares of any other series of Preferred Stock or (C) any other stock or
securities of the Corporation;
(x) if such series is to be convertible or exchangeable, the price or prices
or ratio or ratios or rate or rates at which such conversion or exchange may be
made and the terms and conditions (if any) upon which such price or prices or
ratio or ratios or rate or rates may be adjusted; and
(xi) such other rights, powers and preferences with respect to such series as
may to the Board of Directors seem advisable.
Any series of Preferred Stock may vary from any other series of Preferred Stock
in any or all of the foregoing respects and in any other manner.
(b) The Board of Directors may, with respect to any existing series of
Preferred Stock but subject to the Preferred Stock Designation creating such
series, (i) increase the number of shares of Preferred Stock designated for such
series by a resolution adding to such series authorized and unissued shares of
Preferred Stock not designated for any other series or (ii) decrease the number
of shares of Preferred Stock designated for such series by a resolution
subtracting from such series shares of Preferred Stock designated for such
series (but not below the number of shares of such series then outstanding), and
the shares so subtracted shall become authorized, unissued and undesignated
shares of Preferred Stock.
(c) No vote of the holders of the Common Stock or the Preferred Stock
shall, unless otherwise expressly provided in a Preferred Stock Designation, be
a prerequisite to the issuance of any shares of any series of the Preferred
Stock authorized by and complying with the conditions of this Certificate of
Incorporation. Shares of any series of Preferred Stock that have been
authorized for issuance pursuant to this Certificate of Incorporation and that
have been issued and reacquired in any manner by the Corporation (including upon
conversion or exchange thereof) shall be restored to the status of authorized
and unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors and a Preferred Stock Designation as set forth above.
Section 2.03. Common Stock. (a) The holders of shares of the Common
Stock shall be entitled to vote upon all matters submitted to a vote of the
common stockholders of the Corporation and shall be entitled to one vote for
each share of the Common Stock held.
(b) Subject to the prior rights and preferences (if any) applicable to
shares of Preferred Stock of any series, the holders of shares of the Common
Stock shall be entitled to receive such dividends (payable in cash, stock or
otherwise) as may be declared thereon by the Board of Directors at any time and
from time to time out of any funds of the Corporation legally available
therefor.
-3-
<PAGE>
(c) In the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation, and subject to the preferential
or other rights (if any) of the holders of shares of the Preferred Stock in
respect thereof, the holders of shares of the Common Stock shall be entitled to
receive all the remaining assets of the Corporation available for distribution
to its stockholders, ratably in proportion to the number of shares of the Common
Stock held by them. For purposes of this paragraph (c), a liquidation,
dissolution or winding-up of the Corporation shall not be deemed to be
occasioned by or to include (i) any consolidation or merger of the Corporation
with or into another corporation or other entity or (ii) a sale, lease, exchange
or conveyance of all or a part of the assets of the Corporation.
Section 2.04. Stock Options, Warrants, etc. Unless otherwise expressly
prohibited in a Preferred Stock Designation creating any series of Preferred
Stock, the Corporation shall have authority to create and issue warrants, rights
and options entitling the holders thereof to purchase from the Corporation
shares of the Corporation's capital stock of any class or series or other
securities of the Corporation for such consideration and to such persons, firms
or corporations as the Board of Directors, in its sole discretion, may
determine, setting aside from the authorized but unissued stock of the
Corporation the requisite number of shares for issuance upon the exercise of
such warrants, rights or options. Such warrants, rights and options shall be
evidenced by one or more instruments approved by the Board of Directors. The
Board of Directors shall be empowered to set the exercise price, duration, time
for exercise and other terms of such warrants, rights or options; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.
ARTICLE III
Directors
---------
Section 3.01. Number and Term. The number of directors of the
Corporation shall from time to time be fixed exclusively by the Board of
Directors in accordance with, and subject to the limitations set forth in, the
bylaws of the Corporation (the "Bylaws"); provided, however, that the Board of
Directors shall at all times consist of a minimum of three and a maximum of
fifteen members, subject, however, to increases above fifteen members as may
required in order to permit the holders of any series of Preferred Stock to
exercise their right (if any) to elect additional directors under specified
circumstances. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Anything in this Certificate of
Incorporation or the Bylaws to the contrary notwithstanding, each director shall
hold office until his successor is elected and qualified or until his earlier
death, resignation or removal.
Section 3.02. Nomination and Election. (a) Nominations of persons for
election or reelection to the Board of Directors may be made by or at the
direction of the Board of Directors. The Bylaws may set forth procedures for the
nomination of persons for election or reelection to the Board of Directors and
only persons who are nominated in accordance with such procedures (if any)
-4-
<PAGE>
shall be eligible for election or reelection as directors of the Corporation;
provided, however, that such procedures shall not infringe upon (i) the right of
the Board of Directors to nominate persons for election or reelection to the
Board of Directors or (ii) the rights of the holders of any series of Preferred
Stock, voting separately by class or series, to elect additional directors under
specified circumstances.
(b) Each director shall be elected in accordance with this Certificate of
Incorporation, the Bylaws and applicable law. Election of directors by the
Corporation's stockholders need not be by written ballot unless the Bylaws so
provide.
Section 3.03. Removal. No director may be removed except by the
affirmative vote of the holders of not less than a majority in voting power of
all the outstanding shares of capital stock of the Corporation entitled to vote
generally in an election of directors, voting together as a single class. The
Board of Directors may not remove any director, and no recommendation by the
Board of Directors that a director be removed may be made to the Corporation's
stockholders unless such recommendation is set forth in a resolution adopted by
the affirmative vote of not less than two-thirds of the whole Board of
Directors.
Section 3.04. Vacancies. (a) In case any vacancy shall occur on the
Board of Directors because of death, resignation or removal, such vacancy may be
filled only by a majority (or such higher percentage as may be specified in the
Bylaws) of the directors remaining in office (though less than a quorum), and
the director so appointed shall serve for the unexpired term of his predecessor
or until his successor is elected and qualified or until his earlier death,
resignation or removal. If there are no directors then in office, an election
of directors may be held in the manner provided by applicable law.
(b) Any newly-created directorship resulting from any increase in the
number of directors may be filled only by a majority (or such higher percentage
as may be specified in the Bylaws) of the directors then in office (though less
than a quorum). Each director so appointed shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal.
(c) Except as expressly provided in this Certificate of Incorporation or
as otherwise provided by applicable law, stockholders of the Corporation shall
not have the right to fill vacancies or newly-created directorships on the Board
of Directors.
Section 3.05. Subject to Rights of Holders of Preferred Stock.
Notwithstanding the foregoing provisions of this Article III, if the Preferred
Stock Designation creating any series of Preferred Stock entitles the holders of
such Preferred Stock, voting separately by class or series, to elect additional
directors under specified circumstances, then all provisions of such Preferred
Stock Designation relating to the nomination, election, term of office, removal,
filling of vacancies and other features of such directorships shall, as to such
directorships, govern and control over any conflicting provisions of this
Article III.
-5-
<PAGE>
Section 3.06. Limitation of Access of Stockholders to Books and Records.
In furtherance of, and not in limitation of, the powers conferred by law, the
Board of Directors is expressly authorized and empowered to determine from time
to time whether and to what extent, and at what times and places, and under what
conditions and regulations, the accounts and books of the Corporation, or any of
them, shall be open to inspection of stockholders and, except as so determined
or as expressly provided in this Certificate of Incorporation or in any
Preferred Stock Designation, no stockholder shall have any right to inspect any
account, book or document of the Corporation other than such rights as may be
conferred by applicable law.
Section 3.07. Limitation of Personal Liability. (a) No person who is or
was a director of the Corporation shall be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit.
(b) If the DGCL is hereafter amended to authorize corporate action
further limiting or eliminating the personal liability of directors, then the
personal liability of the directors to the Corporation or its stockholders shall
be limited or eliminated to the full extent permitted by the DGCL, as so amended
from time to time.
ARTICLE IV
Amendment of Bylaws
-------------------
The Board of Directors is expressly authorized and empowered to adopt,
alter, amend or repeal the Bylaws. Stockholders of the Corporation shall have
the power to alter, amend, expand or repeal the Bylaws but only by the
affirmative vote of the holders of not less than 66-2/3% in voting power of all
outstanding shares of capital stock of the Corporation entitled to vote
generally at an election of directors, voting together as a single class.
ARTICLE V
Actions and Meetings of Stockholders
--------------------------------------
Section 5.01. No Action by Written Consent. No action shall be taken by
the stockholders of the Corporation except at an annual or special meeting of
stockholders. Stockholders of the Corporation may not act by written consent in
lieu of a meeting.
Section 5.02. Meetings. (a) Meetings of the stockholders of the
Corporation (whether annual or special) may only be called by the Board of
Directors or such officer or officers of the Corporation as the Board of
Directors may from to time authorize to call meetings of the stockholders of the
Corporation. Stockholders of the Corporation shall not be entitled to call any
-6-
<PAGE>
meeting of stockholders or to require the Board of Directors or any officer or
officers of the Corporation to call a meeting of stockholders except as
otherwise expressly provided by law or in the Preferred Stock Designation
creating any series of Preferred Stock.
(b) Stockholders of the Corporation shall have the right to propose
business for consideration at any meeting of stockholders but only as may be
expressly provided in, and then only in compliance with, the Bylaws.
(c) Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice or waivers of notice of such
meeting. The person presiding at a meeting of stockholders may determine
whether business has been properly brought before the meeting and, if the facts
so warrant, such person may refuse to transact any business at such meeting
which has not been properly brought before such meeting.
Section 5.03. Appoint and Remove Officers, etc. The stockholders of the
Corporation shall have no right or power to appoint or remove officers of the
Corporation nor to abrogate the power of the Board of Directors to elect and
remove officers of the Corporation. Except as provided in Section 3.03, the
stockholders of the Corporation shall have no power to appoint or remove
directors as members of committees of the Board of Directors nor to abrogate the
power of the Board of Directors to establish one or more such committees or the
power of any such committee to exercise the powers and authority of the Board of
Directors.
ARTICLE VI
Indemnification of Directors and Officers
-----------------------------------------
The Corporation shall (i) indemnify, to the fullest extent permitted by
applicable law, each person who is or was a director or officer of the
Corporation and each person who, at the request of the Board of Directors of the
Corporation or an officer of the Corporation, is or was a director or officer of
another corporation, partnership, joint venture, trust or other enterprise, and
(ii) may indemnify each employee and agent of the Corporation and all other
persons whom the Corporation is authorized to indemnify under the provisions of
the DGCL. Without limiting the generality or effect of the foregoing, the
Corporation may enter into one or more agreements with any person which provide
for indemnification greater or different than that provided in this Article VI.
ARTICLE VII
Election to be Governed by Section 203 of the DGCL
--------------------------------------------------
The Corporation hereby elects to be governed by Section 203 of the DGCL;
provided, however, that the provisions of this Article VII shall not apply to
restrict a business combination between the Corporation and an interested
stockholder (as defined in Section 203 of the DGCL) of
-7-
<PAGE>
the Corporation if either (i) such business combination was approved by the
Board of Directors prior to the time that such stockholder became an interested
stockholder or (ii) such stockholder became an interested stockholder as a
result of, and at or prior to the effective time of, a transaction which was
approved by the Board of Directors prior to the time that such stockholder
became an interested stockholder.
ARTICLE VIII
Amendment of Certificate of Incorporation
-----------------------------------------
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this Certificate of Incorporation or a Preferred Stock
Designation, in the manner now or hereafter prescribed by applicable law, and
all rights, preferences and privileges conferred upon stockholders, directors or
any other persons by and pursuant to this Certificate of Incorporation are
granted subject to this reservation. Notwithstanding the foregoing or any other
provision of this Certificate of Incorporation or any provision of law that
might otherwise permit a lesser or no vote, the provisions of this Article VIII
and of Articles III, IV and V may not be repealed or amended in any respect, and
no provision inconsistent with any such provision or imposing cumulative voting
in the election of directors may be added to this Certificate of Incorporation,
unless such action is approved by the affirmative vote of the holders of not
less than 66-2/3% in voting power of all outstanding shares of capital stock of
the Corporation entitled to vote generally at an election of directors, voting
together as a single class; provided, however, that any amendment or repeal of
Section 3.07 or Article VI of this Certificate of Incorporation shall not
adversely affect any right or protection existing thereunder in respect of any
act or omission occurring prior to such amendment or repeal and, provided
further, that no Preferred Stock Designation shall be amended after the issuance
of any shares of the series of Preferred Stock created thereby, except in
accordance with the terms of such Preferred Stock Designation and the
requirements of applicable law.
ARTICLE IX
Voting Requirements Not Exclusive
---------------------------------
The voting requirements contained in this Certificate of Incorporation
shall be in addition to the voting requirements imposed by law or by the
Preferred Stock Designation creating any series of Preferred Stock.
-8-
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
STX CHEMICALS CORP.
The undersigned natural person, acting as an incorporator of a corporation
under the General Corporation Law of the State of Delaware, hereby adopts the
following Certificate of Incorporation for such corporation:
ARTICLE I
NAME
----
The name of the corporation is "STX Chemicals Corp." (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
---------------------------
The street address of the initial registered office of the Corporation is
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the name
of its initial registered agent at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSE
-------
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
SHARES
------
The aggregate number of shares which the Corporation has authority to issue
is 1,000 shares, par value $0.01 per share. The shares are designated as common
stock and have identical rights and privileges in every respect.
<PAGE>
ARTICLE V
INCORPORATOR
------------
The name and address of the incorporator is:
Thomas M. Hart III
c/o Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
600 Travis
Houston, Texas 77002
ARTICLE VI
INITIAL DIRECTORS
-----------------
The number of directors constituting the initial Board of Directors is one
and the name and address of the person who is to serve as director until his
successor is duly elected and qualified is:
Frank J. Hevrdejs
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
ARTICLE VII
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
---------------------------------------------
No director (including any advisory director) of the Corporation shall be
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit.
ARTICLE VIII
INDEMNITY
---------
Section 1. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding,
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whether civil, criminal, administrative, or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Delaware
Court of Chancery or such other court shall deem proper.
Section 3. To the extent that a director, officer, employee, or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee, or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, (ii) if such a quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders. Notwithstanding the foregoing, a director, officer,
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employee, or agent of the Corporation shall be able to contest any determination
that the director, officer, employee, or agent has not met the applicable
standard of conduct set forth in Sections 1 and 2 by petitioning a court of
appropriate jurisdiction.
Section 5. Expenses incurred by an officer or director in defending or
settling a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article
VIII. Such expenses incurred by other employees and agents shall be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
Section 6. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other sections of this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, vote of
stockholders, or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 7. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VIII.
Section 8. For purposes of this Article VIII, references to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees, or
agents, so that any person who is or was a director, officer, employee, or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, shall stand
in the same position under the provisions of this Article VIII with respect to
the Corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
Section 9. For purposes of this Article VIII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee, or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries
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of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
Section 10. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE IX
BYLAWS
------
The Bylaws of the Corporation may be amended or repealed, or new Bylaws may
be adopted (i) by the Board of Directors of the Corporation at any duly held
meeting or pursuant to a written consent in lieu of such meeting or (ii) by the
holders of a majority of the shares represented at any duly held meeting of
stockholders, provided that notice of such proposed action shall have been
contained in the notice of any such meeting, or pursuant to a written consent
signed by the holders of a majority of the outstanding shares entitled to vote
thereon.
The undersigned, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is my act and deed and the facts herein stated are true, and accordingly I have
hereunto set my hand this the 10th day of May, 1996.
/s/ Thomas M. Hart III
----------------------
Thomas M. Hart III
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<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
STX CHEMICALS CORP.
STX Chemicals Corp., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies that:
1. In lieu of a meeting and vote of directors, the Board of Directors
of the Corporation, by unanimous written consent filed with the minutes of
proceedings of the Board of Directors of the Corporation in accordance with the
provisions of Section 141(f) of the General Corporation Law of the State of
Delaware (the "DGCL"), adopted resolutions approving and declaring advisable the
amendment of Article I of the Certificate of Incorporation of the Corporation to
read in its entirety as follows:
ARTICLE I
Name
----
The name of the corporation is "Sterling Chemicals, Inc." (the
"Corporation").
2. In lieu of a meeting and vote of stockholders, the required
percentage of shares of stock have given written consent to said amendment, in
accordance with the provisions of Section 228 of the DGCL, and said written
consent has been filed with the Corporation.
3. Said amendment was duly adopted in accordance with the provisions of
Sections 141, 228 and 242 of the General Corporation Law of the State of
Delaware.
In Witness Whereof, the Corporation has caused this certificate to be
signed this 21 day of August, 1996.
STX Chemicals Corp.
By: /s/ T. Hunter Nelson
--------------------------------
T. Hunter Nelson, Vice President
<PAGE>
EXHIBIT 3.3
RESTATED BYLAWS
OF
STERLING CHEMICALS HOLDINGS, INC.
[As amended through, and effective on, October 23, 1996]
PREAMBLE
These Bylaws are subject to, and governed by, the General Corporation Law
of the State of Delaware ("DGCL") and the Certificate of Incorporation of the
Corporation, as amended (the "Certificate of Incorporation", such term to
include the resolutions of the Board of Directors of the Corporation creating
any series of preferred stock, par value $0.01 per share, of the Corporation).
In the event of a direct conflict between the provisions of these Bylaws and the
mandatory provisions of the DGCL or the provisions of the Certificate of
Incorporation, such provisions of the DGCL or the Certificate of Incorporation,
as the case may be, will be controlling.
ARTICLE I
Offices and Records
-------------------
Section 1.01. Registered Office and Agent. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of the State of Delaware.
Section 1.02. Other Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors of the Corporation (the "Board of Directors") may from time to time
determine or the business of the Corporation may require.
Section 1.03. Books and Records. The books and records of the
Corporation may be kept at the Corporation's principal executive office in
Houston, Texas or at such other locations outside the State of Delaware as may
from time to time be designated by the Board of Directors.
<PAGE>
ARTICLE II
Meetings of Stockholders
------------------------
Section 2.01. Annual Meetings. An annual meeting of the Corporation's
stockholders (the "Stockholders") shall be held each calendar year for the
purposes of (i) electing directors as provided in Section 3.02 and (ii)
transacting such other business as may properly be brought before the meeting.
Each annual meeting shall be held on such date (no later than 13 months after
the date of the last annual meeting of Stockholders) and at such time as shall
be designated by the Board of Directors and stated in the notice or waivers of
notice of such meeting.
Section 2.02. Special Meetings. (a) Special meetings of the
Stockholders, for any purpose or purposes, may be called at any time by the
Chairman of the Board (if any) or the Chief Executive Officer and shall be
called by the Secretary at the written request, or by resolution adopted by the
affirmative vote, of a majority of the total number of directors which the
Corporation would have if there were no vacancies (the "Whole Board"), which
request or resolution shall fix the date, time and place, and state the purpose
or purposes, of the proposed meeting. Except as provided by applicable law,
these Bylaws, the Certificate of Incorporation or the Voting Agreement (defined
below), Stockholders shall not be entitled to call a special meeting of
Stockholders or to require the Board of Directors or any officer to call such a
meeting. Business transacted at any special meeting of Stockholders shall be
limited to the purposes stated in the notice or waivers of notice of such
meeting.
(b) As used in these Bylaws, "Voting Agreement" means that certain
Voting Agreement, dated as of August 12, 1996, among the Corporation and certain
stockholders of the Corporation, as amended and/or restated from time to time.
Section 2.03. Place of Meetings. The Board of Directors may
designate the place of meeting (either within or without the State of Delaware)
for any meeting of Stockholders. If no designation is made by the Board of
Directors, the place of meeting shall be held at the principal executive office
of the Corporation.
Section 2.04. Notice of Meetings. (a) Written notice of each
meeting of Stockholders shall be given to each Stockholder of record entitled to
vote thereat, which notice shall (i) state the place, date and time of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called and (ii) be given not less than 10 nor more than 60 days
before the date of the meeting.
(b) Each notice of a meeting of Stockholders shall be given as
provided in Section 9.01, except that if no address appears on the Corporation's
books or stock transfer records with respect to any Stockholder, notice to such
Stockholder shall be deemed to have been given if sent by first-class mail or
telecommunication to the Corporation's principal executive office or if
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published at least once in a newspaper of general circulation in the county
where such principal executive office is located.
(c) If any notice addressed to a Stockholder at the address of such
Stockholder appearing on the books of a Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the Stockholder
at such address, all further notices to such Stockholder at such address shall
be deemed to have been duly given without further mailing if the same shall be
available to such Stockholder upon written demand of such Stockholder at the
principal executive office of the Corporation for a period of one year from the
date of the giving of such notice.
(d) Any previously scheduled meeting of the Stockholders may be
postponed by resolution of the Board of Directors upon Public Announcement of
such postponement prior to the time previously scheduled for such meeting. As
used in these Bylaws, "Public Announcement" means the disclosure in a press
release reported by the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act (as defined in Section 2.13(f)).
Section 2.05. Voting List. At least 10 days before each meeting of
Stockholders, the Secretary or other officer or agent of the Corporation who has
charge of the Corporation's stock ledger shall prepare a complete list of the
Stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing, with respect to each Stockholder, his address and the number of
shares registered in his name. Such list shall be open to the examination of
any Stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice or waivers of notice of the meeting or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept open at the time and place of the meeting during the whole
time thereof, and may be inspected by any Stockholder who is present. The
stock ledger of the Corporation shall be the only evidence as to who are the
Stockholders entitled to examine any list required by this Section 2.05 or to
vote at any meeting of Stockholders.
Section 2.06. Quorum and Adjournment. The holders of a majority of
the voting power of the outstanding shares of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), present in person
or by proxy, shall constitute a quorum at any meeting of Stockholders, except as
otherwise provided by applicable law, the Certificate of Incorporation or these
Bylaws. If a quorum is present at any meeting of Stockholders, such quorum
shall not be broken by the withdrawal of enough Stockholders to leave less than
a quorum and the remaining Stockholders may continue to transact business until
adjournment. If a quorum shall not be present at any meeting of Stockholders,
the holders of a majority of the voting stock represented at such meeting or, if
no Stockholder entitled to vote is present at such meeting, any officer of the
Corporation may adjourn such meeting from time to time until a quorum shall be
present. Notwithstanding anything in these Bylaws to the contrary, the chairman
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of any meeting of Stockholders shall have the right, acting in his sole
discretion, to adjourn such meeting from time to time.
Section 2.07. Adjourned Meetings. When a meeting of Stockholders is
adjourned to another time or place, unless otherwise provided by these Bylaws,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken; provided,
however, if an adjournment is for more than 30 days or if after an adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder entitled to vote thereat. At any
adjourned meeting at which a quorum shall be present in person or by proxy, the
Stockholders entitled to vote thereat may transact any business which might have
been transacted at the meeting as originally noticed.
Section 2.08. Voting. (a) Election of directors at all meetings of
Stockholders at which directors are to be elected shall be by written ballot
and, except as otherwise provided in the Certificate of Incorporation, a
plurality of the votes cast thereat shall elect. Except as otherwise provided
by applicable law, the Certificate of Incorporation or these Bylaws, all matters
other than the election of directors submitted to the Stockholders at any
meeting shall be decided by a majority of the votes cast with respect thereto.
Except as otherwise provided in the Certificate of Incorporation or by
applicable law, (i) no Stockholder shall have any right of cumulative voting and
(ii) each outstanding share, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of Stockholders.
(b) Shares standing in the name of another corporation (whether
domestic or foreign) may be voted by such officer, agent or proxy as the bylaws
of such corporation may prescribe or, the absence of such provision, as the
board of directors of such corporation may determine. Shares standing in the
name of a deceased person may be voted by the executor or administrator of such
deceased person, either in person or by proxy. Shares standing in the name of
guardian, conservator or trustee may be voted by such fiduciary, either in
person or by proxy, but no fiduciary shall be entitled to vote shares held in
such fiduciary capacity without a transfer of such shares into the name of such
fiduciary. Shares standing in the name of a receiver may be voted by such
receiver. A Stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer by the pledgor on the books of the Corporation he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee (or his proxy) may represent the stock and vote thereon.
(c) If shares or other securities having voting power stand of record
in the name of two or more persons (whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise) or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect:
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(i) if only one votes, his act binds all;
(ii) if more than one votes, the act of the majority so voting binds
all; and
(iii) if more than one votes but the vote is evenly split on any
particular matter, each fraction may vote the securities in question
proportionately or any person voting the shares or a beneficiary (if any)
may apply to the Delaware Court of Chancery or such other court as may have
jurisdiction to appoint an additional person to act with the person so
voting the shares, which shall then be voted as determined by a majority
such persons and the person so appointed by the court.
If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purpose of the paragraph (c) shall
be a majority or even-split in interest.
Section 2.09. Proxies. (a) At any meeting of Stockholders, each
Stockholder having the right to vote thereat may be represented and vote either
in person or by proxy executed in writing by such Stockholder or by his duly
authorized attorney-in-fact. Each such proxy shall be filed with the Secretary
of the Corporation at or before the beginning of each meeting at which such
proxy is to be voted. Unless otherwise provided therein, no proxy shall be
valid after three years from the date of its execution. Each proxy shall be
revocable unless expressly provided therein to be irrevocable and coupled with
an interest sufficient in law to support an irrevocable power or unless
otherwise made irrevocable by applicable law.
(b) A proxy shall be deemed signed if the Stockholder's name is placed
on the proxy (whether by manual signature, telegraphic transmission or
otherwise) by the Stockholder or his attorney-in-fact. In the event any proxy
shall designate two or more persons to act as proxies, a majority of such
persons present at the meeting (or, if only one shall be present, then that one)
shall have and may exercise all the powers conferred by the proxy upon all the
persons so designated unless the proxy shall otherwise provide.
(c) Except as otherwise provided by applicable law, by the Certificate
of Incorporation or by these Bylaws, the Board of Directors may, in advance of
any meeting of Stockholders, prescribe additional regulations concerning the
manner of execution and filing of proxies (and the validation of same) which may
be voted at such meeting.
Section 2.10. Record Date. (a) For the purpose of determining the
Stockholders entitled to notice of or to vote at any meeting of Stockholders (or
any adjournment thereof), the Board of Directors may fix a record date, which
record date shall not precede the date on which the resolution fixing the record
date is adopted by the Board of Directors or be more than 60 nor less than 10
days prior to the date of such meeting. If no record date is fixed, the record
date for determining Stockholders entitled to notice of or to vote at a meeting
of Stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of Stockholders of record entitled to notice of or to vote at a meeting
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of Stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) For the purpose of determining the Stockholders entitled to consent
to any corporate action in writing without a meeting, the Board of Directors may
fix a record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted by the Board of Directors or be
more than 10 days after the date on which the resolution fixing the record date
is adopted by the Board of Directors. If no record date is fixed, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
(c) For the purpose of determining the Stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted by the Board of Directors or be
more than 60 days prior to any other action. If no record date is fixed, the
record date for determining Stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
Section 2.11. Conduct of Meetings; Agenda. (a) Meetings of the
Stockholders shall be presided over by the officer of the Corporation whose
duties under these Bylaws require him to do so; provided, however, if no such
officer of the Corporation shall be present at any meeting of Stockholders, such
meeting shall be presided over by a chairman to be chosen by a majority of the
Stockholders entitled to vote at the meeting who are present in person or by
proxy. At each meeting of Stockholders, the officer of the Corporation whose
duties under these Bylaws require him to do so shall act as secretary of the
meeting; provided, however, if no such officer of the Corporation shall be
present at any meeting of Stockholders, the chairman of such meeting shall
appoint a secretary. The order of business at each meeting of Stockholders
shall be as determined by the chairman of the meeting, including such regulation
of the manner of voting and the conduct of discussion as seems to him in order.
(b) The Board of Directors may, in advance of any meeting of
Stockholders, adopt an agenda for such meeting, adherence to which the chairman
of the meeting may enforce.
Section 2.12. Inspectors of Election; Opening and Closing of Polls. (a)
Before any meeting of Stockholders, the Board of Directors may, and if required
by law shall, appoint one or more persons to act as inspectors of election at
such meeting or any adjournment thereof. If any person appointed as inspector
fails to appear or fails or refuses to act, the chairman of the meeting may, and
if required by law shall, appoint a substitute inspector. If no inspectors are
appointed by the Board of Directors, the chairman of the meeting may, and if
required by law shall, appoint one or more inspectors at the meeting.
Notwithstanding the foregoing, inspectors shall be appointed consistent with the
mandatory provisions of Section 231 of the DGCL.
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(b) Inspectors may include individuals who serve the Corporation in other
capacities (including as officers, employees, agents or representatives);
provided, however, that no director or candidate for the office of director
shall act as an inspector. Inspectors need not be Stockholders.
(c) The inspectors shall (i) determine the number of shares of capital
stock of the Corporation outstanding and the voting power of each, the number of
shares represented at the meeting, the existence of a quorum and the validity
and effect of proxies and (ii) receive votes or ballots, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes and ballots, determine the results and do such acts as are
proper to conduct the election or vote with fairness to all Stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. The inspectors shall have such other
duties as may be prescribed by Section 231 of the DGCL.
(d) The chairman of the meeting may, and if required by the DGCL shall,
fix and announce at the meeting the date and time of the opening and the closing
of the polls for each matter upon which the Stockholders will vote at the
meeting.
Section 2.13. Procedures for Bringing Business before Meetings. (a) At
any annual meeting of Stockholders, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business must be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (iii) properly brought before the meeting
by a Stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a Stockholder, the
Stockholder must have given timely notice thereof in writing to the Secretary
except as otherwise provided in the Voting Agreement. To be timely, a
Stockholder's notice must be delivered to the Secretary at the principal
executive office of the Corporation not less than 120 days nor more than 150
days prior to the first anniversary of the previous year's annual meeting of
Stockholders; provided, however, that if no annual meeting was held in the
previous year or the date of the annual meeting of Stockholders has been changed
by more than 30 calendar days from such anniversary date, the notice must be so
delivered to the Secretary not earlier than the 150th day prior to such annual
meeting and not later than the close of business on the later of the 120th day
prior to such annual meeting or the 10th day following the day on which Public
Announcement of the date of such annual meeting is first made. Any annual
meeting of Stockholders which is adjourned and will reconvene within 30 days
after the meeting date as originally noticed shall, for purposes of any
Stockholder's notice contemplated by this paragraph (a), be deemed to be a
continuation of the original meeting, and no business may be brought before such
adjourned meeting by any Stockholder unless timely notice of such business was
given to the Secretary for the meeting as originally noticed.
(b) Each notice given by a Stockholder as contemplated by paragraph (a)
above shall set forth, as to each matter the Stockholder proposes to bring
before the annual meeting, (i) the
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nature of the proposed business with reasonable particularity, including the
exact text of any proposal to be presented for adoption and any supporting
statement, which proposal and supporting statement shall not in the aggregate
exceed 500 words, and his reasons for conducting such business at the annual
meeting, (ii) any material interest of the Stockholder in such business, (iii)
the name, principal occupation and record address of the Stockholder, (iv) the
class and number of shares of the Corporation which are held of record or
beneficially owned by the Stockholder, (v) the dates upon which the Stockholder
acquired such shares of stock and documentary support for any claims of
beneficial ownership and (vi) such other matters as may be required by the
Certificate of Incorporation.
(c) The foregoing right of a Stockholder to propose business for
consideration at an annual meeting of Stockholders shall be subject to such
conditions, restrictions and limitations as may be imposed by the Certificate of
Incorporation.
(d) At any special meeting of Stockholders, only such business shall be
conducted as shall have been specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors.
Nothing in this Section 2.13 shall entitle any Stockholder to propose business
for consideration at any special meeting of Stockholders.
(e) The chairman of any meeting of Stockholders shall determine whether
business has been properly brought before the meeting and, if the facts so
warrant, may refuse to transact any business at such meeting which has not been
properly brought before the meeting.
(f) Notwithstanding any other provision of these Bylaws, the Corporation
shall be under no obligation to include any Stockholder proposal in its proxy
statement or otherwise present any such proposal to Stockholders at a meeting of
Stockholders if the Board of Directors reasonably believes that the proponents
thereof have not complied with Sections 13 and 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder, and the Corporation shall not be required to include in
its proxy statement to Stockholders any Stockholder proposal not required to be
included in its proxy statement to Stockholders in accordance with the Exchange
Act and such rules or regulations.
(g) Nothing in this Section 2.13 shall be deemed to affect (i) any rights
of Stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 of the Exchange Act or (ii) any rights under
the Voting Agreement relating to the nomination of any person for election or
re-election as a director of the Corporation.
(h) Reference is made to Section 3.03 for procedures relating to the
nomination of any person for election or reelection as a director of the
Corporation.
Section 2.14. Action without Meeting. Except as otherwise provided in
the Voting Agreement, no action shall be taken by Stockholders other than at a
meeting of Stockholders. Except as otherwise provided in the Voting
Agreement, Stockholders may not act by written consent in lieu of a meeting.
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ARTICLE III
Board of Directors -- Powers, Number,
-------------------------------------
Nominations, Resignations, Removal, Vacancies and Compensation
--------------------------------------------------------------
Section 3.01. Management. The business and property of the Corporation
shall be managed by and under the direction of the Board of Directors. In
addition to the powers and authorities expressly conferred upon the Board of
Directors by these Bylaws, the Board of Directors may exercise all the powers of
the Corporation and do all such lawful acts and things as are not by law, by the
Certificate of Incorporation or by these Bylaws directed or required to be
exercised or done by the Stockholders.
Section 3.02. Number, Qualification and Term of Office. (a) The number
of directors shall be fixed from time to time exclusively pursuant to resolution
adopted by a majority of the Whole Board, but shall consist of not less than
three nor more than 15 directors, subject, however, to increases above 15
members as may be required by the Certificate of Incorporation in order to
permit the holders of any series of preferred stock of the Corporation to elect
directors under specified circumstances. In no event shall the number of
directors be less, at any time, than the minimum number then required by the
Voting Agreement.
(b) The directors need not be Stockholders nor residents of the State of
Delaware. Each director must have attained 21 years of age.
(c) Except as otherwise provided in the Voting Agreement and in Section
3.06, directors shall be elected only at annual meetings of Stockholders and at
any special meeting of Stockholders where to the business to be transacted at
such special meeting, as set forth in the official notice of such meeting,
includes the election of directors. Each director shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal. No decrease in the number of directors constituting the Whole Board
shall have the effect of shortening the term of any incumbent director.
Section 3.03. Nominations. (a) Notwithstanding anything in these Bylaws
to the contrary, except as otherwise provided in the Voting Agreement, only
persons who are nominated in accordance with the procedures hereinafter set
forth in this Section 3.03 shall be eligible for election as directors of the
Corporation.
(b) Except as otherwise provided in the Voting Agreement, nominations of
persons for election to the Board of Directors at a meeting of Stockholders may
be made only (i) by or at the direction of the Board of Directors or (ii) by any
Stockholder entitled to vote for the election of directors at the meeting who
satisfies the eligibility requirements (if any) set forth in the Certificate of
Incorporation and who complies with the notice procedures set forth in this
Section 3.03 and in the Certificate of Incorporation; provided, however,
Stockholders may not nominate persons for election to the Board of Directors at
any special meeting of Stockholders
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unless the business to be transacted at such special meeting, as set forth in
the official notice of such meeting, includes the election of directors. Except
as otherwise provided in the Voting Agreement, nominations by Stockholders shall
be made pursuant to timely notice in writing to the Secretary. A Stockholder's
notice given in the context of an annual meeting of Stockholders shall not be
timely unless it is delivered to the Secretary at the principal executive office
of the Corporation not earlier than the 150th day and not later than the 120th
day prior to the first anniversary of the previous year's annual meeting of
Stockholders; provided, however, that if no annual meeting was held in the
previous year or the date of the annual meeting of Stockholders has been changed
by more than 30 calendar days from such anniversary date, the notice must be so
delivered to the Secretary not earlier than the 150th day prior to such annual
meeting and not later than the close of business on the later of the 120th day
prior to such annual meeting or the 10th day following the day on which Public
Announcement of the date of such annual meeting is first made. A Stockholder's
notice given in the context of a special meeting of Stockholders shall not be
timely unless it is delivered to the Secretary at the principal executive office
of the Corporation not earlier than the 150th day prior to such special meeting
and not later than the close of business on the later of the 120th day prior to
such special meeting or the 10th day following the day on which Public
Announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such special
meeting. Any meeting of Stockholders which is adjourned and will reconvene
within 30 days after the meeting date as originally noticed shall, for purposes
of any notice contemplated by this paragraph (b), be deemed to be a continuation
of the original meeting and no nominations by a Stockholder of persons to be
elected directors of the Corporation may be made at any such reconvened meeting
other than pursuant to a notice that was timely for the meeting on the date
originally noticed.
(c) Each notice given by a Stockholder as contemplated by paragraph (b)
above shall set forth the following information, in addition to any other
information or matters required by the Certificate of Incorporation:
(i) as to each person whom the Stockholder proposes to nominate for
election or re-election as a director, (A) the exact name of such person, (B)
such person's age, principal occupation, business address and telephone
number and residence address and telephone number, (C) the number of shares
(if any) of each class of stock of the Corporation owned directly or
indirectly by such person and (D) all other information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors pursuant to Regulation 14A under the Exchange Act or
any successor regulation thereto (including such person's notarized written
acceptance of such nomination, consent to being named in the proxy statement
as a nominee and statement of intention to serve as a director if elected);
(ii) as to the Stockholder giving the notice, (A) his name and address,
as they appear on the Corporation's books, (B) his principal occupation,
business address and telephone number and residence address and telephone
number, (C) the class and number of shares of the Corporation which are held
of record or beneficially owned by him and (D) the dates
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upon which he acquired such shares of stock and documentary support for any
claims of beneficial ownership; and
(iii) a description of all agreements, arrangements or understandings
between the Stockholder giving the notice and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such Stockholder.
At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a Stockholder's notice
of nomination which pertains to the nominee.
(d) The foregoing right of a Stockholder to nominate a person for
election or reelection to the Board of Directors shall be subject to such
conditions, restrictions and limitations as may be imposed by the Certificate of
Incorporation.
(e) The chairman of a meeting of Stockholders shall have the power and
duty to determine whether a nomination was made in accordance with the
procedures set forth in this Section 3.03 and, if any nomination is not in
compliance with this Section 3.03, to declare that such defective nomination
shall be disregarded.
(f) Nothing in this Section 3.03 shall be deemed to affect (i) any
nomination rights conferred by the Voting Agreement or (ii) any rights of
Stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 of the Exchange Act.
Section 3.04. Resignations. Any director may resign at any time by
giving written notice to the Board of Directors or the Secretary. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein. Acceptance of such resignation shall not be
necessary to make it effective.
Section 3.05. Removal. No director may be removed except by the
affirmative vote of the holders of not less than a majority of the voting power
of all outstanding Voting Stock, voting together as a single class. The Board
of Directors may not remove any director, and no recommendation by the Board of
Directors that a director be removed may be made to the Stockholders unless such
recommendation is set forth in a resolution adopted by the affirmative vote of
not less than 66-2/3% of the Whole Board. Nothing in this Section 3.05 shall be
deemed to affect any removal rights conferred by the Voting Agreement.
Section 3.06. Vacancies. (a) In case any vacancy shall occur on the
Board of Directors because of death, resignation or removal, such vacancy may be
filled by a majority of the directors remaining in office (though less than a
quorum), and the director so appointed shall serve until his successor is
elected and qualified or until his earlier death, resignation or removal. If
there are no directors then in office, an election of directors may be held in
the manner provided by applicable law.
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(b) Any newly-created directorship resulting from any increase in the
number of directors constituting the Whole Board may be filled by a majority of
the directors then in office (though less than a quorum). Each director so
appointed shall hold office until his successor is elected and qualified or
until his earlier death, resignation or removal.
(c) Except as expressly provided in these Bylaws, the Certificate of
Incorporation or the Voting Agreement or as otherwise provided by law,
Stockholders shall not have any right to fill vacancies on the Board of
Directors, including newly-created directorships.
(d) If, as a result of a disaster or emergency (as determined in good
faith by the then remaining directors), it becomes impossible to ascertain
whether or not vacancies exist on the Board of Directors and a person is or
persons are elected by the directors, who in good faith believe themselves to be
a majority of the remaining directors, to fill a vacancy or vacancies that such
remaining directors in good faith believe exists, then the acts of such person
or persons who are so elected as directors shall be valid and binding upon the
Corporation and the Stockholders, although it may subsequently develop that at
the time of the election (i) there was in fact no vacancy or vacancies existing
on the Board of Directors or (ii) the directors who so elected such person or
persons did not in fact constitute a majority of the remaining directors.
Section 3.07. Subject to Rights of Holders of Preferred Stock.
Notwithstanding the foregoing provisions of this Article III, if the resolutions
of the Board of Directors creating any series of preferred stock of the
Corporation entitle the holders of such preferred stock, voting separately by
series, to elect additional directors under specified circumstances, then all
provisions of such resolutions relating to the nomination, election, term of
office, removal, filling of vacancies and other features of such directorships
shall, as to such directorships, govern and control over any conflicting
provisions of this Article III.
Section 3.08. Subject to Rights of Certain Stockholders under Voting
Agreement. In case any provision of this Article III conflicts with the
provisions of the Voting Agreement relating to the nomination, election, term of
office, removal, filling of vacancies and other features of the Designees (as
defined in the Voting Agreement), such provisions of the Voting Agreement shall
govern and be controlling.
Section 3.09. Compensation. The Board of Directors shall have the
authority to fix, and from time to time to change, the compensation of
directors. Each director shall be entitled to reimbursement from the
Corporation for his reasonable expenses incurred in attending meetings of
the Board of Directors (or any committee thereof) and meetings of the
Stockholders. Nothing contained in these Bylaws shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
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ARTICLE IV
Board of Directors -- Meetings and Actions
------------------------------------------
Section 4.01. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place (within or without
the State of Delaware) as shall from time to time be determined by the Board of
Directors. Except as otherwise provided by applicable law, any business may be
transacted at any regular meeting of the Board of Directors.
Section 4.02. Special Meetings. Special meetings of the Board of
Directors shall be called by the Secretary at the request of the Chairman of the
Board (if any) or the Chief Executive Officer on not less than 24 hours' notice
to each director, specifying the time, place (within or without the State of
Delaware) and purpose of the meeting. Special meetings shall be called by the
Secretary on like notice at the written request of any two directors, which
request shall state the purpose of the meeting.
Section 4.03. Quorum; Voting. (a) At all meetings of the Board of
Directors, a majority of the Whole Board shall be necessary and sufficient to
constitute a quorum for the transaction of business. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time (without notice other than
announcement at the meeting) until a quorum shall be present. A meeting of the
Board of Directors at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors; provided,
however, that no action of the remaining directors shall constitute the act of
the Board of Directors unless the action is approved by at least a majority of
the required quorum for the meeting or such greater number of directors as shall
be required by applicable law, by the Certificate of Incorporation or by these
Bylaws.
(b) The act of a majority of the directors present at any meeting of the
Board of Directors at which there is a quorum shall be the act of the Board of
Directors unless by express provision of law, the Certificate of Incorporation
or these Bylaws a different vote is required, in which case such express
provision shall govern and control.
Section 4.04. Conduct of Meetings; Presiding Officer and Secretary. (a)
At meetings of the Board of Directors, business shall be transacted in such
order as shall be determined by the chairman of the meeting unless the Board of
Directors shall otherwise determine the order of business. The Board of
Directors shall keep regular minutes of its proceedings which shall be placed in
the minute book of the Corporation.
(b) At each meeting of the Board of Directors, the Chairman of the Board
shall preside and the Secretary shall act as secretary of the meeting.
Section 4.05. Action without Meeting. Unless otherwise provided in the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all directors consent thereto in
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writing. All such written consents shall be filed with the minutes of
proceedings of the Board of Directors.
Section 4.06. Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors
may participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.
ARTICLE V
Committees of the Board of Directors
------------------------------------
Section 5.01. Executive Committee. (a) The Board of Directors may, by
resolution adopted by the affirmative vote of the Whole Board, designate an
Executive Committee which, during the intervals between meetings of the Board of
Directors and subject to Section 5.10, shall have and may exercise, in such
manner as it shall deem to be in the best interests of the Corporation, all of
the powers of the Board of Directors in the management or direction of the
business and affairs of the Corporation, except as reserved to the Board of
Directors or as delegated by the Board of Directors to another committee of the
Board of Directors or as may be prohibited by law. The Executive Committee
shall consist of not less than two directors, the exact number to be determined
from time to time by the affirmative vote of the Whole Board. None of the
members of the Executive Committee need be an officer of the Corporation.
(b) Meetings of the Executive Committee may be called at any time by the
Chairman of the Board (if any) or the Chief Executive Officer on not less than
one day's notice to each member given verbally or in writing, which notice shall
specify the time, place (within or without the State of Delaware) and purpose of
the meeting.
Section 5.02. Other Committees. The Board of Directors may, by
resolution adopted by a majority of the Whole Board, establish additional
standing or special committees of the Board of Directors, each of which shall
consist of one or more directors (the exact number to be determined from time to
time by the Board of Directors) and, subject to Section 5.10, shall have such
powers and functions as may be delegated to it by the Board of Directors. No
member of any such additional committee need be an officer of the Corporation.
Section 5.03. Term. Each member of a committee of the Board of
Directors shall serve as such until the earliest of (i) his death, (ii) the
expiration of his term as a director, (iii) his resignation as a member of such
committee or as a director and (iv) his removal as a member of such committee or
as a director.
Section 5.04. Committee Changes; Removal. The Board of Directors shall
have the power at any time to fill vacancies in, to change the membership of and
to abolish any committee
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of the Board of Directors; provided, however, that no such action shall be taken
in respect of the Executive Committee unless approved by a majority of the Whole
Board.
Section 5.05. Alternate Members. The Board of Directors may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. If no alternate
members have been so appointed or each such alternate committee member is absent
or disqualified, the committee member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member.
Section 5.06. Rules and Procedures. (a) The Board of Directors may
designate one member of each committee as chairman of such committee; provided,
however, that, except as provided in the following sentence, no person shall be
designated as chairman of the Executive Committee unless approved by a majority
of the Whole Board. If the Board of Directors fails to designate a chairman for
any committee, the members thereof shall designate a chairman.
(b) Each committee shall adopt its own rules (not inconsistent with the
Certificate of Incorporation or these Bylaws or, with any specific direction as
to the conduct of its affairs, as shall have been given by the Board of
Directors) governing the time, place and method of holding its meetings and the
conduct of its proceedings and shall meet as provided by such rules.
(c) If a committee is comprised of an odd number of members, a quorum
shall consist of a majority of that number. If a committee is comprised of an
even number of members, a quorum shall consist of one-half of that number. If a
committee is comprised of two members, a quorum shall consist of both members.
(d) Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when requested.
(e) Unless otherwise provided by these Bylaws or by the rules adopted by
any committee, notice of the time and place of each meeting of such committee
shall be given to each member of such committee as provided in these Bylaws with
respect to notices of special meetings of the Board of Directors.
Section 5.07. Action without Meeting. Any action required or permitted
to be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting if all members of such committee consent thereto in writing.
All such written consents shall be filed with the minutes of proceedings of such
committee.
Section 5.08. Telephonic Meetings. Members of any committee of the
Board of Directors may participate in a meeting of such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting
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can hear each other, and such participation in a meeting shall constitute
presence in person at such meeting.
Section 5.09. Resignations. Any committee member may resign at any time
by giving written notice to the Board of Directors or the Secretary. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein. Acceptance of such resignation shall not be
necessary to make it effective.
Section 5.10. Limitations on Authority. Unless otherwise provided in
the Certificate of Incorporation, no committee of the Board of Directors shall
have the power or authority to (i) authorize an amendment to the Certificate of
Incorporation, (ii) adopt an agreement of merger or consolidation, recommend to
the Stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, (iii) recommend to the Stockholders a
dissolution of the Corporation or a revocation of a dissolution, (iv) amend
these Bylaws, (v) declare a dividend or other distribution on, or authorize the
issuance, purchase or redemption of, securities of the Corporation, (vi) elect
any officer of the Corporation or (vii) approve any material transaction between
the Corporation and one or more of its directors, officers or employees or
between the Corporation and any corporation, partnership, association or other
organization in which one or more of its directors, officers or employees are
directors or officers or have a financial interest; provided, however, that the
Executive Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of preferred stock adopted by
the Board of Directors as provided in the Certificate of Incorporation, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the decrease or increase of the
shares of any such series. For purposes of the foregoing clause (vii), a
transaction shall be deemed material if it involves consideration or other
obligation in excess of $1,000,000.
ARTICLE VI
Officers
--------
Section 6.01. Number; Titles; Qualification; Term of Office. (a) The
officers of the Corporation shall be a Chief Executive Officer, a President, a
Secretary and a Treasurer. The Board of Directors from time to time may also
elect such other officers (including, without limitation, a Chairman of the
Board and one or more Vice Presidents) as the Board of Directors deems
appropriate or necessary. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his earlier
death, resignation or removal. Any two or more offices may be held by the same
person, but no officer shall execute any instrument in more than one capacity if
such instrument is required by law or any act of the Corporation to be executed
or countersigned by two or more officers. None of the officers need be a
Stockholder
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or a resident of the State of Delaware. No officer (other than the Chairman of
the Board, if any) need be a director.
(b) The Board of Directors may, by resolution adopted by the affirmative
vote of a majority of the Whole Board, designate a director as Vice Chairman of
the Board and fix his duties as such. However, no such Vice Chairman of the
Board shall be considered an officer of the Corporation, the officers of the
Corporation being limited to those officers elected by the Board of Directors in
accordance with paragraph (a) above. The designation of any director as Vice
Chairman of the Board may be rescinded by a majority of the Whole Board at any
time, in which event such person shall automatically cease to be Vice Chairman
of the Board.
(c) The Board of Directors may delegate to the Chairman of the Board (if
any) and/or the Chief Executive Officer the power to appoint one or more
employees of the Corporation as divisional or departmental vice presidents and
fix their duties as such appointees. However, no such divisional or
departmental vice presidents shall be considered an officer of the Corporation,
the officers of the Corporation being limited to those officers elected by the
Board of Directors in accordance with paragraph (a) above.
Section 6.02. Election. At the first meeting of the Board of Directors
after each annual meeting of Stockholders at which a quorum shall be present,
the Board of Directors shall elect the officers of the Corporation.
Section 6.03 Removal. Any officer may be removed, either with or
without cause, by the Board of Directors; provided, however, that (i) the
Chairman of the Board (if any) and the Chief Executive Officer may be removed
only by the affirmative vote of a majority of the Whole Board and (ii) the
removal of any officer shall be without prejudice to the contract rights, if
any, of such officer. Election or appointment of an officer shall not of itself
create contract rights.
Section 6.04. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors, the Chairman of the Board (if
any) or the Chief Executive Officer. Any such resignation shall take effect on
receipt of such notice or at any later time specified therein. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. Any such resignation is without prejudice to the rights, if
any, of the Corporation under any contract to which the officer is a party.
Section 6.05. Vacancies. If a vacancy shall occur in any office because
of death, resignation, removal, disqualification or any other cause, the Board
of Directors may elect or appoint a successor to fill such vacancy for the
remainder of the term.
Section 6.06. Salaries. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors or pursuant to its direction, and no
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.
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Section 6.07. Chairman of the Board. The Chairman of the Board (if any)
shall (i) act in a general executive capacity for the purpose of suggesting
strategic actions and plans with respect to the business of the Corporation and
its subsidiaries and for the purpose of assisting the Chief Executive Officer in
the administration and operation of the Corporation's business and the general
supervision of its policies and affairs and (ii) have and perform such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws. The Chairman of the Board, if present, shall preside at all meetings of
the Board of Directors and of the Stockholders. The Chairman of the Board shall
have the power to sign all certificates, contracts and other instruments of the
Corporation which may be authorized by the Board of Directors. During the time
of any vacancy in the office of Chief Executive Officer or in the event of the
absence or disability of the Chief Executive Officer, the Chairman of the Board
shall have the duties and powers of the Chief Executive Officer unless otherwise
determined by the Board of Directors. In no event shall any third party having
dealings with the Corporation be bound to inquire as to any facts required by
the terms of this Section 6.07 for the exercise by the Chairman of the Board of
the powers of the Chief Executive Officer.
Section 6.08. Chief Executive Officer. (a) The Chief Executive Officer
shall be the chief executive officer of the Corporation and, subject to the
supervision, direction and control of the Board of Directors, shall have general
supervision, direction and control of the business and officers of the
Corporation with all such powers as may be reasonably incident to such
responsibilities. He shall have the general powers and duties of management
usually vested in the chief executive officer of a corporation and such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.
(b) During the time of any vacancy in the office of Chairman of the
Board or in the event of the absence or disability of the Chairman of the Board,
the Chief Executive Officer shall have the duties and powers of the Chairman of
the Board unless otherwise determined by the Board of Directors. During the
time of any vacancy in the office of President or in the event of the absence or
disability of the President, the Chief Executive Officer shall have the duties
and powers of the President unless otherwise determined by the Board of
Directors. In no event shall any third party having any dealings with the
Corporation be bound to inquire as to any facts required by the terms of this
Section 6.08 for the exercise by the Chief Executive Officer of the powers the
Chairman of the Board or the President.
Section 6.09. President. (a) The President shall be the chief operating
officer of the Corporation and, subject to the supervision, direction and
control of the Chief Executive Officer and the Board of Directors, shall manage
the day-to-day operations of the Corporation. He shall have the general powers
and duties of management usually vested in the chief operating officer of a
corporation and such other powers and duties as may be assigned to him by the
Board of Directors, the Chief Executive Officer or these Bylaws.
(b) During the time of any vacancy in the offices of the Chairman of the
Board and Chief Executive Officer or in the event of the absence or disability
of the Chairman of the Board and the Chief Executive Officer, the President
shall have the duties and powers of the Chief
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Executive Officer unless otherwise determined by the Board of Directors. In no
event shall any third party having any dealings with the Corporation be bound to
inquire as to any facts required by the terms of this Section 6.09 for the
exercise by the President of the powers the Chief Executive Officer.
Section 6.10. Vice Presidents. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors, or if not ranked, the Vice President designated by the
President, shall perform all the duties of the President as chief operating
officer of the Corporation, and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President as chief operating
officer of the Corporation. In no event shall any third party having dealings
with the Corporation be bound to inquire as to any facts required by the terms
of this Section 6.10 for the exercise by any Vice President of the powers of the
President as chief operating officer of the Corporation. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be assigned to them by the Board of Directors, the Chief Executive Officer
or the President.
Section 6.11. Treasurer. The Treasurer shall (i) have custody of the
Corporation's funds and securities, (ii) keep full and accurate account of
receipts and disbursements, (iii) deposit all monies and valuable effects in the
name and to the credit of the Corporation in such depository or depositories as
may be designated by the Board of Directors and (iv) perform such other duties
as may be prescribed by the Board of Directors or the Chief Executive Officer.
Section 6.12. Assistant Treasurers. Each Assistant Treasurer shall have
such powers and duties as may be assigned to him by the Board of Directors, the
Chief Executive Officer or the President. In case of the absence or disability
of the Treasurer, the Assistant Treasurer designated by the President (or, in
the absence of such designation, the Treasurer) shall perform the duties and
exercise the powers of the Treasurer during the period of such absence or
disability. In no event shall any third party having dealings with the
Corporation be bound to inquire as to any facts required by the terms of this
Section 6.12 for the exercise by any Assistant Treasurer of the powers of the
Treasurer under these Bylaws.
Section 6.13. Secretary. (a) The Secretary shall keep or cause to be
kept, at the principal office of the Corporation or such other place as the
Board of Directors may order, a book of minutes of all meetings and actions of
the Board of Directors, committees of the Board of Directors and Stockholders,
with the time and place of holding, whether regular or special, and, if special,
how authorized, the notice thereof given, the names of those present at meetings
of the Board of Directors and committees thereof, the number of shares present
or represented at Stockholders' meetings and the proceedings thereof.
(b) The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, a share register, or a duplicate share register, showing the names
of all Stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates issued for the same and the number
and date of cancellation of every certificate surrendered for cancellation.
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(c) The Secretary shall give, or cause to be given, notice of all
meetings of the Stockholders and of the Board of Directors required by these
Bylaws or by law to be given, and he shall keep the seal of the Corporation, if
one be adopted, in safe custody, and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board (if any), the Chief Executive Officer, the President or these
Bylaws.
(d) The Secretary may affix the seal of the Corporation, if one be
adopted, to contracts of the Corporation.
Section 6.14. Assistant Secretaries. Each Assistant Secretary shall
have such powers and duties as may be assigned to him by the Board of Directors,
the Chairman of the Board (if any), the Chief Executive Officer or the
President. In case of the absence or disability of the Secretary, the Assistant
Secretary designated by the President (or, in the absence of such designation,
the Secretary) shall perform the duties and exercise the powers of the Secretary
during the period of such absence or disability. In no event shall any third
party having dealings with the Corporation be bound to inquire as to any facts
required by the terms of this Section 6.14 for the exercise by any Assistant
Secretary of the powers of the Secretary under these Bylaws.
ARTICLE VII
Stock
-----
Section 7.01. Certificates. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors. The certificates shall be signed (i) by the Chairman of the Board
(if any), the President or a Vice President and (ii) by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer.
Section 7.02. Signatures on Certificates. Any or all of the signatures
on the certificates may be a facsimile and the seal of the Corporation (or a
facsimile thereof), if one has been adopted, may be affixed thereto. In case
any officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 7.03. Legends. The Board of Directors shall have the power and
authority to provide that certificates representing shares of stock of the
Corporation bear such legends and statements (including, without limitation,
statements relating to the powers, designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of the shares represented by such certificates) as the Board of
Directors deems appropriate in connection with the requirements of federal or
state securities laws or other applicable laws.
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Section 7.04. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the Secretary and the Treasurer each may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, in each case upon the making of an affidavit of that fact by the
owner of such certificate, or his legal representative. When authorizing such
issue of a new certificate or certificates, the Board of Directors, the
Secretary or the Treasurer, as the case may be, may, in its or his discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as the Board of Directors,
the Secretary or the Treasurer, as the case may be, shall require and/or to
furnish the Corporation a bond in such form and substance and with such surety
as the Board of Directors, the Secretary or the Treasurer, as the case may be,
may direct as indemnity against any claim, or expense resulting from any claim,
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 7.05. Transfers of Shares. Shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives. Upon surrender to the Corporation, or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation or its transfer agent shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon the
Corporation's books.
Section 7.06. Registered Stockholders. The Corporation shall be
entitled to treat the holder of record of any share of stock of the Corporation
as the holder in fact thereof and, accordingly, shall not be bound to recognize
any equitable or other claim or interest in such share on the part of any other
person, whether or not the Corporation shall have express or other notice
thereof, except as expressly provided by the laws of the State of Delaware.
Section 7.07. Regulations. The Board of Directors shall have the power
and authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of stock of the Corporation. The Board of Directors may
(i) appoint and remove transfer agents and registrars of transfers and (ii)
require all stock certificates to bear the signature of any such transfer agent
and/or any such registrar of transfers.
Section 7.08. Stock Options, Warrants, etc. Unless otherwise expressly
prohibited in the resolutions of the Board of Directors creating any class or
series of preferred stock of the Corporation, the Board of Directors shall have
the power and authority to create and issue (whether or not in connection with
the issue and sale of any stock or other securities of the Corporation)
warrants, rights or options entitling the holders thereof to purchase from the
Corporation any shares of capital stock of the Corporation of any class or
series or any other securities of the Corporation for such consideration and to
such persons, firms or corporations as the Board of Directors, in its sole
discretion, may determine, setting aside from the authorized
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but unissued stock of the Corporation the requisite number of shares for
issuance upon the exercise of such warrants, rights or options. Such warrants,
rights and options shall be evidenced by one or more instruments approved by the
Board of Directors. The Board of Directors shall be empowered to set the
exercise price, duration, time for exercise and other terms of such warrants,
rights and operations; provided, however, that the consideration to be received
for any shares of capital stock subject thereto shall not be less than the par
value thereof.
ARTICLE VIII
Indemnification
---------------
Section 8.01. Third Party Actions. The Corporation (i) shall, to the
maximum extent permitted from time to time under the laws of the State of
Delaware, indemnify every person who is or was a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that such person
is or was a director or officer of the Corporation or any of its direct or
indirect subsidiaries or is or was serving at the request of the Corporation or
any of its direct or indirect subsidiaries as a director, officer or fiduciary
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, and (ii) may, to the maximum extent permitted from time to
time under the laws of the State of Delaware, indemnify every person who is or
was a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that such person is or was an employee or agent of the
Corporation or any of its direct or indirect subsidiaries or is or was serving
at the request of the Corporation or any of its direct or indirect subsidiaries
as an employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
counsel fees), judgments, fines and amounts paid or owed in settlement actually
and reasonably incurred by such person or rendered or levied against such
person in connection with such action, suit or proceeding; provided, however,
that no indemnification shall be made to any person under this Section 8.01
unless such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, in itself, create a presumption that the
person did not act in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal action or proceeding, that the person had
reasonable cause to believe that his conduct was unlawful. Any person seeking
indemnification under this Section 8.1 shall be deemed to have met the standard
of conduct required for such indemnification unless the contrary is established.
Section 8.02. Actions By or in the Right of the Corporation. The
Corporation (i) shall, to the maximum extent permitted from time to time under
the laws of the State of
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Delaware, indemnify every person who is or was a party or who is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation or any
of its direct or indirect subsidiaries or is or was serving at the request of
the Corporation or any of its direct or indirect subsidiaries as a director,
officer or fiduciary of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, and (ii) may, to the maximum extent
permitted from time to time under the laws of the State of Delaware, indemnify
every person who is or was a party or who is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an employee or agent of the Corporation or any of its direct or
indirect subsidiaries or is or was serving at the request of the Corporation or
any of its direct or indirect subsidiaries as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including counsel fees) actually and reasonably
incurred by such person in connection with the defense or settlement or such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification shall be made to any
person under this Section 8.02 with respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnification.
Section 8.03 Certain Limitations. Unless otherwise determined by the
affirmative vote of a majority of the Whole Board, no indemnification shall be
made to any person under Section 8.01 or 8.02:
(i) for amounts actually paid to such person pursuant to one or more
policies of directors and officers liability insurance maintained by the
Corporation or pursuant to a trust fund, letter of credit or other security
or funding arrangement provided by the Corporation; provided, however, that
if it should subsequently be determined that such person is not entitled to
retain any such amount, this clause (i) shall no longer apply to such amount;
(ii) in respect of remuneration paid to such person if it shall be
determined by a final judgment or other final adjudication that payment of
such remuneration was in violation of applicable law;
(iii) on account of such person's conduct which is finally adjudged to
constitute willful misconduct or to have been knowingly fraudulent,
deliberately dishonest or from which such person derives an improper personal
benefit; or
(iv) on account of any suit in which final judgment is rendered against
such person for an accounting of profits made from the sale or purchase by
such person of securities of the Corporation pursuant to the provisions of
Section 16(b) of the Exchange Act.
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Section 8.04. Expenses. Expenses, including counsel fees and court
costs, actually and reasonably incurred by a director or officer of the
Corporation or any of its direct or indirect subsidiaries in defending a civil
or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VIII. Such
expenses incurred by other employees and agents of the Corporation and other
persons eligible for indemnification under this Article VIII may be paid upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 8.05. Non-exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VIII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any provision of law, the
Certificate of Incorporation, the certificate of incorporation or bylaws or
other governing documents of any direct or indirect subsidiary of the
Corporation, under any agreement, vote of stockholders or disinterested
directors or under any policy or policies of insurance maintained by the
Corporation on behalf of any person or otherwise, both as to action in his
official capacity and as to action in another capacity while holding any of the
positions or having any of the relationships referred to in this Article VIII.
Section 8.06. Enforceability. The provisions of this Article VIII (i)
are for the benefit of, and may be enforced directly by, each director or
officer of the Corporation the same as if set forth in their entirety in a
written instrument executed and delivered by the Corporation and such director
or officer and (ii) constitute a continuing offer to all present and future
directors and officers of the Corporation. The Corporation, by its adoption of
these Bylaws, (A) acknowledges and agrees that each present and future director
and officer of the Corporation has relied upon and will continue to rely upon
the provisions of this Article VIII in becoming, and serving as, a director or
officer of the Corporation or, if requested by the Corporation, a director,
officer or fiduciary or the like of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, (B) waives reliance
upon, and all notices of acceptance of, such provisions by such directors and
officers and (C) acknowledges and agrees that no present or future director or
officer of the Corporation shall be prejudiced in his right to enforce directly
the provisions of this Article VIII in accordance with their terms by any act or
failure to act on the part of the Corporation.
Section 8.07. Survival. The provisions of this Article VIII shall
continue as to any person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of the estate, executors,
administrators, heirs, legatees and devisees of any person entitled to
indemnification under this Article VIII.
Section 8.08. Amendment. No amendment, modification or repeal of this
Article VIII or any provision hereof shall in any manner terminate, reduce or
impair the right of any past, present or future director or officer of the
Corporation to be indemnified by the Corporation, nor the obligation of the
Corporation to indemnify any such director or officer, under and in
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accordance with the provisions of this Article VIII as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising,
in whole or in part, from a state of facts extant on the date of, or relating to
matters occurring prior to, such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.
Section 8.09. Definitions. For purposes of this Article VIII, (i)
reference to any person shall include the estate, executors, administrators,
heirs, legatees and devisees of such person, (ii) "employee benefit plan" and
"fiduciary" shall be deemed to include, but not be limited to, the meaning set
forth, respectively, in sections 3(3) and 21(A) of the Employee Retirement
Income Security Act of 1974, as amended, (iii) references to the judgments,
fines and amounts paid or owed in settlement or rendered or levied shall be
deemed to encompass and include excise taxes required to be paid pursuant to
applicable law in respect of any transaction involving an employee benefit plan
and (iv) references to the Corporation shall be deemed to include any
predecessor corporation or entity and any constituent corporation or entity
absorbed in a merger, consolidation or other reorganization of or by the
Corporation which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees, agents and
fiduciaries so that any person who was a director, officer, employee, agent or
fiduciary of such predecessor or constituent corporation or entity, or served at
the request of such predecessor or constituent corporation or entity as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
shall stand in the same position under the provisions of this Article VIII with
respect to the Corporation as such person would have with respect to such
predecessor or constituent corporation or entity if its separate existence had
continued.
ARTICLE IX
Notices and Waivers
-------------------
Section 9.01. Methods of Giving Notices. Whenever, by applicable law,
the Certificate of Incorporation or these Bylaws, notice is required to be given
to any Stockholder, any director or any member of a committee of the Board of
Directors and no provision is made as to how such notice shall be given,
personal notice shall not be required and such notice may be given (i) in
writing, by mail, postage prepaid, addressed to such Stockholder, director or
committee member at his address as it appears on the books or (in the case of a
Stockholder) the stock transfer records of the Corporation or (ii) by any other
method permitted by law (including, but not limited to, overnight courier
service, telegram, telex or telecopier). Any notice required or permitted to be
given by mail shall be deemed to be delivered and given at the time when the
same is deposited in the United States mail as aforesaid. Any notice required or
permitted to be given by overnight courier service shall be deemed to be
delivered and given one business day after delivery to such service with all
charges prepaid and addressed as aforesaid. Any notice required or permitted to
be given by telegram, telex or telecopy shall be deemed to be delivered and
given at the time transmitted with all charges prepaid and addressed as
aforesaid.
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Section 9.02. Waiver of Notice. Whenever any notice is required to be
given to any Stockholder, director or member of a committee of the Board of
Directors by applicable law, the Certificate of Incorporation or these Bylaws, a
waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice. Attendance of a Stockholder (whether in person or by
proxy), director or committee member at a meeting shall constitute a waiver of
notice of such meeting, except where such person attends for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.
ARTICLE X
Miscellaneous Provisions
------------------------
Section 10.01. Dividends. Subject to applicable law and the provisions
of the Certificate of Incorporation, dividends may be declared by the Board of
Directors at any meeting and may be paid in cash, in property or in shares of
the Corporation's capital stock. Any such declaration shall be at the
discretion of the Board of Directors. A director shall be fully protected in
relying in good faith upon the books of account of the Corporation or statements
prepared by any of its officers as to the value and amount of the assets,
liabilities or net profits of the Corporation or any other facts pertinent to
the existence and amount of surplus or other funds from which dividends might
properly be declared.
Section 10.02. Reserves. There may be created by the Board of Directors,
out of funds of the Corporation legally available therefor, such reserve or
reserves as the Board of Directors from time to time, in its absolute
discretion, considers proper to provide for contingencies, to equalize dividends
or to repair or maintain any property of the Corporation, or for such other
purpose as the Board of Directors shall consider beneficial to the Corporation,
and the Board of Directors may thereafter modify or abolish any such reserve in
its absolute discretion.
Section 10.03. Checks. All checks, drafts or other orders for payment of
money, notes or other evidences of indebtedness, issued in the name of or
payable to the Corporation shall be signed by such officer or officers or by
such employees or agents of the Corporation as may be designated from time to
time by the Board of Directors.
Section 10.04. Corporate Contracts and Instruments. Subject always to the
specific directions of the Board of Directors, the Chairman of the Board (if
any), the Chief Executive Officer, the President, any Vice President, the
Secretary or the Treasurer may enter into contracts and execute instruments in
the name and on behalf of the Corporation. The Board of Directors and, subject
to the specific directions of the Board of Directors, the Chairman of the Board
(if any), the Chief Executive Officer or the President may authorize one or more
officers, employees or agents of the Corporation to enter into any contract or
execute any instrument in the name of
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and on behalf of the Corporation, and such authority may be general or confined
to specific instances.
Section 10.05. Limitation of Access of Stockholders to Books and Records.
Subject to applicable law, the Board of Directors is expressly authorized and
empowered to determine from time to time whether and to what extent, and at what
times and places, and under what conditions and regulations, the accounts and
books of the Corporation, or any of them, shall be open to inspection of
Stockholders. Except as so determined or as expressly provided in the
Certificate of Incorporation, no Stockholder shall have any right to inspect any
account, book or document of the Corporation other than such rights as may be
conferred by applicable law.
Section 10.06. Attestation. With respect to any deed, deed of trust,
mortgage or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary or an Assistant Secretary of the Corporation shall not be necessary to
constitute such deed, deed of trust, mortgage or other instrument a valid and
binding obligation of the Corporation unless the resolutions, if any, of the
Board of Directors authorizing such execution expressly state that such
attestation is necessary.
Section 10.07. Fiscal Year. The fiscal year of the Corporation shall be
October 1 through September 30, unless otherwise fixed by the Board of
Directors.
Section 10.08. Seal. The seal of the Corporation shall be such as from
time to time may be approved by the Board of Directors.
Section 10.09. Invalid Provisions. If any part of these Bylaws shall be
invalid or inoperative for any reason, the remaining parts, so far as is
possible and reasonable, shall remain valid and operative.
Section 10.10. Headings. The headings used in these Bylaws have been
inserted for administrative convenience only and shall not limit or otherwise
affect any of the provisions of these Bylaws.
Section 10.11. References/Gender/Number. Whenever in these Bylaws the
singular number is used, the same shall include the plural where appropriate.
Words of any gender used in these Bylaws shall include the other gender where
appropriate. In these Bylaws, unless a contrary intention appears, all
references to Articles and Sections shall be deemed to be references to the
Articles and Sections of these Bylaws.
Section 10.12. Amendments. These Bylaws may be altered, amended or
repealed or new bylaws may be adopted by the affirmative vote of a majority of
the Whole Board; provided, however, that no such action shall be taken at any
special meeting of the Board of Directors unless notice of such action is
contained in the notice of such special meeting; and, provided further, that
Section 5.01 may not be altered or amended except by the affirmative vote of the
Whole Board. These Bylaws may not be altered, amended or rescinded, nor may new
bylaws
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be adopted, by the Stockholders except by the affirmative vote of the holders of
not less than 66-2/3% of the voting power of all outstanding Voting Stock,
voting together as a single class. Each alteration, amendment or repeal of these
Bylaws shall be subject in all respects to Section 8.07.
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EXHIBIT 10.3(C)
STERLING CHEMICALS, INC.
AMENDED AND RESTATED
HOURLY PAID EMPLOYEES' PENSION PLAN
(Effective as of May 1, 1996)
<PAGE>
TABLE OF CONTENTS
Page
Section 1
Introduction..........................2
1.1 Purpose....................................................2
1.2 Plan Administration........................................2
1.3 Fund Management, Trust Agreement...........................2
1.4 Effective Date.............................................2
1.5 Plan Year..................................................2
1.6 Employers..................................................2
1.7 Use of Terms...............................................3
Section 2
Eligibility for Participation and Vesting..........4
2.1 Participation..............................................4
2.2 Vesting....................................................4
Section 3
Retirement Dates, Employment Termination Date........5
3.1 Normal Retirement Date.....................................5
3.2 Late Retirement Date.......................................5
3.3 Early Retirement Date......................................5
3.4 Disability Termination Date................................5
3.5 Retirement Date............................................5
3.6 Employment Termination Date................................5
3.7 Employment with Subsidiaries Not Participating in Plan.....5
Section 4
Normal, Early, and Late Retirement Benefits.........6
4.1 Normal Retirement..........................................6
4.2 Regular Benefits - Normal Retirement.......................6
4.3 Early Retirement - Deferred Payment........................6
4.4 Early Retirement - Early Payment...........................6
4.5 Late Retirement............................................6
4.6 Participants with Prior Monsanto Company Service...........6
4.7 Section 401(a)(17) Participants............................7
i
<PAGE>
Section 5
Disability Provisions....................9
5.1 Disability Provisions Effective Date.......................9
5.2 Long-Term Disability.......................................9
5.3 Retirement Options While on Long-Term Disability...........9
Section 6
Termination Before Retirement...............10
6.1 Vested Termination - Deferred Payment.....................10
6.2 Vested Termination - Early Payment........................10
6.3 Termination Prior to Vesting..............................10
Section 7
Death Benefits.......................11
7.1 Death During Employment...................................11
7.2 Death After Termination of Employment.....................11
Section 8
Benefit Limitations and Top-Heavy Rules..........12
8.1 Single Defined Benefit Plan...............................12
8.2 Two or More Defined Benefit Plans.........................14
8.3 Defined Contribution Plan and Defined Benefit Plan........14
8.4 Definitions...............................................16
8.5 Top-Heavy Rules...........................................18
Section 9
Payment of Retirement Income
and Other Benefits.....................26
9.1 Normal Form of Benefits Payment...........................26
9.2 Optional Forms of Monthly Benefits........................27
9.3 Election and Discontinuance of Options....................28
9.4 Spouse's Retirement Income Benefit........................30
9.5 Surviving Spouse Benefit..................................32
9.6 Special Payment Limitations...............................34
9.7 Payment of Small Amounts..................................35
9.8 Designation of Beneficiaries..............................36
9.9 Salaried Employees Transferred to Hourly Basis............36
9.10 Payment of Distribution Directly to Eligible Retirement
Plan......................................................37
9.11 Definitions...............................................37
ii
<PAGE>
Section 10
Reemployment.........................39
10.1 Reinstatement of Participation............................39
10.2 Determination of Benefits.................................39
Section 11
Employer Contributions...................40
11.1 Employer Contributions....................................40
11.2 Application of Forfeitures................................40
Section 12
The Plan Committee.....................41
12.1 Membership................................................41
12.2 Plan Committee's General Powers, Rights and Duties........41
12.3 Manner of Action..........................................41
12.4 Information Required by Plan Committee....................42
12.5 Plan Committee Decision Final.............................42
12.6 Review of Benefit Determinations..........................42
12.7 Uniform Rules.............................................42
12.8 Payment of Expenses.......................................42
Section 13
Relating to the Employers.................44
13.1 Action by Employers.......................................44
13.2 Additional Employers......................................44
13.3 Restrictions as to Reversion of Trust Assets to Employers.44
Section 14
General Provisions.....................45
14.1 Notices...................................................45
14.2 Waiver of Notice..........................................45
14.3 Absence of Guaranty.......................................45
14.4 Employment Rights.........................................45
14.5 Interests Not Transferable................................45
14.6 Facility of Payment.......................................45
14.7 Gender and Number.........................................46
14.8 Evidence..................................................46
14.9 Controlling State Law.....................................46
14.10 Severability..............................................46
iii
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Section 15
Amendment, Termination or Plan Merger............47
15.1 Amendment.................................................47
15.2 Approvals for Establishment of Plan.......................47
15.3 Internal Revenue Service Approval.........................47
15.4 Termination...............................................48
15.5 Plan Merger or Consolidation..............................48
15.6 Notice of Amendment, Termination or Plan Merger...........48
15.7 Nonforfeitability on "Termination" or "Partial
Termination".............................................48
Section 16
Allocation and Distribution on Termination.........49
Section 17
Definitions........................51
17.1 Vesting Service...........................................51
17.2 Benefit Service...........................................54
17.3 Benefit Service...........................................54
17.4 Hours of Service..........................................57
17.5 Break In Service..........................................59
17.6 Standard Work Week........................................59
17.7 Layoff....................................................59
17.8 Retirement Income Factor..................................59
17.9 Subsidiary................................................59
17.10 Subsidiary................................................59
17.11 Qualified Actuary.........................................59
17.12 Actuarial Equivalent......................................59
17.13 Code......................................................60
17.14 Final Average Pay.........................................60
17.15 ERISA.....................................................62
EXHIBIT "A"
Retirement Income Factor
iv
<PAGE>
STERLING CHEMICALS, INC.
AMENDED AND RESTATED
HOURLY PAID EMPLOYEES' PENSION PLAN
(Effective as of May 1, 1996)
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, effective August 1, 1986 Sterling Chemicals, Inc. (the
"Corporation") established the Sterling Chemicals, Inc. Hourly Paid Employees'
Pension Plan (the "Plan") in recognition of the contribution the employees have
made to the operation of the Corporation;
WHEREAS, effective January 1, 1991, the Corporation amended the Plan
to incorporate amendments required by the Tax Reform Act of 1986, to make
certain additional changes required by subsequent legislation and Regulations,
and to make other changes desired by the Corporation;
WHEREAS, effective October 1, 1993 the Corporation amended and
restated the Plan to make certain changes desired by the Corporation;
WHEREAS, in Section 15.1 of the Plan, the Corporation reserved the
right to amend the Plan at any time.
NOW, THEREFORE, effective May 1, 1996, the Corporation hereby amends
the Plan to incorporate certain changes desired by the Corporation, which Plan
shall read as follows:
<PAGE>
STERLING CHEMICALS, INC.
AMENDED AND RESTATED
HOURLY PAID EMPLOYEES' PENSION PLAN
(Effective as of May 1, 1996)
Section 1
---------
Introduction
------------
1.1 Purpose. The Plan is maintained by the Corporation to provide
retirement benefits for eligible employees of the Corporation and of its
subsidiaries which adopt the Plan.
1.2 Plan Administration. The Plan is administered by a committee known as
the Employee Benefits Plans Committee (the "Plan Committee" or "Committee")
appointed by the Corporation. The Plan Committee shall constitute the Named
Fiduciary under the Plan for the purpose of administering and managing the Plan.
1.3 Fund Management, Trust Agreement. The Plan Committee is appointed by
and derives its authority from the Corporation, and shall constitute the Named
Fiduciary under the Plan with the power and authority on its own behalf or
through its agents to manage and control the assets of the Trust Fund including,
in addition to the powers and authority specifically granted to the Committee by
the Trust Agreement, all powers and all authority necessary or appropriate to
the discharge of its duties as such Named Fiduciary. The funds contributed
under the Plan are held and invested by one or more corporate trustees (the
"Trustee") appointed by the Committee or by such Trustee selected by the
Committee. The Trustee acts in accordance with one or more trust agreements
(the "Trust Agreement") which may, but need not, provide for the appointment of
investment managers to make investments of the Trust Fund, and which implement
and form a part of this Plan. As of the date the "Trust Fund" means the total
assets of any kind including Qualifying Employer Securities, but only to the
extent that immediately after such investment or reinvestment, the aggregate
fair market value of all such Qualifying Securities held under this Plan does
not exceed 10% of the total assets of the combined Trust Fund held by the
Trustee. Copies of the Plan and the Trust Agreement are on file at the
principal office of the Corporation where they may be examined by any
participant. Notwithstanding the foregoing, certain powers and authority
otherwise exercised by the Plan Committee in accordance with this Section and in
accordance with Section 12 shall be exercised by a Pension Board
as may be provided in the collective bargaining agreement between the
Corporation and the representatives of the participants.
1.4 Effective Date. The "Effective Date" of the Plan is August 1, 1986.
1.5 Plan Year. The Plan is administered on the basis of a plan year (the
"Plan Year") which coincides with the Corporation Fiscal Year, except for the
first Plan Year which commenced on August 1.
1.6 Employers. With approval of the Corporation, any subsidiary of the
Corporation may adopt this Plan in accordance with the provisions of Section
13.2. The Corporation and its
2
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subsidiaries which adopt the Plan are referred to below collectively as the
"Employers" and individually as an "Employer".
1.7 Use of Terms. Certain terms, as used in this Plan, are defined in
Section 17 or elsewhere in this Plan and when so used shall have the meanings so
assigned to them.
3
<PAGE>
Section 2
---------
Eligibility for Participation and Vesting
-----------------------------------------
2.1 Participation. Each employee of an Employer on the Effective Date who
was a participant of the Monsanto Company Hourly Paid Employees' Pension Plan
and was employed by the Monsanto Company ("Prior Employer") immediately prior to
the Effective Date shall be immediately eligible to participate in the Plan.
Upon meeting the above participation requirements, such employee shall be
considered a Prior Employer Participant.
Thereafter each employee of an Employer will become a participant in the
Plan on any date as of which he becomes a member of a group of employees to
which the Plan has been and continues to be extended by his Employer or by
agreement.
For all purposes of this Plan, Leased Employees (as defined in Section
414(n)(2) of the Code) shall not be considered employees of the Corporation or
the Employers.
2.2 Vesting. A participant shall be fully vested and have a Vested
Percentage of 100% in this Plan on his Normal Retirement Date or on any date as
of which he has completed at least five years of Vesting Service with the
Employers and the Subsidiaries as defined in Section 17.1.
The computation of a participant's nonforfeitable percentage of his
interest in the Plan shall not be reduced as the result of any direct or
indirect amendment to this Section. In the event that the Plan is amended to
change or modify any vesting schedule, a participant with a least three (3)
Years of Service as of the expiration date of the election period may elect to
have his nonforfeitable percentage computed under the Plan without regard to
such amendment. If a participant fails to make such election, then such
participant shall be subject to the new vesting schedule. The participant's
election period shall commence on the adoption date of the amendment and shall
end 60 days after the latest of:
(a) the adoption date of the amendment,
(b) the effective date of the amendment, or
(c) the date the participant receives written notice of the amendment from
the Employer or Plan Committee.
4
<PAGE>
Section 3
---------
Retirement Dates, Employment Termination Date
---------------------------------------------
3.1 Normal Retirement Date. A participant's "Normal Retirement Date" will
be the first day of the month next following the later of the month in which he
attains age 65 years or the month in which he attains 5 years of Vesting
Service. A participant's "Normal Retirement Age" shall be his age on his Normal
Retirement Date.
3.2 Late Retirement Date. A participant's "Late Retirement Date" will be
the first day of the month next following the month in which a participant fails
to complete 40 or more Hours of Service with the Employers after his Normal
Retirement Date. However, if a participant shall subsequently complete 40 or
more Hours of Service in a calendar month, the participant shall be treated as a
re-employed participant in accordance with Section 10 as of the first day of
such month. A participant who works beyond his Normal Retirement Date shall
continue to accrue Benefit Service until his Late Retirement Date.
3.3 Early Retirement Date. A participant's "Early Retirement Date" will
be the first day of the month next following the month in which he retires from
the employ of all the Employers before his Normal Retirement Date but after he
has both attained age 55 years and is vested pursuant to Section 2.2.
3.4 Disability Termination Date. A participant's "Disability Termination
Date" will be the last day worked for any Employer before his Normal Retirement
Date because of Long-Term Disability, as determined pursuant to Section 5
hereof. If a participant has accrued 5 years of Vesting Service as determined
pursuant to Section 17.1(a)(vii) hereof as of the later of age 55 or the date as
of which he is deemed to qualify for Long-Term Disability, his Monthly
Retirement Income shall be payable hereunder at age 65 or when benefits are no
longer available under the Hourly Disability Plan, if later.
3.5 Retirement Date. A participant's "Retirement Date" will be that one of
the dates described in Sections 3.1, 3.2, and 3.3 as of which he retires from
the employ of all the Employers.
3.6 Employment Termination Date. A participant's "Employment Termination
Date" will be the date on which his employment with all of the Employers
terminates before he qualifies for retirement on a Retirement Date.
3.7 Employment with Subsidiaries Not Participating in Plan. For the
purpose of determining a participant's Retirement Date or Employment Termination
Date, references in the Plan to his retirement or termination from the employ of
all of the Employers shall mean his retirement or termination from the
employment of all Employers and all subsidiaries, including those which have not
adopted the Plan.
5
<PAGE>
Section 4
---------
Normal, Early, and Late Retirement Benefits
-------------------------------------------
4.1 Normal Retirement. Subject to the conditions and limitations of the
Plan, a participant retiring on his Normal Retirement Date will be entitled to a
Monthly Retirement Income for life commencing at his Normal Retirement Date in
an amount equal to his Regular Benefits determined in accordance with Section
4.2.
4.2 Regular Benefits - Normal Retirement. The "Regular Benefits" for any
participant who retires on his Normal Retirement Date on or after the Effective
Date will be a monthly amount equal to the amount determined by multiplying the
sum of his Years of Benefit Service times the "Retirement Income Factor" set
forth in Exhibit "A" determined with respect to such participant times the
Vested Percentage set forth in Section 2.2 of the Plan.
In establishing the liabilities under the Plan and contributions thereto,
the enrolled actuary will use such methods and assumptions under Section 411(b)
of the Code as will reasonably reflect the cost of the benefits under the Plan.
4.3 Early Retirement - Deferred Payment. Subject to the conditions and
limitations of the Plan, if a participant retires on an Early Retirement Date
and elects to defer his Monthly Retirement Income until his Normal Retirement
Date, he will be entitled to a Monthly Retirement Income for life commencing at
his Normal Retirement Date. Such Monthly Retirement Income shall be computed in
accordance with Sections 4.1 and 4.2 (as in effect as of his Early Retirement
Date) based upon his Benefit Service determined as of his Early Retirement Date.
4.4 Early Retirement - Early Payment. In lieu of the Monthly Retirement
Income payable under Section 4.3 commencing on his Normal Retirement Date, a
participant who retires on an Early Retirement Date and does not elect to defer
his Monthly Retirement Income in accordance with Section 4.3 will be entitled to
a Monthly Retirement Income commencing on his Early Retirement Date or, if he so
elects, on the first day of any month thereafter before his Normal Retirement
Date. The Monthly Retirement Income which is payable to a participant in
accordance with the preceding sentence will be computed by determining the
amount of Monthly Retirement Income which the participant would have been
entitled to receive under Section 4.3 commencing at his Normal Retirement Date
and reducing such amount by one-fourth of one percent for each complete calendar
month by which the date his Monthly Retirement Income payments commence precedes
his Normal Retirement Date, except that the reduction provided for above shall
not apply if the sum of his age and Years of Vesting Service as of his Early
Retirement Date equals or exceeds 80.
4.5 Late Retirement. Subject to the terms and conditions of the Plan, a
participant who retires on a Late Retirement Date will be entitled to a Monthly
Retirement Income for life commencing at his Late Retirement Date in an amount
equal to his Regular Benefits determined in accordance with Section 4.2.
4.6 Participants with Prior Monsanto Company Service. For a Prior
Employer Participant, the amount of his Monthly Retirement Income will be
reduced by an amount equal to
6
<PAGE>
the monthly amount of benefits payable under the Monsanto Company Hourly Paid
Employees' Pension Plan and the Monsanto Company Salaried Employees' Pension
Plan as of the Effective Date calculated as a single life annuity as if such
Prior Employer Participant commenced retirement benefits from the Monsanto
Company on the date of his retirement or employment termination from the
Employer.
4.7 Section 401(a)(17) Participants. The accrued benefit of any
participant with at least one Hour of Service in a Plan Year beginning after
December 31, 1988 shall be equal to the greater of (a) the participant's Frozen
Accrued Benefit, or (b) the participant's accrued benefit calculated above based
on the Regular Benefit formula provided in the Supplement.
"Frozen Accrued Benefit" means a participant's accrued benefit under the
Plan determined as of the latest Fresh-Start Date as if the participant
terminated employment with the Employer on that date and without regard to any
amendment to the Plan adopted after that date, other than amendments recognized
as effective as of or before that date under Code Section 401(b) or Regulation
Section 1.401(a)(4)-11(g).
If, as of the latest Fresh-Start Date, the amount of a participant's Frozen
Accrued Benefit was limited by the application of Code Section 415, the
participant's Frozen Accrued Benefit will be increased for years after the
latest Fresh-Start Date to the extent permitted under Code Section 415(d)(1).
If: (a) the Plan's normal form of benefit in effect on the latest Fresh-Start
Date is not the same as the normal form under the Plan after the latest Fresh-
Start Date and/or (b) the Normal Retirement Age for any participant on that date
was greater than the Normal Retirement Age for that participant under the Plan
after the latest Fresh-Start Date, the stated Frozen Accrued Benefit will be
expressed as an actuarially equivalent benefit in the normal form under the Plan
after the latest Fresh-Start Date, commencing at the participant's Normal
Retirement Age under the Plan in effect after the latest Fresh-Start Date.
"Fresh-Start Date" means the last day of the Plan Year preceding a Plan
Year for which any amendment of the Plan that directly or indirectly affects the
amount of a participant's benefit determined under the current benefit formula,
is made effective.
Notwithstanding any other provision in the Plan, each "Section 401(a)(17)
Participant's" accrued benefit under this Plan will be the greater of:
(a) the participant's accrued benefit as of the last day of the last
Plan Year beginning before January 1, 1994, frozen in accordance with
Regulation 1.401(a)(4)-13, or
(b) the participant's accrued benefit determined with respect to the
benefit formula applicable for the Plan Year beginning on or after January
1, 1994, as applied to the participant's total years of service taken into
account under the Plan for purposes of benefit accruals.
A "Section 401(a)(17) Participant" means a participant whose current
accrued benefit as of a date on or after the first day of the first Plan Year
beginning on or after January 1, 1994, is based
7
<PAGE>
on compensation for a year beginning prior to the first day of the first Plan
Year beginning on or after January 1, 1994 that exceeded $150,000.
8
<PAGE>
Section 5
---------
Disability Provisions
---------------------
5.1 Disability Provisions Effective Date. The provisions of the Plan
relating to disability shall apply exclusively to participants who have
completed at least two and one-half years of Benefit Service by their Disability
Termination Date, whose last full day of active employment prior to disability
is on or after the Effective Date of this Plan, and who qualify for benefits
under the Hourly Disability Plan. The disability entitlements of participants
whose last full day of active employment is prior to the Effective Date of this
Plan or who are actively at work after the Effective Date but do not qualify for
participation in the Hourly Disability Plan, shall be governed by the
eligibility provisions of the Predecessor Plans and the benefit formula in
effect at the time they first qualify for Long-Term Disability.
5.2 Long-Term Disability. After the Effective Date of the Plan and subject
to Section 5.1 above, determination of Long-Term Disability will be based on the
procedures and provisions of the Hourly Disability Plan.
5.3 Retirement Options While on Long-Term Disability. Retirement options
described in Sections 9.1 and 9.2 of this Plan shall not be available to a
participant who is on Long-Term Disability and receiving payments from the
Hourly Disability Plan. When such a participant ceases receiving benefits under
the Hourly Disability Plan at or after age 65 and provided that he is otherwise
eligible for benefits hereunder, all options described in Sections 9.1 and 9.2
of this Plan shall be available.
9
<PAGE>
Section 6
---------
Termination Before Retirement
-----------------------------
6.1 Vested Termination - Deferred Payment. Subject to the conditions and
limitations of the Plan, if a participant's employment with all of the Employers
and all of the subsidiaries terminates for a reason other than retirement under
the Plan or his death, but after he is vested pursuant to Section 2.2, the
participant shall be eligible to receive a Monthly Vested Termination Benefit
commencing at his Normal Retirement Date. Such monthly benefit shall be computed
in accordance with Sections 4.1 and 4.2 (as in effect as of his Employment
Termination Date) based upon his Benefit Service determined as of his Employment
Termination Date.
6.2 Vested Termination - Early Payment. In lieu of the Monthly Vested
Termination Benefit otherwise payable under Section 6.1 commencing at his Normal
Retirement Date, a participant may elect to receive a reduced Monthly Vested
Termination Benefit commencing on the first day of the calendar month next
following the month in which he attains age 55 years or on the first day of any
month thereafter before his Normal Retirement Date. The Monthly Vested
Termination Benefit payable to a participant in accordance with the preceding
sentence will be computed by determining the amount of Monthly Vested
Termination Benefit to which the participant would have been entitled under
Section 6.1 above commencing at his Normal Retirement Date and reducing such
amount by one-fourth of one percent for each complete calendar month by which
the date his Monthly Vested Termination Benefits commence precedes his Normal
Retirement Date.
6.3 Termination Prior to Vesting. If a participant's employment with all
of the Employers and subsidiaries terminates for a reason other than Retirement
under the Plan or his death, and prior to his becoming vested pursuant to
Section 2.2, no benefits shall be payable to him under the Plan attributable to
his employment with the Employers.
10
<PAGE>
Section 7
---------
Death Benefits
--------------
7.1 Death During Employment. Except as provided below, if a participant's
death occurs while he is employed by an Employer, no benefits attributable to
his employment with the Employers shall be payable under the Plan; provided,
however, that if the Spouse's Retirement Income Benefit or the Surviving Spouse
Benefit as defined in Section 9.4 and 9.5 were in effect with respect to such a
participant at the time of his death, the only benefits payable under the Plan
attributable to his employment shall be those provided under those Benefits.
If the participant dies prior to the date benefits under this Plan commence, any
remaining portion of the participant's interest which is not payable to a
Beneficiary designated by the participant will be distributed within five years
after such participant's death.
7.2 Death After Termination of Employment. Except as provided in
paragraphs (a) through (d) below, if a participant's death occurs after his
employment by the Employers has terminated, no benefits attributable to his
employment with the Employers shall be payable under the Plan. However:
(a) In the case of a participant who was receiving or eligible to
receive a Monthly Retirement Income in accordance with paragraph 9.1(a) and
with respect to whom no election in accordance with paragraph 9.1(b) or
Section 9.2 was in effect at the time of his death, the benefits payable
under the Plan shall be those provided under Section 9.1(a), if any.
(b) In the case of a participant who had elected an option under
Section 9.2 and the option was in effect at the time of his death, the
benefits payable under the Plan shall be those provided under the option.
(c) In the case of a participant who dies after being declared on
Long-Term Disability while receiving benefits from the Hourly Disability
Plan, after completing 10 or more years of Vesting Service pursuant to
Section 17.1(a)(viii), and before his Normal Retirement Date, his Eligible
Surviving Spouse shall receive only the 50% Survivor benefit provided for
under Section 9.4, based upon the participant's Benefit Service pursuant to
Section 17.3(a)(vii) to the date of death.
(d) In the case of a participant eligible to receive a Monthly Vested
Termination Benefit, the death benefit, if any, shall be determined in
accordance with Section 9.5.
11
<PAGE>
Section 8
---------
Benefit Limitations and Top-Heavy Rules
---------------------------------------
Notwithstanding any provision of this Plan to the contrary, the total
Annual Benefit received by an Employee shall be subject to the following
limitations:
8.1 Single Defined Benefit Plan. The normal retirement benefit of any
participant under this Plan or any other defined benefit plans maintained by the
Employers or any subsidiary of the Corporation ("Related Pension Plans") cannot
exceed the lesser of $90,000 (increased annually for Limitation Years beginning
after December 31, 1987 in accordance with Section 415(d) of the Code to reflect
cost-of-living adjustments) or one hundred percent (100%) of such participant's
Average Compensation. For purposes of determining whether a participant's
benefits exceed these limitations, the following rules shall apply:
(a) Adjustment If Benefit Not Single Life Annuity. If the normal form
of benefit is other than a single life annuity, such form must be adjusted
actuarially to the equivalent of a single life annuity. This single life
annuity cannot exceed the maximum dollar or percent limitations outlined
above. No adjustment is required for the following: qualified joint and
survivor annuity benefits, preretirement disability benefits, preretirement
death benefits and post-retirement medical benefits.
(b) Adjustment If Benefit Commences Before Social Security Retirement
Age. If benefit distributions begin before the participant's Social
Security Retirement Age, but on or after age 62, the $90,000 limitation
shall be reduced by: (1) in the case of a participant whose Social Security
Retirement Age is 65, 5/9 of 1% for each month by which benefits commence
before the month in which the participant attains age 65, or (2) in the
case of a participant whose Social Security Retirement Age is greater than
65, 5/9 of 1% for each of the first 36 months and 5/12 of 1% for each
additional month (up to 24) by which benefits commence before the month in
which the participant attains his Social Security Retirement Age. If
benefit distributions begin before age 62, the $90,000 limitation shall be
the actuarial equivalent of the participant's limitation for benefits
commencing at age 62, reduced for each month by which benefits commence
before the month in which the participant attains age 62. In order to
determine actuarial equivalence for this purpose, the interest rate
assumption shall be as set forth in Section 8.1(e).
(c) Adjustment If Benefit Commences After Social Security Retirement
Age. If benefit distributions begin after the participant's Social Security
Retirement Age, the $90,000 limitation shall be increased so that it is the
actuarial equivalent of the $90,000 limitation at the participant's Social
Security Retirement Age. The increased maximum benefit may not exceed 100%
of the participant's highest three year average Compensation.
(d) Social Security Retirement Age Defined. "Social Security
Retirement Age" as used herein shall mean the age used as the retirement
age under Section 216(1) of the Social Security Act, except that such
Section shall be applied without regard to the age
12
<PAGE>
increase factor and as if the early retirement age under Section 216(1)(2)
of such Act were sixty-two (62).
(e) Interest Assumption. The interest rate used for adjusting the
maximum limitations above shall be:
(i) For benefits commencing before Social Security Retirement Age
and for forms of benefit other than straight life annuity, the greater
of:
A. 5%, or
B. the rate used to determine actuarial equivalence for other
purposes of this Plan.
(ii) For benefits commencing after Social Security Retirement Age,
the lesser of:
A. 5%, or
B. the rate used to determine actuarial equivalence for other
purposes of this Plan.
(f) Reduction For Service Less Than 10 Years. In the case of a
participant who has less than ten (10) years of participation in a Related
Pension Plan, the benefits shall not exceed the limit set forth in Section
8.1 above multiplied by a fraction, the numerator of which is the number of
years (or part thereof) of participation in a Related Pension Plan, and the
denominator of which is ten (10).
(g) Adjustment For Small Benefits. In the case of a participant whose
Annual Benefit is not in excess of $10,000, the benefits payable with
respect to such participant under this Plan shall be deemed not to exceed
the limitation of this Section if:
(i) The Annual Benefits payable with respect to such participant
under this Plan and all other Related Pension Plans do not exceed
$10,000 for the Plan Year or for any prior Plan Year, and
(ii) The Employer has not at any time maintained a defined
contribution plan in which the participant participated.
(h) Protected Accrued Benefit. Notwithstanding anything in this
Section 8 to the contrary, the maximum annual benefit for any participant
in a Related Pension Plan in existence on July 1, 1982 shall not be less
than the protected current accrued benefit, payable annually, as provided
for under question T-3 of Internal Revenue Service Notice 83-10, 1983-1
C.B. 536. In the case of an individual who was a participant in one or more
Related Pension Plans as of the first day of the first Limitation Year
beginning after December 31,
13
<PAGE>
1986, the application of the limitation of this Section 8 shall not cause
the maximum permissible amount for such individual under all such Related
Pension Plans to be less than the individual's current accrued benefit. The
preceding sentence applies only if such Related Pension Plans met the
requirements of Code Section 415 for all Limitation Years beginning before
January 1, 1987.
8.2 Two or More Defined Benefit Plans. If the Employers or any subsidiary
of the Corporation maintain one or more Related Pension Plans in addition to
this Plan, the sum of the normal retirement benefits of all plans will be
treated as a single benefit for the purposes of applying the limitations in
Section 8.1. If these benefits exceed, in the aggregate, the limitations in
Section 8.1, the normal retirement benefit under this Plan shall be reduced (but
not below zero) until the sum of the benefits of the remaining plans satisfy the
limitations.
8.3 Defined Contribution Plan and Defined Benefit Plan.
(a) General Rule. If the Employer or any subsidiary of the Corporation
maintains (or has ever maintained) one or more defined contribution plans
and one or more Related Pension Plans, the sum of the "defined contribution
plan fraction" and the "defined benefit plan fraction," as defined below,
cannot exceed 1.0 for any Limitation Year. For purposes of this paragraph,
employee contributions to a qualified defined benefit plan are treated as a
separate defined contribution plan. For purposes of this paragraph, all
defined contribution plans of an Employer are to be treated as one defined
contribution plan and all defined benefit plans of an Employer are to be
treated as one defined benefit plan, whether or not such plans have been
terminated.
If the sum of the defined contribution plan fraction and defined
benefit plan fraction exceeds 1.0, the Annual Benefit of the defined
benefit plans will be reduced so that the sum of the fractions will not
exceed 1.0. In no event will the Annual Benefit be decreased below the
amount of the accrued benefit to date. If additional reductions are
required for the sum of the fractions to equal 1.0, the reductions will
then be made to the Annual Additions of the defined contribution plans.
(b) Defined Contribution Plan Fraction.
(i) General Rule: The defined contribution plan fraction for any
Limitation Year is 1 divided by 2, where:
1 is the sum of the actual Annual Additions to the
participant's account under all the defined contribution plans
(whether or not terminated) maintained by the Employer for the
current and all prior Limitation Years (including the annual
additions attributable to the participant's nondeductible Employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Code
Section 419(e), and individual
14
<PAGE>
medical accounts, as defined in Code Section 415(l)(2), maintained by
the Employer); and
2 is the sum of maximum aggregate amounts for the current and all
prior Limitation Years of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer).
The maximum aggregate amount in any Limitation Year is the lesser of
125 percent of the dollar limitation determined under Code Sections
415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35 percent
of the participant's Compensation for such year.
(ii) If the participant was a participant as of the first day of the
First Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an
amount equal to the product of (1) the excess of the sum of the fractions
over 1.0 times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of
the last Limitation Year beginning before January 1, 1987, and disregarding
any changes in the terms and conditions of the plans made after May 5,
1986, but using the Code Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
(c) Defined Benefit Plan Fraction.
(i) General Rule. The defined benefit plan fraction for any year is 1
divided by 2, where:
1 is the projected Annual Benefit of the participant under the
Plan (determined as of the close of the Limitation Year), and
2 is the lesser of
(1) 1.25 times the dollar limitation (adjusted, if necessary)
for such year, or
(2) 1.4 times one hundred percent (100%) of the participant's
Average Compensation for the high three (3) years (adjusted, if
necessary).
(ii) Notwithstanding the above, if the participant was a participant
as of the first day of the first Limitation Year beginning after December
31, 1986, in one or more Related Pension Plans which were in existence on
May 6, 1986, the
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<PAGE>
denominator of this fraction will not be less than one hundred twenty-five
percent (125%) of the sum of the Annual Benefits under such plans which the
participant had accrued as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding any changes in the terms and
conditions of the plans after May 5, 1986. The preceding sentence applies
only if the Related Pension Plans individually and in the aggregate
satisfied the requirements of Code Section 415 as in effect for all
Limitation Years beginning before January 1, 1987.
8.4 Definitions.
(a) Employer. The Corporation and any other Employer that adopts this
Plan. In the case of a group of employers which constitutes a controlled
group of corporations (as defined in Code Section 414(b) as modified by
Code Section 415(h)) or which constitutes trades and businesses (whether or
not incorporated) which are under common control (as defined in Code
Section 414(c) as modified by Code Section 415(h)) or an affiliated service
group (as defined in Code Section 414(m)), all such employers shall be
considered a single Employer for purposes of applying the limitations of
this Section.
(b) Excess Amount. The excess of the participant's Annual Additions
for the Limitation Year over the Maximum Permissible Amount.
(c) Limitation Year. A twelve (12) consecutive month period ending on
September 30.
(d) Maximum Permissible Amount. For a Limitation Year, the Maximum
Permissible Amount with respect to any participant shall be the lesser of:
(i) $30,000 (increased annually for Limitation Years beginning
after December 31, 1987 in accordance with Section 415(d) of the Code
to reflect cost-of-living adjustments), or
(ii) 25% of the participant's Compensation for the Limitation
Year.
(e) Compensation. For purposes of determining compliance with the
limitations of Code Section 415, Compensation shall mean a participant's
earned income, wages, salaries, fees for professional services and other
amounts received for personal services actually rendered in the course of
employment with an Employer maintaining the Plan, including, but not
limited to, commissions paid to salesmen, compensation for services based
on a percentage of profits, commissions on insurance premiums, tips and
bonuses, and excluding the following:
(i) Employer contributions to a plan of deferred compensation to
the extent contributions are not included in gross income of the
participant for the taxable year in which contributed, or on behalf of
an participant to a simplified employee pension plan to the extent
such contributions are deductible under Code
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Section 210(b)(2), and any distributions from a plan of deferred
compensation whether or not includable in the gross income of the
participant when distributed (however, any amounts received by a
participant pursuant to an unfunded nonqualified plan may be
considered as Compensation in the year such amounts are included in
the gross income of the participant);
(ii) amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by a participant
becomes freely transferable or is no longer subject to a substantial
risk of forfeiture;
(iii) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) other amounts which receive special tax benefits, or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described under Code Section 403(b) (whether or not the contributions
are excludable from the gross income of the participant).
For purposes of applying the limitations in this Article, amounts
included as Compensation are those actually paid or made available to a
participant within the Limitation Year. For Limitation Years beginning
after December 31, 1988, Compensation shall be limited to $200,000 (unless
adjusted in the same manner as permitted under Code Section 415(d)).
Notwithstanding anything to the contrary in the definition, Compensation
shall include any and all items which may be includable in Compensation
under Section 415(c)(3) of the Code.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the Compensation of each
participant taken into account under the Plan shall not exceed the "OBRA
'93 Annual Compensation Limit." The "OBRA '93 Annual Compensation Limit" is
$150,000, as adjusted for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined ("Determination Period") beginning in such
calendar year. If a Determination Period consists of fewer than 12 months,
the "OBRA '93 Annual Compensation Limit" will be multiplied by a fraction,
the numerator of which is the number of months in the Determination Period,
and the denominator of which is 12. In applying this limitation, the family
group of a highly compensated employee (as defined in Code Section 414(q))
who is subject to the family member aggregation rules of Code Section
414(q)(6) because such participant is either a "five-percent owner" of the
Employer or one of the ten (10) highly compensated employees paid the
greatest Compensation during the year, shall be treated as a single
participant, except that for this purpose family members shall include only
the affected participant's spouse and any lineal descendants who have not
attained age nineteen (19) before the close of the year. If, as a result of
the application of such rules the adjusted "OBRA '93 Annual Compensation
Limit" is exceeded, then the limitation shall be prorated
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<PAGE>
among the affected family members in proportion to each such family
member's Compensation prior to the application of this limitation, or the
limitation shall be adjusted in accordance with any other method permitted
by regulation.
Any reference in this Plan to the limitation under Code Section
401(a)(17) shall mean the "OBRA '93 Annual Compensation Limit" set forth
in this Section.
If Compensation for any prior Determination Period is taken into
account in determining a participant's benefits accruing in the current
Plan Year, the Compensation for that prior Determination Period is subject
to the "OBRA '93 Annual Compensation Limit" in effect for that prior
Determination Period. For this purpose, for Determination Periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the "OBRA '93 Annual Compensation Limit" is
$150,000.
(f) Average Compensation. The average Compensation during a
participant's high three (3) years of service, which period is the three
(3) consecutive calendar years (or, the actual number of consecutive years
of employment for those participants who are employed for less than three
(3) consecutive years with the Employer) during which the participant had
the greatest aggregate Compensation from the Employer.
(g) Annual Benefit. A benefit payable annually in the form of a
straight life annuity (with no ancillary benefits) under a plan to which
participants do not contribute and under which no rollover contributions
are made.
(h) Annual Additions. With respect to each Limitation Year, the total
of the employer contributions, participant contributions, forfeitures, and
amounts described in Code Sections 415(1) and 419A(d)(2) which are
allocated on behalf of a participant.
8.5 Top-Heavy Rules. For any Plan Year for which this Plan is a Top-Heavy
Plan, as defined in Section 8.5(g), any other provisions of this Plan to the
contrary notwithstanding, this Plan shall be subject to the provisions of this
Section 8.5.
(a) Vesting Provisions. Each participant who has completed an "Hour of
Service" (as defined in Section 17.4 hereof) after the Plan becomes top
heavy and while the Plan is top heavy and who has completed the Service
specified in the following table shall be vested in his accrued benefit
under this Plan at least as rapidly as is provided in the following
schedule; except that the vesting provision set forth in Section 2.2 shall
be used at any time in which it provides for more rapid vesting:
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Years of Service Vested Percentage
---------------- -----------------
Less than 2 years 0%
2 but less than 3 years 20%
3 but less than 4 years 40%
4 but less than 5 years 60%
5 but less than 6 years 80%
6 years or more 100%
If an account becomes vested by reason of the application of the preceding
schedule, it may not thereafter be forfeited by reason of reemployment
after retirement pursuant to a suspension of benefits provision, by reason
of withdrawal of any mandatory employee contributions to which employer
contributions were keyed, or for any other reason. If the Plan subsequently
ceases to be top-heavy, the preceding schedule shall continue to apply with
respect to any participant who had at least three (3) years of service (as
defined in Treasury Regulation Section 1.411(a)-8T(b)(3)) as of the close
of the last year that the Plan was top-heavy, except that each participant
whose non-forfeitable percentage of his accrued benefit derived from
employer contributions is determined under such amended schedule, and who
has completed at least three (3) years of service with the employer, may
elect, during the election period, to have the non-forfeitable percentage
of his accrued benefit derived from employer contributions determined
without regard to such amendment if his non-forfeitable percentage under
the Plan as amended is, at any time, less than such percentage determined
without regard to such amendment. For all other participants, the non-
forfeitable percentage of their accrued benefit prior to the date the Plan
ceased to be top-heavy shall not be reduced, but future increases in the
non-forfeitable percentage shall be made only in accordance with Section
2.2.
(b) Minimum Benefit Provisions. Each participant who is a Non-Key
Employee, as defined in Section 8.5(g), shall be entitled to an accrued
benefit in the form of a single-life annuity (with no ancillary benefits)
beginning at his normal retirement date, that shall not be less than his
average annual participant's Compensation, within the meaning of Code
Section 415, for years in the Testing Period multiplied by the lesser of:
(a) two percent (2%) multiplied by the number of years of Top-Heavy Service
or (b) twenty percent (20%). A Non-Key Employee may not fail to receive a
minimum benefit because of a failure to receive a specified amount of
Compensation or a failure to make mandatory employee or elective
contributions.
"Testing Period' means, with respect to a participant, the period of
consecutive years of Top-Heavy Service, not exceeding five (5), during
which the participant had the greatest aggregate compensation, within the
meaning of Code Section 415, from the Corporation. "Top-Heavy Service"
means his Service credited under Section 17.4. Top-Heavy Service shall not
include any Service before July 1, 1984 or any Service that begins after
the close of the last Plan Year in which the Plan was a Top-Heavy Plan.
Years before and after such excluded periods shall be considered
consecutive for purposes of determining the Testing Period.
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(c) Limitation on Compensation. A participant's annual Compensation
taken into account under this Section 8.5 and for purposes of computing
benefits under this Plan shall not be in excess of Two Hundred Thousand
Dollars ($200,000). Such amount shall be adjusted automatically for each
Plan Year to the amount prescribed by the Secretary of the Treasury or his
delegate pursuant to regulations for the calendar year in which such Plan
Year commences. For Plan Years beginning on or after January 1, 1994, a
participant's annual Compensation taken into account under this Section 8.5
and for purposes of computing benefits under this Plan shall not be in
excess of the limitation under Code Section 401(a)(17) .
(d) Limitation on Benefits. In the event that the Corporation, other
Employer or an Affiliate (hereinafter in this Section collectively referred
to as a "Considered Company") also maintains a defined contribution plan
providing contributions on behalf of participants in this Plan, one of the
two following provisions shall apply:
(i) If for a Plan Year this would not be a Top-Heavy Plan if "90
percent" were substituted for "60 percent" in Section 8.5(g), then the
percentages used in Section 8.5(b) are changed to be the lesser of (i)
three percent (3%) multiplied by the number of years of Top-Heavy
Service or (ii) the lesser of thirty percent (30%) or twenty percent
(20%) plus one percent (1%) for each year the Plan is taken into
account under this subsection (i).
(ii) If for a Plan Year this Plan would continue to be a Top-Heavy
Plan if "90 percent" were substituted for "60 percent" in Section
8.5(g), then the denominator of both the defined contribution plan
fraction and the defined benefit plan fraction shall be calculated as
set forth in Section 8.3, for the limitation year ending in such Plan
Year by substituting "one (1.0)" for "one and twenty-five hundredths
(1.25)" in each place such figure appears. This subsection (ii) will
not apply for such Plan Year with respect to any individual for whom
there are no (i) Corporation contributions, forfeitures or voluntary
non-deductible contributions allocated to such individual or (ii)
accruals for such individual under the defined benefit plan.
Furthermore, the limitation rules set forth in Code Section
415(e)(6)(B)(i) shall be applied by substituting "Forty-one Thousand
Five Hundred Dollars ($41,500)' for "Fifty-One Thousand Eight Hundred
Seventy-Five Dollars ($51,875)" where it appears therein.
(e) Coordination With Other Plans. In the event that another defined
contribution or defined benefit plan maintained by a Considered Company
provides contributions or benefits on behalf of participants in this Plan,
such other plan shall be treated as a part of this Plan pursuant to
applicable principles prescribed by U.S. Treasury Regulations or applicable
IRS rulings (such as Revenue Ruling 81-202 or any successor ruling) to
determine whether this Plan satisfies the requirements of Sections 8.5(a),
8.5(b) and 8.5(c) and to avoid inappro priate omissions or inappropriate
duplication of minimum contributions. Such determination shall be made upon
the advice of counsel by the Committee. In the event a participant is
covered by a defined benefit plan which is top-heavy pursuant to Section
416 of the Code,
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<PAGE>
a comparability analysis (as prescribed by Revenue Ruling 81-202 or any
successor ruling) shall be performed in order to establish that the plans
are providing benefits at least equal to the defined benefit minimum.
(f) Distributions to Certain Key Employees. Notwithstanding any other
provision of this Plan to the contrary, the entire interest in this Plan of
each participant who is a five percent (5%) owner (as described in Section
(416)(i)(A) of the Code determined with respect to the Plan Year ending in
the calendar year in which such individual attains age 70 1/2), shall be
distributed to such participant not later than the first day of April
following the calendar year in which such individual attains age 70 1/2.
(g) Determination of Top-Heavy Status. The Plan shall be a Top-Heavy
Plan for any Plan Year if, as of the Determination Date, the present value
of the cumulative accrued benefits under the Plan determined as of the
Valuation Date for participants (including former participants) who are Key
Employees exceeds sixty percent (60%) of the present value of the
cumulative accrued benefits under the Plan for all participants (including
former participants) or, if this Plan is required to be in an Aggregation
Group, any such Plan Year in which such Group is a Top-Heavy Group.
In determining Top-Heavy status, if an individual has not performed
one (1) Hour of Service for a Considered Company at any time during the
five-year period ending on the Determination Date, any accrued benefit for
such individual and the aggregate accounts of such individual shall not be
taken into account. The accrued benefit of any employee (other than a Key
Employee) shall be determined under (a) the method, if any, that uniformly
applies for accrual purposes under all plans maintained by the Aggregation
Group or (b) if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under the fractional
accrual rate of Code Section 411(b)(1)(C).
For purposes of this Section, the capitalized words have the following
meanings:
(i) "Aggregation Group" means the group of plans, if any, that
includes both the group of plans that is required to be aggregated and
the group of plans that is permitted to be aggregated. The group of
plans that is required to be aggregated (the "required aggregation
group") includes:
A. Each plan of a Considered Company in which a Key
Employee is a member, including collectively bargained plans,
and
B. Each other plan, including collectively bargained
plans, of a Considered Company which enables a plan in which a
Key Employee is a member to meet the requirements of either Code
Section 401(a)(4) or 410.
The group of plans that is permitted to be aggregated (the "permissive
aggregation group") includes the required aggregation group and any
plan that is not part of the required aggregation group that the
Committee certifies as constituting a plan within
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the permissive aggregation group. Such plans may be added to the
permissive aggregation group only if, after the addition, the
aggregation group as a whole continues to meet the requirements of
both Code Sections 401(a)(4) and 410.
(ii) "Determination Date" means for any Plan Year the last day of
the immediately preceding Plan Year or in the case of the first Plan
Year of the Plan, Determination Date means the last day of such Plan
Year.
(iii) "Key Employee" means an Employee as defined in Code Section
416(i) and the Regulations thereunder. Generally, any Employee or
former Employee (as well as each of his Beneficiaries) is considered a
Key Employee if he, at any time during the Plan Year or any of the
preceding four (4) Plan Years, has been included in one of the
following categories:
A. an officer of the Employer (as that term is defined
within the meaning of the Regulations under Code Section 416)
having annual Compensation greater than 50 percent of the amount
in effect under Code Section 415(b)(1)(A) for any such Plan Year;
B. one of the ten Employees having annual Compensation from
the Employer for a Plan Year greater than the dollar limitation in
effect under Code Section 415(c)(1)(A) for the calendar year in
which such Plan Year ends and owning (or considered as owning
within the meaning of Code Section 318) both more than one-half
percent interest and the largest interests in the Employer;
C. a "five percent owner" of the Employer. "Five percent
owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than five percent
(5%) of the outstanding stock of the Employer or stock possessing
more than five percent (5%) of the total combined voting power of
all stock of the Employer, or, in the case of an unincorporated
business, any person who owns more than five percent (5%) of the
capital or profits interest in the Employer. In determining
percentage ownership hereunder, Employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be
treated as separate employers; or
D. a "one percent owner" of the Employer having an annual
Compensation from the Employer of more than $150,000. "One percent
owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than one percent (1%)
of the outstanding stock of the Employer or stock possessing more
than one percent (1%) of the total combined voting power of all
stock of the Employer, or, in the case of an unincorporated
business, any person who owns more than one percent (1%) of the
capital or profits interest in the Employer. In determining
22
<PAGE>
percentage ownership hereunder, Employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be
treated as separate Employers. However, in determining whether an
individual has Compensation of more than $150,000, Compensation from
each employer required to be aggregated under Code Sections 414(b),
(c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of Compensation shall
be based only on Compensation which is actually paid and shall be made by
including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income
of the participant under Code Sections 125, 402(e)(3), 402(h), 403(b) or
457, and Employee contributions described in Code Section 414(h)(2) that
are treated as Employer contributions.
(iv) A "Non-Key Employee" means any employee (and any beneficiary of
an employee) who is not a Key Employee.
(v) "Top-Heavy Group" means the Aggregation Group, if as of the
applicable Determination Date, the sum of the present value of the
cumulative accrued benefits for Key Employees under all defined benefit
plans included in the Aggregation Group plus the aggregate of the accounts
of Key Employees under all defined contribution plans included in the
Aggregation Group exceeds sixty percent (60%) of the sum of the present
value of the cumulative accrued benefits for all employees, excluding
former Key Employees as provided in paragraph (i) below, under all such
defined benefit plans plus the aggregate accounts for all employees,
excluding former Key Employees as provided in paragraph (i) below, under
all such defined contribution plans. In determining Top-Heavy status, if an
individual has not performed one (1) Hour of Service for a Considered
Company at any time during the five-year period ending on the Determination
Date, any accrued benefit for such individual and the aggregate accounts of
such individual shall not be taken into account. If the Aggregation Group
that is a Top-Heavy Group is a permissive aggregation group, only those
plans that are part of the required aggregation group will be treated as
Top-Heavy Plans. If the Aggregation Group is not a Top Heavy Group, no plan
within such group will be a Top-Heavy Plan.
In determining whether this Plan constitutes a Top Heavy Plan, the
Committee (or its agent) will make the following adjustments in connection
therewith:
(vi) When more than one plan is aggregated, the Committee shall
determine separately for each plan as of each plan's Determination Date the
present value of the accrued benefits (for this purpose using the actuarial
assumptions set forth in the applicable plan, and if such assumptions are
not set forth in the applicable plan, using the assumptions set forth in
this Plan) or account balance. The results shall then be aggregated by
adding the results of each plan as of the Determination Dates for such
plans that fall within the same calendar year.
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<PAGE>
(vii) In determining the present value of the cumulative accrued
benefit (for this purpose using the actuarial assumptions set forth in
Section 17.12 hereof) or the amount of the account of any employee, such
present value or account will include the amount in dollar value of the
aggregate distributions made to such employee under the applicable plan
during the five-year period ending on the Determination Date unless
reflected in the value of the accrued benefit or account balance as of the
most recent Valuation Date. The amounts will include distributions to
employees which represented the entire amount credited to their accounts
under the applicable plan.
(viii) Further, in making such determination, such present value or
such account shall not include any rollover contribution (or similar
transfer) initiated by the employee and made after December 31, 1983 to an
applicable plan.
A. If the rollover contribution (or similar transfer) is
initiated by the employee and made to or from a plan maintained by a
Considered Company, the plan providing the distribution shall include
such distribution in the present value or such account; the plan
accepting the distribution shall not include such distribution in the
present value or such account unless the plan accepted it before
December 31, 1983.
B. If the rollover contribution (or similar transfer) is not
initiated by the employee or made from a plan maintained by a
Considered Company, the plan accepting the distribution shall include
such distribution, in the present value or such account, whether the
plan accepted the distribution before or after December 31, 1983; the
plan making the distribution shall not include the distribution in the
present value or such account.
(ix) Further, in making such determination, in any case where an
individual is a Non-Key Employee with respect to an applicable plan but was
a Key Employee with respect to such plan for any prior Plan Year, any
accrued benefit and any account of such employee shall be altogether
disregarded. For this purpose, to the extent that a Key Employee is deemed
to be a Key Employee if he or she met the definition of Key Employee within
any of the four (4) preceding Plan Years, this provision shall apply
following the end of such period of time.
(x) "Valuation Date" means for purposes for determining the present
value of an accrued benefit as of the Determination Date the date
determined as of the most recent valuation date which is within a twelve-
month period ending on the Determination Date. For the first plan year of a
plan, the accrued benefit for a current employee shall be determined either
as if the individual (i) terminated service as of the Determination Date or
(ii) terminated service as of the Valuation Date, but taking into account
the estimated accrued benefit as of the Determination Date. The Valuation
Date shall be determined in accordance with the principles set forth in
Q.&A.T-25 of Treasury Regulations Section 1.416-1.
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(xi) For purposes of this Article, "Compensation" shall have the
meaning given to it in Section 8.4(e) of the Plan.
25
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Section 9
---------
Payment of Retirement Income
----------------------------
and Other Benefits
------------------
9.1 Normal Form of Benefits Payment. Except as otherwise specifically
provided, payment of a participant's Monthly Retirement Income or Monthly Vested
Termination Benefit in accordance with Sections 4 or 6 shall be made to him as
follows:
(a) A participant who has a spouse on the date as of which such
payments commence and who has not made an election in accordance with
paragraphs (b) and (c) below or Section 9.2 shall receive payments in the
form of a joint and survivor annuity and such payments shall be
actuarially equivalent to the amount of Monthly Retirement Income or
Monthly Vested Termination Benefit otherwise payable to the participant in
accordance with Sections 4 or 6 on a life annuity basis. Such joint and
survivor annuity shall provide for a reduced Monthly Retirement Income or
Monthly Vested Termination Benefit continuing during the participant's
lifetime, and upon the participant's death, payment of one-half of such
reduced Monthly Retirement Income or reduced Monthly Vested Termination
Benefit shall be made to such spouse if he or she is then living. The
joint and survivor form of benefit payments described in this paragraph
(a) will commence to be paid to the participant, if then living, as of his
Retirement Date, or in the case of a Vested Terminated Participant, on the
date as of which his Monthly Vested Termination Benefits commence. The
monthly payments to which a participant's spouse is entitled under this
paragraph (a) shall commence as of the first day of the month following
the month in which the participant dies and the last such payment shall be
made as of the first day of the month in which the spouse dies.
(b) A participant who has one or more Hours of Service and who is
entitled to payment of a Monthly Retirement Income or a Monthly Vested
Termination Benefit and who has a spouse on the date as of which such
benefit payments commence shall receive payments in the form of a joint
and survivor annuity pursuant to paragraph (a) above unless such spouse
has consented to an election to waive the joint and survivor annuity
pursuant to Section 9.3 below.
(c) A participant who does not qualify for a joint and survivor
annuity under paragraphs (a) and (b) above, or a participant who prior to
the date as of which his payments commence elects in accordance with
Section 9.3 not to receive a Monthly Retirement Income or a Monthly Vested
Termination Benefit in the form of a joint and survivor annuity, shall
receive a Monthly Retirement Income or a Monthly Vested Termination
Benefit in accordance with Sections 4 or 6, whichever applies, on a
single life annuity basis as described in Section 4.1.
(d) The joint and survivor annuity and any pre-retirement survivor
annuity requirements under this Plan will apply to benefits in which the
participant was vested immediately prior to his or her death. A joint and
survivor annuity shall be provided to an unmarried participant unless
elected otherwise within 90 days ending on the annuity starting
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<PAGE>
date. The joint and survivor annuity for an unmarried participant shall be
an annuity for the participant's life. A joint and survivor annuity shall
also be provided for a participant who does not die prior to the annuity
starting date. The annuity starting date shall be defined as the first day
of the first period for which an amount is payable as an annuity or in the
case of a benefit not payable in the form of an annuity, the first day on
which all events have occurred which entitles the recipient to such
benefit.
A former participant who is entitled to a Monthly Vested Termination
Benefit shall only be entitled to a benefit payable under this Section 9.1 and
shall not be entitled to elect any of the options described in the remainder of
this Section 9. Each such former participant shall in all cases commence such
payment no later than the first day of the month following the month in which he
attains age 65.
9.2 Optional Forms of Monthly Benefits. In lieu of the normal forms and
amounts of Monthly Retirement Incomes specified in Section 9.1 and subject to
the provisions of Sections 9.1(b) and 9.3, a participant may elect a Monthly
Retirement Income of an actuarially equivalent value in one of the following
optional forms:
(a) A Ten-Year Certain and Continuous Option providing the participant
with an amount of Monthly Retirement Income until his death with the
provision that if the participant dies before 120 monthly payments are
made there shall be a continuing payment of the same amount to a
beneficiary or beneficiaries designated by him for the balance of such 120
payments.
(b) A Contingent Annuitant Option providing the participant with an
amount of Monthly Retirement Income until his death, with the provision
that a payment of the same monthly amount or 75 percent, 50 percent or 25
percent of that monthly amount (as the par ticipant elects) will be made
to his surviving contingent annuitant (designated by the participant) for
life.
(c) A Reversionary Contingent Annuitant Option with the participant's
spouse as the contingent annuitant providing the participant with a
reduced amount of Monthly Retirement Income with the provision that if the
participant predeceases his spouse, payment of the same monthly amount or
75 percent, 50 percent or 25 percent of that monthly amount (as the
participant elects) shall be made to his surviving spouse for life and if
the participant's spouse predeceases the participant, the participant's
Monthly Retirement Income shall revert to a single life annuity basis
commencing with the first day of the month next following the month in
which such spouse dies.
(d) A Level Income Option providing a participant who retires early
pursuant to Section 4.4 with an increased amount of retirement income up
to age 62 or age 65 if he retires prior to age 62, or up to age 65 if he
retires after age 62, at which time the amount of his retirement income
shall be decreased commencing with the first day of the month following
the month in which he attains either age 62 or 65. The amount of decrease
at age 62 or age 65, whichever is applicable, shall be equal to the amount
of his Old Age Insurance
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<PAGE>
benefit under the Social Security Act as estimated by the Plan Committee,
to which the participant will then be entitled.
(e) A Level Income Option in conjunction with one of the optional
forms of payment described in paragraphs (a), (b) or (c) above, providing
the participant with an amount of Monthly Retirement Income determined in
accordance with paragraph (d) above except that the monthly amount
otherwise payable to the participant during his life under paragraph (d)
will be further reduced at the time of his retirement to provide for a
continuation of monthly payments, commencing with the first day of the
month next following the month in which the participant dies, in
accordance with paragraphs (a), (b) or (c) above (as the participant
elects).
(f) Other Optional forms may be elected by a participant with the
approval of the Plan Committee and in accordance with the rules adopted by
the Plan Committee for this purpose.
(g) Notwithstanding the provisions of paragraphs (b), (c), (e) and (f)
above, the options reflected in said paragraphs shall not be available
unless the actuarial value of the amounts paid to the participant shall be
more than 50 percent of the actuarial value of the total payments to be
made to the participant and to his beneficiaries; provided, however, that
this limitation shall not be applicable where all the following conditions
are satisfied:
(i) The beneficiary is the participant's spouse;
(ii) The distribution is in the form of periodic payments
starting with the participant's retirement; and
(iii) Each payment made to the spouse can be no greater than each
payment made to the participant.
9.3 Election and Discontinuance of Options. An election by a Participant
of an optional form of Monthly Retirement Income specified in Section 9.2 shall
be subject to the following:
(a) An election of an option must be in writing signed and dated by
the Participant, and filed with the Plan Committee.
(b) Unless otherwise provided in this Section 9.3, a Participant's
benefits under the Plan shall commence on his Retirement Date, which shall
be the effective date of such option.
(c) Any election to waive the joint and survivor annuity under Section
9.1(b) above and to elect benefits payable under Sections 9.1(c) or 9.2
above shall not be effective unless:
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(i) the spouse of the participant consents in writing to such election
and acknowledges the effect of such election on forms provided by and
filed with the Plan Committee and witnessed by a plan representative or a
notary public; or
(ii) it is established that there is no spouse, the spouse cannot be
located, or under such other circumstances as may be provided by
regulations prescribed by the Code.
The election must be filed during the period described in paragraph (d)
below for married participants and may be changed or revoked in writing by the
participant at any time during such period. The number of revocations shall not
be limited. The election may be revoked but not changed by the participant
without consent of the participant's spouse in accordance with this paragraph.
Any consent by a spouse pursuant to this paragraph shall be irrevocable and
shall be effective only with respect to such spouse.
Notwithstanding anything in this Section 9.3 to the contrary, an election
to waive the joint and survivor annuity under Section 9.1(b) above shall not be
required where the participant elects a 50 percent, a 75 percent, or 100 percent
Contingent Annuitant Option in accordance with Section 9.2(b) with his spouse as
the surviving contingent annuitant.
(d) A Participant may elect an option under Sections 9.1 and 9.2 at any
time prior to his Retirement Date.
In all events a married participant must make the election to waive the
joint and survivor annuity pursuant to paragraph (c) above within the 90-day
period ending on the participant's "annuity starting date." For purposes of
this Section, the "annuity starting date" means the first day of the first
period for which an amount is paid as an annuity, or, in the case of a benefit
not payable in the form of an annuity, the first day on which all events have
occurred which entitle the participant to such benefit.
Within a reasonable period of time before the "annuity starting date," the
married participant shall be provided with a written notification, in
nontechnical terms, of the terms and conditions of the joint and survivor
annuity and the effect of electing not to receive it, including the financial
effect upon the participant's annuity in terms of dollars per annuity payment,
the participant's right to make, and the effect of, an election under paragraph
(c) to waive the joint and survivor annuity form of benefit, and the rights of
the participant's spouse and the right to make, and the effect of, a revocation
of an election under paragraph (c).
If a married Participant does not elect a benefit payment form other than
the joint and survivor annuity during this 90 day period, he shall be deemed to
have elected the joint and survivor annuity. If the married Participant does
not elect out of another benefit payment form back into the joint and survivor
annuity during this 90 day period, he shall be deemed to have elected to receive
the other benefit payment form. If a married Participant elects out of a
benefit payment form other than the joint and survivor, he may only elect into a
joint and
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survivor benefit in which case he may thereafter, within the election
period, only change his election in the manner set forth in paragraph (c)
to a single life annuity.
An unmarried individual may also elect out of a benefit payment form
other than a single life annuity during such 90 day period ending on the
participant's "annuity starting date." In lieu of his prior election he
may elect only the single life annuity provided in Section 9.1(c) and he
may thereafter not elect any other payment form.
(e) A Participant who has elected an option may revoke or change it at
any time prior to the effective date of the option by written election
filed with the Plan Committee. A revocation or change of an option may be
made without the consent of any person the Participant had designated in
the option; provided, however, that any revised election shall be subject
to the requirement of paragraph (c) above. A Participant may revoke an
election of one of the options set forth in Sections 9.1 and 9.2 on or
after the effective date of the option only with the approval of the Plan
Committee.
(f) If a Participant who had elected an optional form of monthly
benefit under Sections 9.1(c) and 9.2 dies before the effective date of
the option, the option elected will be cancelled automatically and no
benefits will be paid to any person under the option except as provided in
Sections and 9.4 and 9.5.
(g) If a Participant elects a Ten Year Certain and Continuous Option
under Section 9.2(a) or in conjunction with Sections 9.2(d) or 9.2(e) and
the person designated by him under the option dies after the effective
date of the option with the Participant still then living, the option
shall remain in effect and the Participant may designate another person or
persons to receive any benefits payable under the option after his death.
(h) If the Participant elects a Contingent Annuitant Option under
Section 9.2(b) or in conjunction with Sections 9.2(d) or 9.2(e) and the
person designated by him dies before the effective date of the option, the
option elected will be cancelled automatically and the Participant's
Monthly Retirement Income will be paid to him under the normal form unless
a new election can be and is made for the Participant.
(i) If a Participant elects a Contingent Annuitant Option under
Section 9.2(b) or in conjunction with one of the optional forms of payment
described in Sections 9.2(d) or 9.2(e) and the person designated by him
dies after the effective date of the option, payments under the option
then being made to the Participant shall continue for the remainder of the
Participant's life.
9.4 Spouse's Retirement Income Benefit. A Spouse's Retirement Income
Benefit in an amount determined below will be payable with respect to the
"Eligible Surviving Spouse" (as defined below) of a Participant who:
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<PAGE>
(a) dies after completion of 5 or more years of Vesting Service and
before his Normal Retirement Date (or, if applicable, his Late Retirement
Date) while employed by an Employer and after attaining age 50, or
(b) dies after completion of 20 or more years of Vesting Service while
employed by an Employer, or
(c) dies after his Disability Termination Date while receiving
benefits from the Hourly Disability Plan, after completing 10 or more
years of Vesting Service pursuant to Section 17.1(a)(viii), and before his
Normal Retirement Date.
A Participant's "Eligible Surviving Spouse" means the person to whom the
Participant was married on the date of his death.
The Spouse's Retirement Income Benefit shall be a monthly amount payable
for life to the Participant's Eligible Surviving Spouse and shall be equal to
fifty percent (50%) of the Monthly Retirement Income that would have been
payable to the Participant in accordance with Section 9.1(a) if the Participant
had retired on the date of his death and had commenced to receive benefits on
the first day of the month next following the month in which his death occurred
and based upon his Benefit Service as of the date of his death. Such Benefit
shall commence on the first day of the month following the month in which the
Participant's death occurred.
This Section shall also be applicable to any Participant, as defined in
Section 2, who works beyond his Normal Retirement Date and who dies prior to his
Late Retirement Date.
A Spouse's Retirement Income Benefit will also be paid to an Eligible
Surviving Spouse of any Participant who dies on or after his Normal Retirement
Age or his Early Retirement Date and prior to commencement of receipt of
benefits hereunder, if his Eligible Surviving Spouse would be otherwise deprived
of a benefit hereunder of at least a monthly amount, or the equivalent thereof,
equal to the Spouse's Retirement Income Benefit. If the Eligible Surviving
Spouse takes under this Section, all other optional forms of benefits and other
Beneficiaries and/or contingent annuitants shall be revoked.
A vested participant may elect with the consent of his or her Eligible
Surviving Spouse not to take the Spouse's Retirement Income Benefit and may also
revoke an election not to take the Spouse's Retirement Income Benefit or choose
again to take such benefit at any time or any number of times within the
applicable election period. The election period shall be from the first day of
the Plan year in which the participant attains age 35 until the participant's
death. If a vested participant dies before the annuity starting date, the
Eligible Surviving Spouse must be able to receive the Spouse's Retirement Income
Benefit no later than the date at which the participant would have reached the
Plan's earliest retirement age.
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9.5 Surviving Spouse Benefit.
(a) Subject to the provisions of this Section 9.5, a Surviving Spouse
Benefit in an amount determined below will be payable with respect to a
participant's Eligible Surviving Spouse as defined in Section 9.4 with
respect to a participant who dies after completion of 5 or more years of
Vesting Service and before commencement of his Monthly Retirement Income
or his Monthly Vested Termination Benefit. The amount of the Surviving
Spouse Benefit shall be equal to:
(i) in the case of a participant who dies after the first day on
which the participant would have attained his Early Retirement Date,
the amount that would have been paid to the Eligible Surviving Spouse
had the participant retired on the day preceding his date of death and
had then immediately commenced receiving benefits pursuant to Section
9.1(a) in the form of a joint and survivor annuity;
(ii) in the case of a participant who dies on or before the first
day on which the participant would have attained his Early Retirement
Date, the amount that would have been paid to the Eligible Surviving
Spouse pursuant to Section 9.1(a) in the form of a joint and survivor
annuity had the participant:
(A) separated from service on the date of his death (if an
active employee);
(B) survived to the first day on which he would have
attained his Early Retirement Date; and
(C) died on the day after the first day on which he would
have attained his Early Retirement Date.
A Surviving Spouse Benefit shall be payable to the Eligible Surviving
Spouse on the first day of the month next following the month in which the
participant would have first attained his Early Retirement Date.
(b) The Plan shall fully subsidize the costs of the Surviving Spouse
Benefit in the case of a participant who satisfies the provisions of
paragraph (a) and who dies while in the employ of the Company or an
Employer. In the case of a participant who satisfies the provisions of
paragraph (a) and who is no longer in the employ of the Employer
immediately prior to the commencement of Monthly Vested Termination
Benefits, the Monthly Vested Termination Benefit of such participant shall
be reduced for each complete twelve month period in which such participant
had not elected to waive the Surviving Spouse Benefit as provided in
paragraph (c) beginning with the first day of the month in which the
participant separates from service in the following manner: one-tenth of
one percent for each complete twelve month period until age 45, two-tenths
of one percent for each complete twelve month period beginning with the
first day of the month in which the participant attains age 45 until age
55, and five-tenths of one percent for each complete twelve month period
beginning with
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<PAGE>
the first day of the month in which the participant attains age 55 until
commencement of payment of benefits. Such reduction shall only apply for
each complete twelve month period in which no election to waive the
Surviving Spouse Benefit is in effect under paragraph (c).
(c) Participants who are entitled to a Monthly Vested Termination
Benefit payable under Sections 6.1 and 6.2 may elect to waive the Surviving
Spouse Benefit as provided in this paragraph (c). With regard to the
election, the Plan Committee shall provide each participant within the
applicable period, with respect to each participant (and consistent with
regulations), a written explanation of the Surviving Spouse Benefit. For
purposes of this paragraph, the term "applicable period" means, with
respect to a participant, whichever of the following periods ends last:
(i) the period beginning with the first day of the Plan Year in
which the participant attains age 32 and ending with the close of the
Plan Year preceding the Plan Year in which the participant attains age
35;
(ii) a reasonable period after the individual becomes a
participant;
(iii) a reasonable period ending after the Plan no longer fully
subsidizes the cost of the Surviving Spouse Benefit with respect to
the participant;
(iv) a reasonable period ending after Code Section 401(a)(11)
applies to the participant; or
(v) a reasonable period after separation from service in the case
of a participant who separates before attaining age 35. For this
purpose, the Plan Committee must provide the explanation beginning one
year before the separation from service and ending one year after such
separation. If such a participant thereafter returns to employment
with the Employer, the applicable period for such participant shall be
redetermined.
For purposes of applying this Section, a reasonable period ending
after the enumerated events described in paragraphs (ii), (iii) and (iv) is
the end of the two year period beginning one year prior to the date the
applicable event occurs, and ending one year after that date.
Such election to waive the Spouse's Survivor Annuity must be made on
forms provided by and filed with the Plan Committee and shall not be
effective unless:
(i) the Eligible Surviving Spouse of the participant consents to
and acknowledges the effect of such election on forms provided by the
Plan Committee and witnessed by a plan representative or a notary
public; or
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<PAGE>
(ii) it is established that there is no spouse, the spouse cannot
be located, or under such other circumstances as may be provided by
regulations prescribed by the Code.
Such election may be filed at any time beginning with the Employment
Termination Date and ending with the date of the participant's death and
may be changed or revoked in writing by the participant at any time until
the date of the participant's death. The election may be revoked but not
changed by the participant without the consent of the participant's spouse
in accordance with this paragraph. Any consent by a spouse pursuant to this
paragraph shall be irrevocable and shall be effective only with respect to
such spouse.
As soon as practicable after the Employment Termination Date, the
participant shall be provided with a written notification, in nontechnical
terms, of the terms and conditions of the Surviving Spouse Benefit and the
effect of electing not to receive it, including the financial effect upon
the participant's annuity, the participant's right to make, and the effect
of an election to waive the Surviving Spouse Benefit, the rights of the
participant's spouse, and the effect of a revocation of an election.
The Monthly Vested Termination Benefit payable to a participant who
elects to waive the Surviving Spouse Benefit shall not be reduced as
provided by paragraph (b) above for the period covered by such election.
(d) An Eligible Surviving Spouse who is entitled to payment of
benefits under Section 9.4 shall not be entitled to payment of benefits
under this Section 9.5.
(e) The provisions of this Section 9.5 shall apply to any participant
who has at least one Hour of Service who dies before the commencement of
benefits.
9.6 Special Payment Limitations.
(a) Unless an election by a participant to defer payment is approved
by the Plan Committee, payment of benefits under the Plan to a participant
shall commence not later than the 60th day after the latest of the end of
the calendar year in which:
(i) The participant attains age 65 years;
(ii) The tenth anniversary of the year in which the participant
commenced participation in the Plan occurs; or
(iii) The participant terminates his employment with all the
Employers.
(b) Notwithstanding anything in this Section 9 to the contrary, in no
event shall payment of benefits under the Plan to a participant commence
later than the date the participant attains age 70 1/2 or if later, in the
case of a participant who is not a Key Employee in a Top Heavy Plan as
described in Section 8.5, the date he retires.
34
<PAGE>
(c) A participant who commences to receive benefits, notwithstanding
anything in paragraphs (a) and (b) to the contrary, the entire interest of
a participant under the Plan must be distributed:
(i) not later than the Required Beginning Date; or
(ii) commencing not later than the Required Beginning Date, in
accordance with applicable regulations under the Code, over the life
of such participant or over the lives of such participant and a
designated beneficiary.
The Required Beginning Date shall mean April 1 of the calendar year
following the later of:
(i) the calendar year in which the participant attains age 70
1/2; or
(ii) in the case of a participant who is not a 5-percent owner (as
defined in Section 416 of the Code), the calendar year in which the
participant retires under the Plan.
If a participant dies before his entire interest under the Plan has
been distributed to him, the remaining portion of such interest will be
distributed at least as rapidly as under the method of distribution being
used as of the date of his death.
(d) Payment of a participant's Monthly Retirement Income or Monthly
Vested Termination Benefit has not commenced prior to the date of the
participant's death and payments are to be made to the Eligible Surviving
Spouse as provided in Sections 9.4 and 9.5, amounts payable shall be
distributed to the Eligible Surviving Spouse (in accordance with
regulations under the Code) over the life of the spouse.
(e) A distribution under this Plan shall not be made to a participant
without his consent when the Accrued Benefit under this Plan is in excess
of $3,500. An Accrued Benefit is immediately distributable if any part of
the benefit may be distributed to the participant before the later of
normal retirement age or age 62. This provision does not apply after the
death of the participant.
9.7 Payment of Small Amounts. If upon his retirement or other termination
of employment the lump sum actuarially equivalent value of the portion of a
participant's or Eligible Surviving Spouse's monthly benefits attributable to
Employer Contributions does not exceed $3,500, the Plan Committee, in its
discretion, may direct that a lump sum payment equal to the lump sum actuarially
equivalent value of such monthly benefits be paid to the participant or Eligible
Surviving Spouse. The lump sum actuarial equivalent value of the participant's
accrued benefits shall be determined as of the date of the distribution and by
using an interest rate not greater than the interest rate which would be used by
the Pension Benefit Guaranty Corporation at the beginning of the Plan Year for
determining lump sum distributions on plan termination. A partial or total
distribution may not be made after the annuity starting date regardless of the
present value of the nonforfeitable
35
<PAGE>
accrued benefit without appropriate Eligible Surviving Spouse's consent, if such
benefit exceeds $3,500.
A participant who is re-employed by the employer after a termination of
employment may repay any benefit he has received under the Plan before the
earlier of five years after the first date on which the participant is
subsequently re-employed by the Employer or the close of the first period of
five consecutive one-year breaks in service commencing after the participant's
withdrawal of benefits.
9.8 Designation of Beneficiaries. Subject to the provisions of Section
9.1(b), each participant may, from time to time and in accordance with rules
established by the Plan Committee, designate any Beneficiary or Beneficiaries
(who may be designated concurrently, contingently or successively) to whom any
death benefits payable on behalf of such participant are to be distributed
(other than any portion of a survivor's annuity payable to the participant's
spouse under Sections 9.1(a), 9.4 or 9.5 or any death benefits payable to the
participant's spouse or any other person pursuant to an option in effect at the
time of his death pursuant to Section 9.2). A beneficiary designation will be
effective only when it is signed, dated and filed with the Plan Committee while
the participant is still alive and will cancel all Beneficiary forms previously
signed and filed by the participant. Subject to the provisions of Section
9.1(b), a participant's Beneficiary designation in effect under a Predecessor
Plan immediately before the Effective Date shall be deemed a valid Beneficiary
designation filed with the Plan Committee under this Plan unless and until the
participant revokes such Beneficiary designation or makes a new Beneficiary
designation under this Plan. The term "Beneficiary" as used in the Plan means
the person or persons, trust(s), estate(s), or other entity(ies) to whom a
deceased participant's benefits are payable under this Section.
No deferral of commencement of benefits elected under this Section shall be
permitted unless the present value of the benefits payable to the participant at
the end of the deferral period pursuant to the payment option elected by the
participant shall be more than 50% of the present value of benefits payable to
the participant and his beneficiaries, subject to the qualifications established
in Section 9.2(b) of the Plan. If a participant elects to defer payment of
benefits as permitted in this Section, such election shall be filed in writing
with the Committee no earlier than 90 days prior to age 65 and no later than 60
days prior to such age and must be accompanied by an election of a payment
option pursuant to which benefits shall be payable to the participant and his
beneficiaries at the end of such deferral period. Such payment option shall,
when accepted by the Committee, be irrevocable. Provided, however, that no
election under this paragraph shall be accepted for consideration from any
participant unless and until the Committee adopts rules permitting and
implementing such deferral elections. Such rules shall specify, with such
particularity as the Committee in its discretion deems appropriate, the nature
and terms of deferral elections available to participants together with any
election or approval procedure deemed appropriate by the Committee which is
consistent with this paragraph.
9.9 Salaried Employees Transferred to Hourly Basis. The benefits payable
to a participant who was a salaried employee prior to the date his participation
under this Plan commenced and who is otherwise entitled to a benefit under a
salaried pension plan maintained by
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<PAGE>
the Corporation or its subsidiaries (the "Salaried Plan") with respect to his
participation in this Plan and his participation in the Salaried Plan shall be
the greater of:
(a) The Monthly Retirement Income or Monthly Vested Termination
Benefit under this Plan which is attributable to Regular Benefits computed
on the basis of all Benefit Service accrued under the Salaried Plan and
this Plan; or
(b) The sum of:
(i) The Monthly Retirement Income or Monthly Vested Termination
Benefit which is attributable to Regular Benefits under this Plan
computed on the basis of his Benefit Service solely attributable to
his service with the Corporation and its Subsidiaries on and after the
date his participation in this Plan commenced; and
(ii) His Basic Benefits under the Salaried Plan determined on the
basis of his Benefit Service accrued under the Salaried Plan prior to
the date his participation in this Plan commenced which Basic Benefits
shall be computed on the basis of the provisions of the Salaried Plan
as in effect on the date he ceased to be a salaried employee actively
participating thereunder and based upon his final or annual highest
compensation during his status as either a salaried or hourly
employee.
There shall be no duplication of Benefits for the same period of time, and
if paragraph (a) above is applicable, the benefits payable hereunder shall be
reduced by the benefits payable under the Salaried Plan. A participant subject
to this Section 9.9 must retire under both the Salaried Plan and this Plan at
the same time, must elect the same form of pension payments, must name the same
beneficiaries and must make all other elections in the same manner under both
the Salaried Plan and this Plan. If such participant qualified as a Prior
Employer Participant under the Salaried Plan, he shall be considered a Prior
Employer Participant under this Plan to the same extent as under the Salaried
Plan.
9.10 Payment of Distribution Directly to Eligible Retirement Plan.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a Distributee's election under this Section, a Distributee may elect, at
the time and in the manner prescribed by the Committee, to have any portion of
an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover.
9.11 Definitions.
(a) Eligible Rollover Distribution. An 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)
37
<PAGE>
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. An Eligible Retirement Plan is an
individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an Eligible
Rollover Distribution to the surviving spouse, an Eligible Retirement Plan
is an individual retirement account or individual retirement annuity.
(c) Distributee. A 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. A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
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Section 10
----------
Reemployment
------------
10.1 Reinstatement of Participation. If a former participant is
reemployed by an Employer or if a participant who is receiving or is entitled to
receive a Monthly Retirement Income or Monthly Vested Termination Benefit is
reemployed by an Employer or a Subsidiary (referred to below as a "rehired
employee") and meets the eligibility requirements described in Section 2 (except
Section 2(b)) on or after the date of his reemployment, he shall become an
active participant on the first date he meets such requirements.
10.2 Determination of Benefits. If a rehired employee is reinstated
in accordance with Section 10.1, no benefits shall be payable to him under the
Plan after his reinstatement and during the period of his reemployment. Benefits
payable to a retired employee after his period of reemployment ends shall be
determined in accordance with the provisions of the Plan as in effect as of the
date his reemployment ends, but if the Benefit Service to which he was entitled
at the time of his initial termination of employment for the purpose of
computing the amount of any benefit payable to him under the Plan has been added
to his Benefit Service earned for that purpose after his reemployment pursuant
to Section 17.3, such benefits shall be reduced by the actuarial equivalent
value of any benefits previously paid to him under the Plan.
39
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Section 11
----------
Employer Contributions
----------------------
11.1 Employer Contributions. The Employers will contribute to the Plan
from time to time such amounts as shall be determined by the "Qualified Actuary"
(as defined in Section 17.11) at least sufficient to meet the normal costs for
the Plan and to amortize the past service liability of the Plan over the
amortization period required by applicable funding requirements imposed by
federal law. In no event shall the Employer Contributions for any year exceed
the amount which is deductible by the Employers for tax purposes for that year.
Nothing in this Section 11.1 shall be deemed to prevent the Employers from
making contributions to the Trust Fund in an amount which is greater than the
amount which is required to be contributed in accordance with this Section 11.1.
No participant will be required or permitted to make any contributions to this
Plan.
11.2 Application of Forfeitures. Benefits that would have been
payable to a participant if his employment with the Employers had not terminated
before he was eligible to receive a Monthly Retirement Income or a Monthly
Vested Termination Benefit and any benefits that would have been payable to such
participant or to any other person but for the participant's death shall not be
applied to increase the benefits of any other participants or of any other
person entitled to benefits under the Plan.
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Section 12
----------
The Plan Committee
------------------
12.1 Membership. The Plan Committee shall consist of three or more
members appointed by the Corporation.
12.2 Plan Committee's General Powers, Rights and Duties. The Plan
Committee, which is established by and derives its authority from the
Corporation, is (except as otherwise provided in this Plan), as respects the
rights and obligations of all parties with an interest in this Plan, given the
powers, rights and duties specifically stated elsewhere in the Plan, the Trust
Agreement or any other document, and in addition is given the following powers,
rights and duties:
(a) To determine all questions concerning administration and
management arising under the Plan, including the power to determine the
rights or eligibility of employees or participants and any other persons,
and the amounts of their benefits under the Plan, and to remedy
ambiguities, inconsistencies or omissions.
(b) To adopt such rules of procedure and regulations as in its opinion
may be necessary for the proper and efficient administration of the Plan
and as are consistent with the Plan and Trust Agreement.
(c) To enforce the Plan in accordance with the terms of the Plan and
the Trust Agreement and in accordance with the rules and regulations
adopted by the Plan Committee as above.
(d) To direct the Trustee as respects payments or distributions from
the Trust Fund in accordance with the provisions of the Plan.
(e) To furnish the Employers with such information as may be required
by them for tax or other purposes as respects the Plan.
(f) To employ or designate agents, attorneys, accountants, actuaries
or other persons (who also may be employed by any Employers, the Fund
Committee or the Trustee), and to allocate or delegate to them such
powers, rights and duties as the Plan Committee may consider necessary or
advisable to properly carry out the administration of the Plan, provided
that such allocation or delegation and the acceptance thereof by such
agents, attorneys, accountants, actuaries or other persons, shall be in
writing.
12.3 Manner of Action. During any period in which two or more Plan
Committee members are acting, the following provisions apply where the context
admits:
(a) The Plan Committee members may act by meeting or by writing signed
without meeting, and may sign any document by signing one document or
concurrent documents.
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(b) An action or a decision of a majority of the members of the Plan
Committee as to a matter shall be as effective as if taken or made by all
members of the Plan Committee.
(c) A Plan Committee member by writing may delegate any or all of his
rights, powers, duties and discretions to any other Plan Committee member,
with the consent of the latter.
(d) If, because of the number qualified to act, there is an even
division of opinion among the Plan Committee members as to a matter, a
disinterested party selected by the Plan Committee shall decide the matter
and such party's decision shall control.
(e) Except as otherwise provided by law, no member of the Plan
Committee shall be liable or responsible for an act or omission of the
other Plan Committee members in which the former has not concurred.
(f) The certificate of the Secretary of the Plan Committee or of a
majority of the Plan Committee members that the Plan Committee has taken
or authorized any action shall be conclusive in favor of any person
relying on the certificate.
12.4 Information Required by Plan Committee. The Employers shall
furnish the Plan Committee with such data and information as the Plan Committee
may deem necessary or desirable in order to administer the Plan. The records of
the Employers as to an employee's or participant's period or periods of
employment, termination of employment and the reason therefor, leave of absence,
reemployment and the reason therefor, and earnings will be conclusive on all
persons unless determined to the Plan Committee's satisfaction to be incorrect.
Participants and other persons entitled to benefits under the Plan also shall
furnish the Plan Committee with such evidence, data or information as the Plan
Committee considers necessary or desirable to administer the Plan.
12.5 Plan Committee Decision Final. Subject to applicable law and the
provisions of Section 12.6, any interpretation of the provisions of the Plan and
any decision on any matter within the discretion of the Plan Committee made by
the Plan Committee in good faith shall be binding on all persons. A misstatement
or other mistake of fact shall be corrected when it becomes known and the Plan
Committee shall make such adjustment on account thereof as it considers
equitable and practicable.
12.6 Review of Benefit Determinations. The Plan Committee will
provide notice in writing to any participant, Beneficiary or other person whose
claim for benefits under the Plan is denied and the Plan Committee shall afford
such participant, Beneficiary or other person a full and fair review of its
decision, if so requested.
12.7 Uniform Rules. The Plan Committee shall administer the Plan on a
reasonable and nondiscriminatory basis and shall apply uniform rules to all
participants similarly situated.
12.8 Payment of Expenses. All expenses of administration may be paid
out of the Trust Fund unless paid by the Employer. Such expenses shall include
any expenses incident to the
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functioning of the Plan Committee, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability
of the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred.
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Section 13
----------
Relating to the Employers
-------------------------
13.1 Action by Employers. Any action required or permitted of an
Employer under the Plan shall be by resolution of its Board of Directors, by a
duly authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or by resolution of such
committee.
13.2 Additional Employers. Any subsidiary that is not an Employer may
adopt the Plan and become an Employer under the Plan and a party to the Trust
Agreement:
(a) By filing with the Plan Committee, the Fund Committee and the
Trustee a certified copy of a resolution of the Board of Directors of the
subsidiary providing for its adoption of the Plan; and
(b) By filing with the Plan Committee, the Fund Committee and the
Trustee a certified copy of a resolution of the Board of Directors of the
Corporation consenting to the adoption of the Plan by such subsidiary.
13.3 Restrictions as to Reversion of Trust Assets to Employers.
Except as to contributions and premiums paid as a result of actuarial error, the
Employer shall have no right, title or interest in the assets of the Trust Fund,
nor will any part of the assets of the Trust Fund at any time revert or be
repaid to an Employer, unless the Internal Revenue Service initially determines
that the Plan, as applied to any Employer that had not maintained a Predecessor
Plan, does not meet the requirements of a "qualified plan" under the Code, or
unless all fixed and contingent liabilities or obligations to or on account of
persons entitled to benefits under the Plan shall have been paid or provided for
in full and assets remain in the Trust Fund.
Notwithstanding the foregoing, contributions may, at the Plan Committee's
option, revert back to the Employer if such contributions were made pursuant to
their tax deductibility by the Employer and such contributions were subsequently
found not to be deductible. All reversions pursuant to this Section 13.3 shall
be limited in amount, circumstances and timing to the provisions of Section
403(c) of the Act, and no such reversion shall be allowed if, solely on account
of such reversion, the Plan would cease to be a qualified plan pursuant to
Section 401(a) of the Code.
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Section 14
----------
General Provisions
------------------
14.1 Notices. Each person entitled to benefits under the Plan must
file in writing with the Plan Committee such person's post office address and
each change of post office address. Any communication, statement or notice
addressed to any such person at the last post office address filed with the Plan
Committee will be binding upon such person for all purposes of the Plan, and
none of the Plan Committee, the Employers or the Trustee shall be obligated to
search for or ascertain the whereabouts of any such person. Any notice or
document required to be given to or filed with the Plan Committee shall be
considered as given or filed if delivered or mailed by registered mail, postage
prepaid, to Employee Benefits Plans Committee in care of Sterling Chemicals,
Inc., P.O. Box 1311, 201 Bay Street, Texas City, Texas 77590.
14.2 Waiver of Notice. Any notice required under this Plan may be
waived by the person entitled to notice.
14.3 Absence of Guaranty. Neither the Plan Committee nor any Employer
in any way guarantees the Trust Fund or any other fund from loss or
depreciation, nor guarantees any payment to any person. The liability of the
Employers, the Trustee or the Plan Committee to make any payment under the Plan
will be limited to the assets held by the Trustee which are available for that
purpose.
14.4 Employment Rights. The Plan does not constitute a contract of
employment, and participation in the Plan will not give any participant the
right to be retained in the employ of the Employers, nor any right or claim to
any benefit under the Plan, unless such right or claim has specifically accrued
and vested under the terms of the Plan.
14.5 Interests Not Transferable. Except as may be required by the tax
withholding provisions of the Code, Section 401(a)(13)(B) of the Code dealing
with Qualified Domestic Relations Orders, or of a state's income tax act, and
except (to the extent permitted by law) as to any debt owing to the Trustee, the
interests of any person under this Plan, under the Trust Agreement are not
subject to the claims of their creditors and may not be voluntarily or
involuntarily sold, transferred, alienated, assigned or encumbered.
14.6 Facility of Payment. When a person entitled to benefits under
the Plan is under a legal disability, or, in the Plan Committee's opinion, is in
any way incapacitated so as to be unable to manage his financial affairs, the
Plan Committee may direct that all or part of the benefits to which such person
otherwise would be entitled shall be made to such person's legal representative,
or to a relative or friend of such person for such person's benefit, or the Plan
Committee may direct the application of such benefits for the benefit of such
person. If the Plan Committee receives proper authorization by a participant or
any other person entitled to benefits under the Plan, and unless and until the
Plan Committee is notified or becomes aware that such authorization no longer is
in effect, the Plan Committee may direct that periodic deposits of the benefits
which otherwise would be payable directly to the participant shall be made into
a savings or checking account established in his name at a bank or other
financial institution. Any payment made in accordance with the
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provisions of this Section 14.6 shall be a full and complete discharge of any
liability for such payment under the Plan.
14.7 Gender and Number. Where the context admits, words denoting the
masculine gender shall include the feminine and neuter genders, the singular
shall include the plural, and the plural shall include the singular.
14.8 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
14.9 Controlling State Law. To the extent not superseded by the laws
of the United States, the laws of Texas shall be controlling in all matters
relating to the Plan.
14.10 Severability. In case any provisions of the Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if such illegal and invalid provisions had never been set forth in
the Plan.
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Section 15
----------
Amendment, Termination or Plan Merger
-------------------------------------
15.1 Amendment. While the Employers expect and intend to continue the
Plan, the Corporation reserves the right to amend or modify, retroactively or
prospectively, the Plan from time to time, subject to the following:
(a) No such amendment or modification, except as may be required by
the Internal Revenue Service for the purpose of meeting the conditions for
qualification or for tax deduction under Sections 401 through 415 and
Section 501 of the Code or any applicable regulations or court decisions
thereunder, or as may be required by ERISA or any other state or federal
law shall alter the operation of the Plan as it applies to employees with
whom or with whose representatives a written agreement respecting such
Plan has been made in contravention of the provisions of any such
agreement pertaining to retirement income benefits, during the term of any
such agreement.
(b) Except as provided in Section 13.3, under no condition shall any
amendment result in the return or repayment to any Employer of any part of
the Trust Fund or the income therefrom, or result in the distribution of
the Trust Fund for the benefit of anyone other than employees and former
employees of the Employers and any other persons entitled to benefits
under the Plan.
15.2 Approvals for Establishment of Plan. The Plan as established
herein is contingent upon obtaining the approval of the Corporation's Board of
Directors, and if the approvals of the Internal Revenue Service of this Plan as
provided in Section 15.3 are not obtained, this Plan shall no longer be
effective.
15.3 Internal Revenue Service Approval. This Plan is contingent upon,
and subject to obtaining and maintaining such approvals of the Internal Revenue
Service as may be necessary to establish:
(a) That the Plan meets the requirements of Sections 401, 410, 411,
415 and other applicable provisions of the Code, as amended, and
regulations thereunder, as now in effect or hereafter amended or adopted;
(b) That any Trust established under the Plan is entitled to exemption
from federal income tax under Section 501(a) and other applicable
provisions of the Code and regulations thereunder; and
(c) That any contributions made by the Employers under the Plan shall
be deductible for federal income tax purposes under Section 404 and other
applicable provisions of the Code and regulations thereunder.
Any modification or amendment of the Plan may be made retroactively, if
necessary or appropriate, to qualify or maintain the Plan as a plan and trust or
trusts meeting the requirements of
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Sections 401, 404, 410, 411, 415 and 501 or other applicable provisions of the
Code and regulations thereunder.
15.4 Termination. The Plan will terminate as to all Employers on any
date specified by the Corporation if 30 days' advance written notice of the
termination is given to the Plan Committee, the Trustee and the other Employers.
The Plan shall terminate as to an individual Employer on the first to occur of
the following:
(a) The date it is terminated by the Board of Directors of that
Employer.
(b) The date the Employer completely discontinues its contributions
under the Plan.
(c) The date that Employer is judicially declared bankrupt or
insolvent.
(d) The dissolution, merger, consolidation or reorganization of that
Employer, or the sale by that Employer of all or substantially all of its
assets, except that:
(i) In any such event arrangements may be made with the consent of
the Corporation whereby the Plan may be continued by any successor to
that Employer or any purchaser of all or substantially all of its
assets, in which case the successor or purchaser may be substituted
for that Employer under the Plan and the Trust Agreement; and
(ii) If any Employer is merged, dissolved or in any way
reorganized into, or consolidated with, any other Employer, the Plan
as applied to the former Employer will automatically continue in
effect without a termination thereof.
15.5 Plan Merger or Consolidation. In no event shall there be any
merger or consolidation of the Plan with, or transfer of assets or liabilities
to, any other Plan unless each participant in the Plan would (if the Plan then
terminated) receive a benefit immediately after the merger, con solidation, or
transfer which is equal to or greater than the benefit the participant would
have been entitled to receive immediately before the merger, consolidation, or
transfer (if the Plan had then terminated).
15.6 Notice of Amendment, Termination or Plan Merger. Affected
participants will be notified of any termination, plan merger, consolidation or
substantial amendment within a reasonable time.
15.7 Nonforfeitability on "Termination" or "Partial Termination". On
a "Termination" or "Partial Termination" of the Plan, as such terms are defined
or determined pursuant to the applicable provisions of the Code and regulations
thereunder, the rights of all affected participants to benefits accrued to the
date of such Termination or Partial Termination, to the extent funded as of such
date, shall be nonforfeitable.
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Section 16
----------
Allocation and Distribution on Termination
------------------------------------------
On termination of the Plan as respects any Employer, the Plan Committee
will direct the allocation and distribution of Plan assets allocable to
participants employed by that Employer and to retired or terminated participants
and other persons entitled to benefits under the Plan to the extent of their
benefits attributable to employment with that Employer. After payment of any
expenses of administration and liquidation allocable to such Plan assets, such
Plan assets remaining shall be allocated and distributed to such participants
and other persons in the following manner and order to the extent of the
sufficiency of such Plan assets:
(a) First, to each participant or other person, the portion of a
participant's Monthly Retirement Income, or Monthly Vested Termination
Benefits (including benefits vested by virtue of the termination of the
Plan in accordance with Section 15.7) to which the participant or such
other person is entitled which is attributable to any participant's
contributions.
(b) Next, to the following persons:
(i) To each person who was receiving a benefit under the Plan as
of the beginning of the three-year period ending on the date of
termination of the Plan, the full extent of such person's benefit,
determined in accordance with the terms of the Plan in effect during
the five-year period ending on such date under which such person's
benefit would be the least, properly adjusted for any allocation of
assets with respect to such benefit under paragraph (a) above; and
(ii) To each participant who was eligible for retirement at the
beginning of the three-year period ending on the date of termination,
to the full extent of such person's benefit, determined in accordance
with the terms of the Plan in effect during the five-year period
ending on such date under which such participant's benefit would be
the least, properly adjusted for any allocation of assets with respect
to such benefit under paragraph (a) above.
(c) Next, to each person who was entitled to a benefit under the Plan
as of the date of termination of the Plan, the portion of such benefit
which constitutes a "basic benefit" under Title IV of ERISA (determined
without regard to Sections 4022(b)(5) and (b)(6) thereof), properly
adjusted for any allocation of assets with respect to such benefit made
under paragraphs (a) or (b) above.
(d) Next, to each person who was entitled to a benefit under the Plan
as of the date of termination of the Plan, such person's nonforfeitable
benefit, properly adjusted for any allocation of assets with respect to
such benefit made under paragraphs (a), (b) or (c) above.
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(e) Finally, to each person who was a participant in the Plan on the
date of termination of the Plan, such person's benefit under the Plan
accrued up to that date, properly adjusted for any allocation of assets
with respect to such benefit made under paragraphs (a), (b), (c), or (d)
above.
In making such allocations, the benefits contemplated under paragraph (a)
above shall be completely provided for before any allocations are made under
paragraphs (b), (c), (d) and (e), and the allocations provided for in paragraph
(b) above shall be completely provided for before making any allocations under
paragraphs (c), (d) and (e) and so forth. In the event that the assets
available for allocation under either paragraphs (a), (b) or (c) above are not
sufficient to satisfy in full the benefits of all persons described in any such
paragraph, the assets shall be allocated pro rata among such persons on the
basis of the present value (as of the date of termination of the Plan) of their
respective benefits described in such paragraph. In the event that the assets
available for allocation under paragraph (d) above are not sufficient to satisfy
in full the benefits of persons described in that paragraph, except as provided
in the following sentence, the assets shall be allocated to each such person on
the basis of such person's benefit determined in accordance with the terms of
the Plan in effect at the beginning of the five-year period ending on the date
of termination of the Plan, properly adjusted for any allocation of assets with
respect to such person's benefit made under paragraphs (a), (b) or (c). If the
assets available for allocation under paragraph (d) above are sufficient to
satisfy the benefits described in the preceding sentence, then the benefits of
persons described in that paragraph shall be determined on the basis of the Plan
as amended by the most recent Plan amendment effective during such five-year
period under which the assets available for allocation are sufficient to satisfy
in full the benefits of such persons, and any assets remaining to be allocated
under such paragraph shall be allocated on the basis of the Plan as amended by
the next succeeding Plan amendment effective during such period. In the event
that there are not sufficient assets to make the allocation under paragraph (e)
above, the allocation otherwise to be made under that paragraph shall be
proportionately reduced. Distribution may be made in cash, property or annuity
or partly in each, provided property is distributed at its fair market value as
of the date of distribution as determined by the Trustee. If the Plan Committee
so determines, and with the consent of the Corporation, the benefits
distributable under this Section 16 to any participant who continues in the
employ of an Employer may be retained in the Trust Fund until the participant's
employment with the Employers is terminated. Notwithstanding anything herein to
the contrary, distributions due to termination of the Plan shall be made in a
manner consistent with Section 9.
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Section 17
----------
Definitions
-----------
17.1 Vesting Service. A participant's "Vesting Service" means the
total of his years of service and fractional years of service determined in
accordance with the following rules:
(a) Service with the Employers and the Subsidiaries will be treated as
Vesting Service as follows:
(i) Effective January 1, 1996, a participant will be credited with
one year of Vesting Service for each calendar year during which he
completes at least 1,000 "Hours of Service" (as defined in Section
17.4) with the Employers and the Subsidiaries. A participant who
completes at least 1,000 Hours of Service in both (i) the period
beginning October 1, 1995 and ending September 30, 1996 and (ii) the
calendar year beginning January 1, 1996, shall be credited with two
(2) years of Vesting Service.
(ii) If a participant completes less than 1,000 Hours of Service
in any calendar year, he shall be entitled to a fractional portion of
a year of Vesting Service for such calendar year which fraction shall
be determined by dividing the number of such participant's Hours of
Service during such calendar year by the number of Hours of Service
(not less than 1,000 hours) which are included in the participant's
Standard Work Year (as defined in Section 17.6).
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, a participant who is a Qualified Disabled Terminated Employee
will be credited with one year of Vesting Service and fractions
thereof, respectively, for each calendar year during which he is
deemed to be on Long-Term Disability.
(iv) Notwithstanding the provisions of paragraph (i) and (ii)
above, a participant's Vesting Service for Plan Years ending prior to
the Effective Date shall in no event be less than his Credited Service
as a Prior Employer participant under the Monsanto Company Hourly Paid
Employees' Pension Plan and the Monsanto Company Salaried Employees'
Pension Plan.
(v) If a participant who has previously completed 5 years of
Vesting Service incurs a one-year "Break in Service" (as defined in
Section 17.5) and is subsequently reemployed by an Employer, his years
of Vesting Service before such Break in Service shall not be taken
into account in determining his Vesting Service after such Break in
Service unless:
A. He subsequently completes a year of Vesting Service with
the Employers and the Subsidiaries; or
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B. His Break in Service was a result of a layoff and he is
subsequently reemployed by an Employer or a Subsidiary following
such layoff; or
C. His Break in Service was a result of Long-Term Disability
and he is reemployed by an Employer or a Subsidiary upon the
cessation of his Long-Term Disability.
(vi) If a participant who has not yet completed 5 years of Vesting
Service incurs a one-year Break in Service and is subsequently
reemployed by an Employer, his years of Vesting Service before such
Break in Service shall not be taken into account in determining his
Vesting Service after such Break in Service unless:
A. He subsequently completes a year of Vesting Service with
the Employers and the Subsidiaries and the number of consecutive
Breaks in Service prior to such reemployment is less than the
aggregate number of his years of Vesting Service prior to such
Break in Service; or
B. He subsequently completes 10 years of Vesting Service with
the Employers and the Subsidiaries; or
C. His Break in Service was a result of a layoff and he is
subsequently reemployed by an Employer or a Subsidiary within the
three-year period following the commencement of such layoff; or
D. His Break in Service was a result of his Long-Term
Disability and he is reemployed by an Employer or a Subsidiary
upon the cessation of his Long-Term Disability; or
E. He subsequently completes a year of Vesting Service with
the Employers and the Subsidiaries and the number of consecutive
Breaks in Service prior to such reemployment is less than the
greater of:
(1) five consecutive one-year Breaks in Service; or
(2) the aggregate number of years of Vesting Service
before such Break in Service.
Solely for the purpose of determining whether any one-year
Break in Service under this paragraph (vi) has occurred, Hours
of Service will be credited pursuant to the normal method of
crediting Hours of Service under this Plan not to exceed 501
Hours of Service as a result of any period of absence of
employment due to:
a. the pregnancy of the participant;
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b. the birth of a child of a participant;
c. the placement of a child with the participant in
connection with the adoption of such child by such
participant; or
d. the care of such child by the participant immediately
following such birth or placement.
The Hours of Service to be credited under this paragraph (vi)(E)
shall only be credited in the year in which the absence from work
begins, if a participant would be prevented from incurring a one-year
Break in Service solely because the period of absence is treated as
Hours of Service or, in any other case, in the immediately following
year. No credit for such enumerated absences will be given pursuant to
this paragraph (vi)(E) unless the participant furnishes to the Plan
Committee such timely information as the Committee may reasonably
require to establish that the absence and the length of absence was
due to an enumerated reason.
(vii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, during the period that a participant is deemed to be on
disability Leave of Absence, as such term is defined in the Hourly
Disability Plan, he will be credited with Hours of Service for Vesting
Service purposes pursuant to the terms of Section 17.4 hereof.
(viii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, a participant who is deemed to be on Long-Term Disability under
the provisions of the Hourly Disability Plan and who has 30 or more
months of Benefit Service at his Disability Termination Date, shall
be credited with Hours of Service for Vesting Service purposes
pursuant to the terms of Section 17.4 hereof until the date payments
cease under the Hourly Disability Plan.
(b) The termination of a participant's employment with one Employer
will not interrupt the continuity of his employment if, concurrently with
or immediately after such termination, he or she is employed by one or
more other Employers.
(c) If and to the extent the Corporation so provides, the last
continuous period of a participant's service with a Predecessor Company
(as defined below) will be considered as service with the Employers if
such participant becomes employed by one or more of the Employers. For
purposes of this paragraph, a "Predecessor Company" means any co rporation
or other entity the stock, assets or business of which is acquired by an
Employer, whether by merger, consolidation, purchase of assets or
otherwise, and any predecessor thereto designated by the Corporation.
(d) For purposes of this Section 17.1, if a participant had a prior
period or periods of service with a Subsidiary that has not adopted the
plan, such period or periods of service with the Subsidiary will be
considered as service with the Employer.
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(e) A period of concurrent service with two or more Employers under
the Plan or Subsidiaries that have not adopted the Plan will be considered
as employment with only one of them during that period.
(f) For purposes of this Section 17.1, if a participant was formerly a
Leased Employee (as defined in Section 414(n) of the Code), a prior period
or periods of service with an Employer or a Subsidiary while in the status
of a Leased Employee, shall be considered as service with an Employer.
(g) A participant's Vesting Service shall include all Credited Service
credited to the participant under the terms of the Employer Plans by
reason of his transfer from salaried employee status to hourly paid
employee status.
(h) Solely for the purpose of computing Vesting Service, a participant
who is or was a "Part-Time Employee" will be credited with the number of
Hours of Service equal to that of a regular full time employee at the
participant's location of employment for each calendar month during which
he furnished employment service to an Employer or a Subsidiary while
employed in the status of a Part-Time Employee.
(i) The Vesting Credited Service accrued by a Prior Employer
Participant under the Monsanto Company Salaried Employees' Pension Plan
and the Monsanto Company Hourly Paid Employees' Pension Plan shall be
considered as Vesting Service under this Plan.
(j) A participant who is granted a Corporation-approved leave-of-
absence to conduct business on behalf of the local union of which the
participant is a member will continue to accrue Vesting Service during the
term of the Corporation-approved leave-of-absence.
17.2 Benefit Service. A participant's "Benefit Service" means his
"Benefit Service" (as defined in Section 17.3). For purposes of Section 4.2 a
participant's years of Benefit Service shall only include such years to the
extent that they are attributable to employment by an Employer and as a Prior
Employer Participant. For the purposes of this Section 17.2 and Section 4.2, a
predecessor employer shall be considered to be an Employer to the extent the
Corporation so provides.
17.3 Benefit Service. A participant's "Benefit Service" means the
total of his years of service and fractional years of service after the Plan's
Effective Date determined in accordance with the following rules:
(a) Service with the Employers and the Subsidiaries on and after the
Plan's Effective Date will be treated as Benefit Service as follows:
(i) Effective January 1, 1997, a participant will be credited with
one year of Benefit Service for any calendar year in which the
participant completes the number of Hours of Service (not less than
1,000 hours) which are included in the participant's Standard Work
Year (as defined in Section 17.6).
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(ii) In determining a participant's years of Benefit Service for any
calendar year in which the participant completes at least 1,000 Hours
of Service but less than the number of Hours of Service set forth in
paragraph (i) above, the participant will be entitled to a fractional
part of a year of Benefit Service determined by dividing the number of
Hours of Service actually completed by such participant by the number
of Hours of Service (not less than 1,000 Hours) which are included in
the participant's Standard Work Year.
(iii) If a participant completes less than 1,000 Hours of Service in
any calendar year, he shall be entitled to a fractional portion a year
of Benefit Service for such year, which fraction shall be determined by
dividing the number of such participant's Hours of Service during such
calendar year by the amount determined in paragraph (i) above.
(iv) For the period beginning October 1, 1996 and ending December 31,
1996, a participant will be credited with a fractional part of a year
of Benefit Service determined by dividing (A) the number of Hours of
Service actually completed by such participant during such period by
(B) the number of Hours of Service (not less than 1,000 hours) which
are included in the participant's Standard Work Year.
(v) If a participant who has previously completed 5 years of Vesting
Service (as defined in Section 17.1) incurs a one-year "Break in
Service" (as defined in Section 17.6) and is subsequently reemployed by
an Employer, his Benefit Service before such Break in Service shall not
be taken into account in determining his Benefit Service after such
Break in Service unless:
A. He subsequently completes a year of Vesting Service with the
Employers and the Subsidiaries; or
B. His Break in Service was a result of a layoff and he or she
is subsequently reemployed by an Employer or a Subsidiary following
such layoff; or
C. His Break in Service was a result of Long-Term Disability and
he is reemployed by an Employer or a Subsidiary upon the cessation of
his Long-Term Disability.
(vi) If a participant who has not yet completed 5 years of Vesting
Service incurs a one-year Break in Service and is subsequently
reemployed by an Employer, his Benefit Service before such Break in
Service shall not be taken into account in determining his Benefit
Service after such Break in Service unless:
A. He subsequently completes a year of Vesting Service with the
Employers and the Subsidiaries and the number of consecutive Breaks
in
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<PAGE>
Service prior to such reemployment is less than the aggregate
number of his years of Vesting Service prior to such Break in
Service; or
B. He subsequently completes 10 years of Vesting Service with
the Employers and the Subsidiaries; or
C. His Break in Service was a result of a layoff and he is
subsequently reemployed by an Employer or a Subsidiary within the
three-year period following the commencement of such layoff; or
D. His Break in Service was a result of Long-Term Disability
and he is reemployed by an Employer or a Subsidiary upon the
cessation of his Long-Term Disability; or
E. He subsequently completes a year of Vesting Service with
the Employers and the Subsidiaries and the number of consecutive
Breaks in Service prior to such reemployment is less than the
greater of:
(1) five consecutive one-year Breaks in Service; or
(2) the aggregate number of years of Vesting Service before
such Breaks in Service
(vii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, during the period that such a participant is deemed to be on
disability Leave of Absence, as such term is defined in the Hourly
Disability Plan, he will be credited with Hours of Service for Benefit
Service purposes pursuant to the terms of Section 17.4 hereof.
(viii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, a participant, who is deemed to be on Long-Term Disability
under the provisions of the Hourly Disability Plan and who has 30 or
more months of Benefit Service at his Disability Termination Date,
shall be credited with Hours of Service for Benefit Service purposes
pursuant to the terms of Section 17.4 hereof until the date payments
cease under the Hourly Disability Plan with his benefit hereunder
based upon the Retirement Income Factor in effect on the date he is
deemed Totally and Permanently Disabled.
(b) The termination of a participant's employment with one Employer
will not interrupt the continuity of his employment if, concurrently with
or immediately after such termination, he is employed by one or more other
Employers.
(c) If and to the extent the Corporation so provides, the last
continuous period of a participant's service with a Predecessor Company
(as defined below) will be considered as service with the Employers if
such participant becomes employed by one or more of the
56
<PAGE>
Employers. For purposes of this paragraph, a "Predecessor Company" means
any corporation or other entity the stock, assets or business of which is
acquired by an Employer, whether by merger, consolidation, purchase of
assets or otherwise, and any predecessor thereto designated by the
Corporation.
(d) A period of concurrent service with two or more Employers under
the Plan or Subsidiaries that have not adopted the Plan will be considered
as employment with only one of them during that period.
(e) A participant who is granted a Corporation-approved leave-of-
absence to conduct business on behalf of the local union of which the
participant is a member will continue to accrue Benefit Service during the
term of the Corporation-approved leave-of-absence.
17.4 Hours of Service. An "Hour of Service" means an hour for which
an employee is directly or indirectly compensated by the Employers or by a
Subsidiary in the case of service with such Subsidiary, for the performance of
duties for the Employers or such Subsidiary (including hours for which an
employee has been awarded backpay by the Employers or such Subsidiary or by any
governmental agency or judicial body to the extent such hours are not otherwise
treated as Hours of Service). Notwithstanding the preceding sentence, the
following special rules shall apply:
(a) To the extent not otherwise treated as Hours of Service the
following shall constitute Hours of Service:
(i) Overtime clock hours;
(ii) Hours of service required to be taken into account to satisfy
federal military service laws or regulations or to satisfy any other
federal laws;
(iii) Hours of absence from active work because of regular paid
vacations or holidays;
(iv) Hours of absence from active work because of occupational
illness or disability not yet determined to constitute Long-Term
Disability;
(v) Hours of absence from active work during the first 12 months
of an absence due to non-occupational illness or disability not yet
determined to constitute Long-Term Disability or due to a layoff;
(vi) Hours during an authorized leave of absence or during such
shorter period as may be specified by the Plan Committee.
(b) For purposes of Section 17.5, Hours of Service shall also include
hours, not otherwise treated as Hours of Service, for which a Participant
is directly or indirectly
57
<PAGE>
compensated by the Employers or the Subsidiaries, or entitled to
compensation from the Employers or Subsidiaries, for absences due to
sickness, disability or similar reason.
(c) The number of Hours of Service which are awarded under this Section
during a Participant's absence from work and during which he performs no
duties for his Employer, whether or not he receives direct or indirect
compensation from an Employer during such absence, shall be the number of
Hours of Service during his Standard Work Week and/or Standard Work Year
during which he would have ordinarily performed duties for his Employer if
he had reported for work instead of being absent. No more than eight Hours
of Service shall be awarded for any day of absence; no more than 1,000 Hours
of Service shall be awarded under this Section for purposes of Section 17.1
in any year; and no more than 2,080 Hours of Service shall be awarded under
this Section for purposes of Section 17.3 in any year. All Hours of Service
awarded a Participant under this Section for periods of absence from work
shall be included in the year in which such absence occurred.
(d) In addition to the periods specified in paragraphs (a)(iv) and (v)
for any period of absence which qualifies as a "Leave of Absence" as such
term is defined in the Hourly Disability Plan, Hours of Service will be
credited for the period during which the participant is entitled to "Minimum
Disability Income" under the Hourly Disability Plan if the participant
either returns to the employment of an Employer or Subsidiary at the end of
such period of absence or is determined to be on Long-Term Disability under
the terms of the Hourly Disability Plan in which case Hours of Service
during such period of absence shall be determined as indicated in paragraph
(c) above and credited for the period provided in Sections 17.1(a)(vii) and
17.3(a)(vii).
(e) Once it is determined that an employee should be credited with an
Hour of Service, such Hour of Service shall be credited to the computation
period or periods in which the duties are performed or are deemed to have
been performed or to which the payment pertains; provided, however, that
except as may be otherwise provided in this Section 17.4 for certain
specified types of absences, no more than 501 Hours of Service shall be
credited during any absence from employment and during which no services are
rendered notwithstanding the fact that the employee may have been deemed to
have performed service during such period or for which payments are due and
the number of hours which will be credited during such absences shall be
credited according to the number of hours which are scheduled in the
Participant's Standard Work Week.
(f) Effective May 1, 1996, in determining the Hours of Service of any
employee who is compensated by the Employers or the Subsidiaries on a basis
not dependent on the number of hours worked by such employee, the Plan
Committee may credit such employee with 95 Hours of Service for each semi-
monthly payroll period in which such employee is directly or indirectly
compensated by the Employers or Subsidiaries for the performance of duties
for the Employers and the Subsidiaries, or may utilize such other method of
estimating the Hours of Service of such employee during such period as may
be authorized under the applicable regulations.
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17.5 Break In Service. Effective January 1, 1996, a one-year "Break
in Service" means a calendar year in which a participant completes not more than
500 Hours of Service, except where such calendar year is the year in which the
participant either:
(a) First commenced employment with an Employer and continuously
accrued Hours of Service from the date of hire to the end of such calendar
year; or
(b) Terminated all further employment with Employers following an
unbroken, continuous accrual of Hours of Service from January 1 of such
year to the date of such termination.
17.6 Standard Work Week. With respect to any regular, full-time
employee covered under the Plan, his "Standard Work Week" shall mean 40 Hours of
Service and the "Standard Work Year" shall mean 2,080 Hours of Service. With
respect to employees who are not regular, full-time employees, the "Standard
Work Week" shall mean the average number of hours which are regularly scheduled
to be worked each week by the employee, and the "Standard Work Year" for such
employees shall mean the number of hours in the employee's Standard Work Week
multiplied by 52.
17.7 Layoff. "Layoff" shall mean layoff of the participant from
employment with an Employer.
17.8 Retirement Income Factor. The "Retirement Income Factor"
applicable with respect to any participant in accordance with Section 4.2 is the
dollar amount set forth in Exhibit "A" determined with respect to such
participant.
17.9 Subsidiary. A "Subsidiary" is any subsidiary or affiliate of the
Corporation, 80 percent of the stock of which is controlled by the Corporation
by application of Sections 414(b) and 1563(a) of the Code.
17.10 Subsidiary. A "subsidiary" is any subsidiary or affiliate of the
Corporation not described in Section 17.9 which would be so described if the
figure 51 were replaced for the figure 80 in Section 17.9.
17.11 Qualified Actuary. "Qualified Actuary" means either an
independent individual actuary who is a member of the Society of Actuaries, or a
firm of independent actuaries, one of whose members is a member of the Society
of Actuaries and who is enrolled with the Joint Board for the Enrollment of
Actuaries, and is selected by the Plan Committee.
17.12 Actuarial Equivalent. Except to the extent expressly provided to
the contrary by ERISA, a benefit shall be actuarially equivalent to any other
benefit if the actuarial reserve required to provide the same is equal to the
actuarial reserve required to provide such other benefit, computed on the basis
of the actuarial rates, tables and procedures last adopted by the Plan Committee
for this purpose. No adjustment in a determination of an actuarially equivalent
value or amount shall be
59
<PAGE>
made if such tables, rates and procedures are changed by the Plan Committee
subsequent to such determination.
Actuarially equivalent amounts or values will be determined on the basis of
the following actuarial rates and tables:
(a) The assumed mortality rates will be based on the 1971 Towers,
Perrin, Forster and Crosby Forecast Mortality Table using a one-year age
setback for the participant and a five-year age setback for the
beneficiary or spouse.
(b) In order to determine the equivalent value of optional benefits,
the assumed annual rate of return will be 7%.
17.13 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any comparable future legislation that amends, supplements or
supersedes said Internal Revenue Code.
17.14 Final Average Pay.
(a) "Final Average Pay" shall be the greater of the Final Average Pay
in the following two computation periods:
(i) the 36 whole months immediately prior to the covered
employee's Retirement Date or Employment Termination Date, whichever
occurs first, or
(ii) the three of the last five calendar years which produced the
highest Final Average Pay immediately prior to the year of the covered
employee's Retirement Date or Employment Termination Date, whichever
occurs first.
(b) The Final Average Pay of a covered employee for each computation
period shall be the sum of (i), (ii) and (iii):
(i) Average annual base pay. Average annual base pay shall be
calculated by (A) determining the covered employee's regular base
straight-time rate, exclusive of any premiums, for the last day of
each month during the applicable computation period; (B) averaging the
above regular base straight-time rates; and (C) multiplying the
average by 2,080.
(ii) Average annual straight-time overtime base pay. Average
annual straight-time overtime base pay shall be calculated by
multiplying the covered employee's average regular base straight-time
rate, exclusive of any premiums, as determined in (i) above, by the
average annual number of overtime hours worked by all covered
employees during the applicable computation period at the location at
which the covered employee is employed. For purposes of this
calculation, overtime hours shall be considered worked in the month in
which the straight-time overtime base pay is actually paid.
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(iii) Average annual shift premium pay. Average annual shift
premium pay shall be calculated by (A) determining the covered
employee's total shift premium paid for regularly scheduled hours
during the applicable computation period; and (B) dividing by three.
For purposes of this calculation, shift premium shall be considered
attributable to hours worked in the month in which the shift premium
pay is actually paid.
(c) Computation of a covered employee's Final Average Pay shall be
subject to the following:
(i) For purposes of calculating Final Average Pay during the final
36 months computation period, if the covered employee has no earnings
during one or more of his final 36 months, his Final Average Pay shall
be based upon his average annual base pay, average annual straight-
time overtime base pay, and average annual shift premium pay during
the final 36 months in which he had base pay.
(ii) For any month in which a covered employee receives only
accident and sickness pay or disability income from any employee
welfare benefit plan maintained by his Employer or in which his
Employer participates, his regular base straight-time rate for
purposes of paragraph (b)(i)(A) above shall be calculated based upon
his regular base straight-time rate on his last day worked, exclusive
of any premiums.
(iii) If a covered employee voluntarily bid to or was
involuntarily placed in a different job which resulted in a reduction
in his regular base straight-time rate during the applicable
computation period and the covered employee's regular base straight-
time rate for each month thereafter during the applicable computation
period for purposes of paragraph (b)(i)(A) above shall be the greater
of the regular base straight-time rate on the last day of the month
prior to such reduction or the regular base straight-time rate in any
subsequent month during the applicable computation period.
(d) In addition to other applicable limitations set forth in the Plan,
and notwithstanding any other provision of the Plan to the contrary, the
compensation of each participant taken into account under the Plan for
purposes of determining Final Average Pay shall not exceed the "OBRA '93
Annual Compensation Limit." The "OBRA '93 Annual Compensation Limit" is
$150,000, as adjusted for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months, over
which compensation is determined ("Determination Period") beginning in
such calendar year. If a Determination Period consists of fewer than 12
months, the "OBRA '93 Annual Compensation Limit" will be multiplied by a
fraction, the numerator of which is the number of months in the
Determination Period, and the denominator of which is 12.
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If compensation for any prior Determination Period is taken into
account in determining a participant's benefits accruing in the current
Plan Year, the compensation for that prior Determination Period is subject
to the "OBRA '93 Annual Compensation Limit" in effect for that prior
Determination Period. For this purpose, for Determination Periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the "OBRA '93 Annual Compensation Limit" is
$150,000.
17.15 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
IN WITNESS WHEREOF, the Corporation has executed this Amended and Restated
Hourly Paid Employees' Pension Plan this 19th day of Aug., 1996.
STERLING CHEMICALS, INC.
ATTEST:
By: /s/ Robert O. McAlister
/s/ F. Maxwell Evans ----------------------------------
__________________________ Name: Robert O. McAlister
Title: V.P.H.R. & Admin.
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EXHIBIT "A"
Retirement Income Factor
The "Retirement Income Factor" applicable with respect to a participant shall be
determined based on Final Average Pay in accordance with the following table:
Final Average Pay: Retirement Income Factor:
----------------- ------------------------
Less than $35,500 $35
$35,500 - $36,499 $36
$36,500 - $37,499 $37
$37,500 - $38,499 $38
$38,500 - $39,499 $39
$39,500 - $40,499 $40
$40,500 - $41,499 $41
$41,500 - $42,499 $42
$42,500 - $43,499 $43
$43,500 - $44,499 $44
$44,500 - $45,499 $45
$45,500 - $46,499 $46
$46,500 - $47,499 $47
$47,500 - $48,499 $48
$48,500 - $49,499 $49
$49,500 - $50,499 $50
$50,500 - $51,499 $51
$51,500 - $52,499 $52
$52,500 - $53,499 $53
$53,500 - $54,499 $54
$54,500 and greater $55
<PAGE>
EXHIBIT 10.6
STERLING CHEMICALS ESOP
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS.................................I-1
ARTICLE II
ADMINISTRATION.............................II-1
2.1 ASSIGNMENT AND DESIGNATION OF
ADMINISTRATIVE AUTHORITY........II-1
2.2 ALLOCATION AND DELEGATION OF
RESPONSIBILITIES................II-1
2.3 POWERS AND DUTIES OF THE
ADMINISTRATOR...................II-2
2.4 RECORDS AND REPORTS..................II-3
2.5 AUDIT................................II-3
2.6 APPOINTMENT OF ADVISORS..............II-4
2.7 INFORMATION FROM EMPLOYER............II-4
2.8 PAYMENT OF EXPENSES..................II-4
2.9 ACTIONS BY ADMINISTRATOR.............II-4
2.10 CLAIMS PROCEDURE.....................II-5
2.11 CLAIMS REVIEW PROCEDURE..............II-5
ARTICLE III
ELIGIBILITY...............................III-1
3.1 CONDITIONS OF ELIGIBILITY...........III-1
3.2 EFFECT OF PARTICIPATION UPON THE
ACCEPTANCE OF ANY BENEFITS
UNDER THIS PLAN................III-1
3.3 DETERMINATION OF ELIGIBILITY........III-1
3.4 TERMINATION OF ELIGIBILITY..........III-1
3.5 OMISSION OF ELIGIBLE EMPLOYEE.......III-1
3.6 INCLUSION OF INELIGIBLE EMPLOYEE....III-1
ARTICLE IV
CONTRIBUTION AND ALLOCATION................IV-1
4.1 EMPLOYER'S CONTRIBUTION..............IV-1
4.2 TIME OF PAYMENT OF EMPLOYER'S
CONTRIBUTION....................IV-1
4.3 ALLOCATION OF CONTRIBUTION,
FORFEITURES AND EARNINGS........IV-1
4.4 MAXIMUM ANNUAL ADDITIONS.............IV-5
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL
ADDITIONS.......................IV-9
4.6 DIRECTED DIVERSIFICATION............IV-10
4.7 SUSPENSE ACCOUNT....................IV-11
-i-
<PAGE>
ARTICLE V
FUNDING AND INVESTMENT POLICY...............V-1
5.1 INVESTMENT POLICY.....................V-1
5.2 APPLICATION OF CASH...................V-1
5.3 TRANSACTIONS INVOLVING COMPANY STOCK..V-1
5.4 LOANS TO THE TRUST....................V-2
ARTICLE VI
VALUATIONS.................................VI-1
6.1 VALUATION OF THE TRUST FUND..........VI-1
6.2 METHOD OF VALUATION..................VI-1
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF
BENEFITS.......................VII-1
7.1 BENEFITS UPON RETIREMENT............VII-1
7.2 BENEFITS UPON DEATH.................VII-1
7.3 BENEFITS UPON DISABILITY............VII-2
7.4 BENEFITS UPON TERMINATION...........VII-2
7.5 DISTRIBUTION OF BENEFITS............VII-5
7.6 HOW PLAN BENEFITS WILL BE
DISTRIBUTED....................VII-7
7.7 DISTRIBUTION FOR MINOR BENEFICIARY..VII-9
7.8 LOCATION OF PARTICIPANT OR
BENEFICIARY UNKNOWN............VII-9
7.9 RIGHT OF FIRST REFUSAL..............VII-9
7.10 STOCK CERTIFICATE LEGEND...........VII-10
7.11 PUT OPTION.........................VII-10
7.12 NONTERMINABLE PROTECTIONS AND
RIGHTS........................VII-12
7.13 LIMITATIONS ON BENEFITS AND
DISTRIBUTIONS.................VII-12
7.14 PAYMENT OF DISTRIBUTION DIRECTLY TO
ELIGIBLE RETIREMENT PLAN......VII-13
7.15 30-DAY WAIVER......................VII-14
ARTICLE VIII
TRUSTEE..................................VIII-1
8.1 BASIC RESPONSIBILITIES OF THE
TRUSTEE.......................VIII-1
8.2 VOTING COMPANY STOCK...............VIII-1
ARTICLE IX
AMENDMENT, TERMINATIONS, AND MERGERS.......IX-1
9.1 AMENDMENT............................IX-1
9.2 TERMINATION..........................IX-1
9.3 MERGER OR CONSOLIDATION..............IX-2
-ii-
<PAGE>
ARTICLE X
MISCELLANEOUS.............................. X-1
10.1 PARTICIPANT'S RIGHTS..................X-1
10.2 ALIENATION............................X-1
10.3 CONSTRUCTION OF PLAN..................X-1
10.4 GENDER AND NUMBER.....................X-1
10.5 LEGAL ACTION..........................X-2
10.6 PROHIBITION AGAINST DIVERSION OF
FUNDS............................X-2
10.7 BONDING...............................X-2
10.8 RECEIPT AND RELEASE FOR PAYMENTS......X-3
10.9 ACTION BY THE EMPLOYER................X-3
10.10 NAMED FIDUCIARIES AND ALLOCATION OF
RESPONSIBILITY...................X-3
10.11 HEADINGS..............................X-3
10.12 APPROVAL BY INTERNAL REVENUE SERVICE..X-3
10.13 UNIFORMITY............................X-4
10.14 SECURITIES AND EXCHANGE COMMISSION
APPROVAL.........................X-4
10.15 INDEMNIFICATION.......................X-4
10.16 CONTROLLING LAW.......................X-4
ARTICLE XI
PARTICIPATING EMPLOYERS....................XI-1
11.1 ADOPTION BY OTHER EMPLOYERS..........XI-1
11.2 REQUIREMENTS OF PARTICIPATING
EMPLOYERS.......................XI-1
11.3 DESIGNATION OF AGENT.................XI-2
11.4 EMPLOYEE TRANSFERS...................XI-2
11.5 PARTICIPATING EMPLOYER'S
CONTRIBUTION....................XI-2
11.6 AMENDMENT............................XI-2
11.7 DISCONTINUANCE OF PARTICIPATION......XI-2
11.8 ADMINISTRATOR'S AUTHORITY............XI-3
11.9 PARTICIPATING EMPLOYER CONTRIBUTION
FOR AFFILIATE...................XI-3
ARTICLE XII
TOP-HEAVY STATUS..........................XII-1
12.1 ARTICLE CONTROLS....................XII-1
12.2 DEFINITIONS.........................XII-1
12.3 TOP-HEAVY STATUS....................XII-2
12.4 TERMINATION OF TOP-HEAVY STATUS.....XII-3
12.5 EFFECT OF ARTICLE...................XII-3
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<PAGE>
STERLING CHEMICALS ESOP
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to recognize the contributions employees
of the Employers will make to the successful operation of its parent corporation
and to reward such contributions by means of an employee stock ownership plan
for those employees who qualify as Participants hereunder; and
WHEREAS, contributions to the Plan will be made by the Employers and
such contributions made to the Plan's trust will be invested primarily in
Company Stock;
NOW, THEREFORE, as of the Effective Date the Company hereby
establishes this ESOP for the exclusive benefit of its Participants and their
Beneficiaries under the following terms:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "Administrator" means the person designated by the Chief Executive
Officer of the Company pursuant to Section to administer the Plan or, in the
absence of any such designation, the Company.
1.3 "Affiliated Employer" means the Employer and any corporation which is
a member of a controlled group of corporations (as defined in Code Section
414(b)) which include the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section 414(c))
with the Employer; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to Regulations under Code Section 414(o).
1.4 "Anniversary Date" means the last day of each Plan Year.
1.5 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
7.2 and 7.6.
1.6 "Benefit Commencement Date" means with respect to each Participant or
Beneficiary, the first date on which all events have occurred which entitle such
Participant or Beneficiary to such benefits.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.8 "Company" means STX Chemicals Corp., to be renamed Sterling Chemicals,
Inc. on the Effective Date (or its successor).
1.9 "Company Stock" means common stock issued by STX Acquisition Corp., to
be renamed Sterling Chemicals Holding, Inc. ("Holdco"), (or by an Employer)
which is readily tradeable on an established securities market. If there is no
common stock which meets the foregoing requirement, the term "Company Stock"
means common stock issued by Holdco (or by an Employer) having a combination of
voting power and dividend rights equal to or in excess of: (A) that class of
common stock of Holdco (or of an Employer) having the greatest voting power, and
(B) that class of stock of the Employer (or of any other such corporation)
having the greatest dividend rights. Preferred Stock shall be deemed to be
"Company Stock" if such stock is convertible at any time into stock which
constitutes "Company Stock" hereunder and if such conversion is at a conversion
price which (as of the date of the acquisition by the Trust) is reasonable.
I-1
<PAGE>
1.10 "Company Stock Account" means the account of a Participant which is
credited with the shares of Company Stock purchased and paid for by the Trust
Fund or contributed to the Trust Fund.
1.11 "Compensation" with respect to any Participant means such
Participant's base Compensation (before any Employee elective salary reductions
pursuant to a Section 125 or 401(k) plan of the Employers) paid from the
Employers for that portion of the Plan Year during which he is an Eligible
Employee and a Participant in the Plan and shall not include any other forms of
compensation, including, without limitation, severance pay, overtime or profit
sharing amounts.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the annual
Compensation of each Employee taken into account under the Plan shall not exceed
the "OBRA '93 Annual Compensation Limit." The "OBRA '93 Annual Compensation
Limit" is $150,000, as adjusted for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined ("Determination Period") beginning in such
calendar year. If a Determination Period consists of fewer than 12 months, the
"OBRA '93 Annual Compensation Limit" will be multiplied by a fraction, the
numerator of which is the number of months in the Determination Period, and the
denominator of which is 12. Any reference in this Plan to the limitation under
Code Section 401(a)(17) shall mean the "OBRA '93 Annual Compensation Limit" set
forth in this Section.
1.12 "Current Obligations" means Trust obligations arising from extension
of credit to the Trust and payable in cash within one year from the date an
Employer Contribution is due.
1.13 "Effective Date" means date of the closing of the acquisition of "old"
Sterling Chemicals, Inc. by STX Acquisition Corp.
1.14 "Eligible Employee" means any Employee of an Employer who (1) is not
(i) a Leased Employee or (ii) a nonresident alien and (2) has satisfied the
provisions of Section 3.1; provided, however, Employees whose employment is
governed by the terms of a collective bargaining agreement between employee
representatives (within the meaning of Code Section 7701(a)(46)) and the
Employer will not be eligible to participate in this Plan unless such agreement
expressly provides for such coverage in this Plan.
1.15 "Employee" means any person who is a common law employee of the
Employer or an Affiliated Employer. Employee shall also include Leased
Employees, except when they are not required to be treated as employees for Plan
purposes by the Code.
1.16 "Employer" means the Company and any Participating Employer (as
defined in Section 11.1) which shall adopt this Plan, and any successor which
shall maintain this Plan.
I-2
<PAGE>
1.17 "Employer Contributions" means the Employer's contributions to the
Plan pursuant to Section 4.1(a).
1.18 "ESOP" means an employee stock ownership plan that meets the
requirements of Code Section 4975(e)(7) and Regulations 54.4975-11. This Plan
is intended to be an ESOP.
1.19 "Exempt Loan" means a loan made to the Plan by a disqualified person
or a loan to the Plan which is guaranteed by a disqualified person and which
satisfies the requirements of Section 2550.408b-3 of the Department of Labor
Regulations, Section 54.4975-7(b) of the Treasury regulations and Section 5.4
hereof.
1.20 "Family Member" means an individual described in Code Section
414(q)(6)(B).
1.21 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan.
1.22 "Forfeiture" means that portion of a Participant's Account that is not
Vested in accordance with the provisions of Section 7.4, on account of the
Participant's termination of employment before full vesting.
1.23 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason. For purposes of Section
1.29, a "Former Participant" shall be treated as a Highly Compensated
Participant if such "Former Participant" was a Highly Compensated Participant
when he separated from service with the Employer or was a Highly Compensated
Participant at any time after attaining age 55.
1.24 "415 Compensation" means compensation as defined in Section 4.4(e).
1.25 "Highly Compensated Employee" means any Employee or former Employee
who is a highly compensated employee as defined in Code Section 414(q) and the
Regulations thereunder. Generally, any Employee or former Employee is considered
a Highly Compensated Employee if such Employee or former Employee performed
services for the Employer during the "determination year" and is one or more of
the following groups:
(a) Employees who at any time during the "determination year" or "look-back
year" were "five percent owners" as defined in Section 1.29(c).
(b) Employees who received "415 Compensation" during the "look-back year"
from the Employer in excess of $75,000. In determining whether an individual
has "415
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Compensation" of more than $75,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c), (m) and (o) shall be
taken into account.
(c) Employees who received "415 Compensation" during the "look-back year"
from the Employer in excess of $50,000 and were in the top-paid group of
Employees for the Plan Year. An Employee is in the top-paid group of Employees
for any Plan Year if such Employee is in the group consisting of the top 20% of
the Employees when ranked on the basis of "415 Compensation" paid during the
Plan Year. In determining whether an individual has "415 Compensation" of more
than $50,000, "415 Compensation" from each employer required to be aggregated
under Code Section 414(b), (c), (m) and (o) shall be taken into account.
(d) Employees who during the "look-back year" were officers as defined in
Section 1.29(a) and received "415 Compensation" during the "look-back year" from
the Employer greater than 50% of the limit in effect under Code Section
415(b)(1)(A) for any such Plan Year. The number of officers shall be limited to
the lesser of (i) 50 employees; or (ii) the greater of 3 employees or 10% of all
employees. For the purpose of determining the number of officers, the following
Employees shall be excluded:
(1) Employees with less than six months of service;
(2) Employees who normally work less than 17 1/2 hours per week;
(3) Employees who normally work less than six months during a year; and
(4) Employees who have not yet attained age 21.
However, such Employees shall still be considered for the purpose of
identifying the particular Employees who are officers. If the Employer does not
have at least one officer whose annual "415 Compensation" is in excess of 50% of
the Code Section 415(b)(1)(A) limit, then the highest paid officer of the
Employer will be treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100 Employees paid the
greatest "415 Compensation" during the "determination year" and are also
described in (b), (c) or (d) above when these paragraphs are modified to
substitute "determination year" for "look-back year."
The "look-back year" shall be the calendar year ending with or within the
Plan Year for which testing is being performed, and the "determination year" (if
applicable) shall be the period of time, if any, that extends beyond the "look-
back year" and ends on the last day of the Plan Year for which testing is being
performed (the "lag period"). If the "lag period" is less than twelve months
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long, the threshold amounts specified in (b), (c), and (d) above shall be
prorated based upon the number of months in the "lag period."
For purposes of this Section, the determination of "415 Compensation" shall
be based only on "415 Compensation" which is actually paid and shall be made by
including amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3) or 402(g) and Employee
contributions described in Code Section 414(h)(2) that are treated as Employer
contributions. Additionally, the dollar threshold amounts specified in (b) and
(c) above shall be adjusted at such time and in such manner as is provided in
Regulations. In the case of such an adjustment, the dollar limits which shall
be applied are those for the calendar year in which the "determination year" or
"look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are non-
resident aliens and who received no earned income (within the meaning of Code
Section 911(d)(2)) from the Employer constituting United States source income
within the meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, all Affiliated Employers shall be taken into account as a single
employer and Leased Employees within the meaning of Code Sections 414(n)(2) and
414(o)(2) shall be considered Employees unless such Leased Employees are covered
by a plan described in Code Section 414(n)(5) and are not covered in any
qualified plan maintained by the Employer. The exclusion of Leased Employees
for this purpose shall be applied on a uniform and consistent basis for all of
the Employer's retirement plans
1.26 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.27 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
or an Affiliated Employer for the performance of duties during the applicable
computation period; (2) each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer or an
Affiliated Employer (irrespective of whether the employment relationship has
terminated) for reasons other than performance of duties (such as vacation,
holidays, sickness, jury duty, disability, lay-off, military duty, or leave of
absence) during the applicable computation period; and (3) each hour for which
back pay is awarded or agreed to by the Employer or Affiliated Employer without
regard to mitigation of damages. An Employee shall be credited with 95 Hours of
Service for each semimonthly period the Employee is credited with at least one
Hour of Service.
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's
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compensation, or unemployment compensation or disability insurance laws; (iii)
Hours of Service are not required to be credited for a payment which solely
reimburses an Employee for medical or medically related expenses incurred by the
Employee; and (iv) Hours of Service recognized by "old" Sterling Chemicals, Inc.
for purposes of its qualified ESOP immediately prior to the Effective Date shall
be recognized under this Plan.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer or Affiliated Employer regardless of whether such payment
is made by or due from the Employer directly, or indirectly through, among
others, a trust fund, or insurer, to which the Employer or Affiliated Employer
contributes or pays premiums and regardless of whether contributions made or due
to the trust fund, insurer, or other entity are for the benefit of particular
Employees or are on behalf of a group of Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year of
Service, a 1-Year Break in Service, and employment commencement date (or
reemployment commencement date). The provisions of Department of Labor
regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.28 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.29 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or Former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year or any of the preceding four Plan Years, has been included
in one of the following categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50% of the amount in effect under Code Section
415(b)(1)(A) for any such Plan Year;
(b) one of the ten Employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends
and owning (or considered as owning within the meaning of Code Section 318)
both more than one-half percent interest and the largest interests in the
Employer;
(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than 5% of the outstanding stock of the Employer or
stock possessing more than 5% of the total combined voting power of all
stock of the Employer, or, in the case of an unincorpo rated business, any
person who owns more than 5% of the capital or profits interest in the
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Employer. In determining percentage ownership hereunder, Employers that
would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers; or
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than 1% of the outstanding stock of the Employer or
stock possessing more than 1% of the total combined voting power of all
stock of the Employer, or, in the case of an unincorporated business, any
person who owns more than 1% of the capital or profits interest in the
Employer. In determining percentage ownership hereunder, Employers that
would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate Employers. However, in determining whether an
individual has "415 Compensation" of more than $150,000, "415 Compensation"
from each employer required to be aggregated under Code Sections 414(b),
(c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation" shall
be based only on "415 Compensation" which is actually paid and shall be made by
including amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2) that are treated as
Employer contributions.
1.30 "Leased Employee" means any person who would be within the meaning of
Code Section 414(n)(2) unless such Leased Employee is covered by a plan
described in Code Section 414(n)(5) and such Leased Employee does not constitute
more than 20% of the recipient's nonhighly compensated work force.
1.31 "Non-Highly Compensated Employee" means any Employee or former
Employee who is not a Highly Compensated Employee nor a Family Member.
1.32 "Non-Highly Compensated Participant" means any Participant or Former
Participant who is neither a Highly Compensated Participant nor a Family Member.
1.33 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.34 "Normal Retirement Age" means the later of the Participant's 65th
birthday or the fifth anniversary of the date his participation in the Plan
commenced.
1.35 "1-Year Break in Service" means the applicable computation period of
12 consecutive months during which an Employee fails to complete more than 500
Hours of Service. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours
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of Service shall be recognized for "authorized leaves of absence" and "maternity
and paternity leaves of absence."
An Employee shall not be deemed to have incurred a 1-Year Break in Service
if he completes an Hour of Service within 12 months following the last day of
the month during which his employment terminated.
"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer or Affiliated Employer pursuant to an
established nondiscriminatory policy, whether occasioned by illness, military
service, or any other reason.
A "maternity or paternity leave of absence" means an absence from work for
any period by reason of the Employee's pregnancy, birth of the Employee's child,
placement of a child with the Employee in connection with the adoption of such
child, or any absence for the purpose of caring for such child for a period
immediately following such birth or placement. For this purpose, Hours of
Service shall be credited for the computation period in which the absence from
work begins, only if credit therefore is necessary to prevent the Employees from
incurring a 1-Year Break in Service, or, in any other case, in the immediately
following computation period.
1.36 "Other Investments Account" means the account of a Participant which
is credited with his share of the net gain (or loss) of the Plan, Forfeitures
and Employer Contributions and which is not invested in Company Stock.
1.37 "Participant" means any Eligible Employee who participates in the Plan
pursuant to Section 3.1.
1.38 "Participant's Accounts" means the accounts established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from Employer Contributions, which shall include
the Company Stock Account and the Other Investment Account.
1.39 "Plan" means this instrument, including all amendments thereto.
1.40 "Plan Year" means the calendar year, which shall also be the
limitation year for purposes of Code Section 415; provided, however, the initial
Plan Year shall be a short year beginning on the Effective Date.
1.41 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.42 "Retirement" means a Participant's ceasing to be an Employee (i) on or
after reaching his Normal Retirement Age or (ii) in connection with his
retirement under a defined benefit plan of the Employer that is qualified under
Code Section 401(a).
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1.43 "Top Heavy Plan" means a plan described in Article XII.
1.44 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
1.45 "Total and Permanent Disability" means, as determined by the
Administrator, a Participant's complete inability to substantially perform each
of the material duties of any gainful occupation for which the Participant is
reasonably qualified by reason of his education, training or experience, which
condition is reasonably expected to continue for an extended period of time.
1.46 "Trust" means the trust established under the Trust Agreement to hold
and invest contributions made under the Plan and from which the Plan benefits
will be distributed.
1.47 "Trust Agreement" means the agreement entered into between the Company
and the Trustee establishing a trust to hold and invest contributions made under
the Plan and from which benefits will be distributed.
1.48 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.49 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.50 "Unallocated Company Stock Suspense Account" means an account
containing Company Stock acquired with the proceeds of an Exempt Loan and which
has not been released from such account and allocated to the Participants'
Company Stock Accounts.
1.51 "Valuation Date" means the last day of each Plan Year and any other
date(s) established by the Administrator.
1.52 "Vested" means the portion of a Participant's Account that is
nonforfeitable.
1.53 "Year of Service" means the computation period of 12 consecutive
months, herein set forth, during which an Employee has at least 1,000 Hours of
Service.
(a) For purposes of determining an Employee's eligibility to
participate in the Plan, the computation period shall be the 12 consecutive
month period beginning on the date the Employee first performs an Hour of
Service for an Affiliated Employer; however, succeeding eligibility periods
after the initial eligibility period shall be the Plan Year, and an
Employee who is credited with 1,000 or more Hours of Service in both the
initial eligibility period and the first Plan Year beginning prior to the
anniversary of the Employee's initial period shall be credited with two
Years of Service for eligibility purposes, and
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(b) For purposes of determining an Employee's vested percentage under
Section 7.4, the computation period shall be the Plan Year. Notwithstanding
the foregoing, for any short Plan Year, the determination of whether an
Employee has completed a Year of Service shall be made in accordance with
Department of Labor regulation 2530.203-2(c).
(c) Years of Service recognized under the "old" Sterling Chemicals,
Inc.'s ESOP immediately prior to the Effective Date shall be recognized
under this Plan.
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ARTICLE II
ADMINISTRATION
2.1 ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY
(a) The Chief Executive Officer of the Company ("CEO") may appoint one
or more persons to be the Administrator. Any person, including, but not
limited to, the Employees, shall be eligible to serve as an Administrator.
Any person so appointed shall signify his acceptance by filing written
acceptance with the Company. An Administrator may resign by delivering his
written resignation to the Company or be removed by the CEO by delivery of
written notice of removal, to take effect at a date specified therein, or
upon delivery to the CEO if no date is specified.
(b) The CEO, upon the resignation or removal of an appointed
Administrator, may designate in writing a successor to this position. If
the CEO does not appoint an Administrator, the Company will function as the
Administrator.
(c) The CEO shall be empowered to appoint and remove an appointed
Administrator from time to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is being operated for
the exclusive benefit of the Participants and their Beneficiaries in
accordance with the terms of the Plan, the Code, and the Act.
(d) The CEO shall periodically review the performance of the
Administrator or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be satisfied by formal periodic
review by the CEO or by a qualified person specifically designated by the
CEO, through day-to-day conduct and evaluation, or through any other
appropriate method.
(e) The Administrator will furnish Plan Fiduciaries and Participants
with notices and information statements when voting rights must be
exercised pursuant to Section 8.2.
2.2 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the CEO may
designate the responsibilities of each Administrator as may be specified by the
CEO and accepted in writing by each Administrator. In the event that no such
delegation is made by the CEO, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the CEO and the Trustee in writing of such action and specify the
responsibilities of each Administrator. The Trustee thereafter shall accept and
rely upon any documents executed by the appropriate Administrator until such
time as the CEO or the Administrators file with the Trustee a written revocation
of such designation.
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2.3 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, subject
to the specific terms of the Plan. The Administrator shall administer the Plan
in accordance with its terms and shall have the power to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive
and binding upon all persons. The Administrator may establish procedures,
correct any defect, supply any information, or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or advisable to
carry out the purpose of the Plan; provided, however, that any procedure,
discretionary act, interpretation or construction shall be done in a
nondiscriminatory manner based upon uniform principles consistently applied and
shall be consistent with the intent that the Plan shall continue to be deemed a
qualified plan under the terms of Code Section 401(a), and shall comply with the
terms of the Act and all regulations issued pursuant thereto. The Administrator
shall have all powers necessary or appropriate to accomplish his duties under
this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) to determine all questions relating to the eligibility of
Employees to participate or remain a Participant hereunder;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
disbursements from the Trust;
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any contract to be purchased
from any insurer, and to designate the insurer from which such contract
shall be purchased;
(g) to compute and certify to the Employer from time to time the sums
of money necessary or desirable to be contributed to the Trust Fund;
(h) to establish a "funding policy and method", i.e., it shall consult
with the Employer, and it shall determine whether the Plan has a short
range need for liquidity (e.g., to pay benefits) or whether liquidity is a
long range goal and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do so. Such "funding
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policy and method" shall be consistent with the objectives of this Plan and
with the requirements of Title I of the Act;
(i) to establish and communicate to Participants a procedure and
method to insure that each Participant will vote Company Stock allocated to
such Participant's Company Stock Account pursuant to Section 8.2; and
(j) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.4 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary for
proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.5 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and
the regulations thereunder for any Plan Year, the Administrator shall
appoint an independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within a reasonable
period after the close of the Plan Year, furnish to the Administrator and
the Trustee a report of his audit setting forth his opinion as to whether
each of the following statements, schedules or lists, or any others that
are required by Section 103 of the Act or the Secretary of Labor to be
filed with the Plan's annual report, are presented fairly and in conformity
with generally accepted accounting principles applied consistently:
(1) statement of the assets and liabilities of the Plan;
(2) statement of changes in net assets available to the Plan;
(3) statement of receipts and disbursements, a schedule of all
assets held for investment purposes, a schedule of all loans or fixed
income obligations in default at the close of the Plan Year;
(4) a list of all leases in default or uncollectible during the
Plan Year;
(5) the most recent annual statement of assets and liabilities of
any bank common or collective trust fund in which Plan assets are
invested or such information regarding separate accounts or trusts
with a bank or insurance company as the Administrator deems necessary;
and
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(6) a schedule of each transaction or series of transactions
involving an amount in excess of 5% of Plan assets.
All auditing and accounting fees shall be an expense of and may, at
the election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Section 103 of the Act is maintained by a
bank, insurance company, or similar institution, regulated and supervised
and subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the Administrator
as provided in Section 103(b) of the Act within 120 days after the end of
the Plan Year or such other date as may be prescribed under regulations of
the Secretary of Labor.
2.6 APPOINTMENT OF ADVISORS
The Administrator may appoint counsel, specialists, advisors, and other
persons as the Administrator deems necessary or desirable in connection with the
administration of this Plan.
2.7 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.8 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless
voluntarily paid by the Employer. Such expenses shall include any expenses
incident to the functioning of the Administrator, including, but not limited to,
fees of accountants, counsel, the Trustee and other specialists and their
agents, and other costs of administering the Plan and/or the Trust. Until paid,
the expenses shall constitute a liability of the Trust Fund. However, the
Employer may reimburse the Trust Fund for any administration expense incurred.
Any administration expense paid to the Trust Fund as a reimbursement shall not
be considered an Employer contribution.
2.9 ACTIONS BY ADMINISTRATOR
The Administrator shall hold meetings upon such notice and at such time and
places as it may from time to time determine. Notice to a member shall not be
required if waived in writing by that member. A majority of the members of the
Administrator duly appointed shall constitute a quorum
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for the transaction of business. All resolutions or other actions taken by the
Administrator at any meeting where a quorum is present shall be by vote of a
majority of those present at such meeting and entitled to vote. Resolutions may
be adopted or other action taken without a meeting upon written consent signed
by all of the Administrators.
2.10 CLAIMS PROCEDURE
Claims for benefits under the Plan must be filed with the Administrator in
writing. Written notice of the disposition of a claim shall be furnished to the
claimant within 90 days after the application is filed. In the event the claim
is denied, the reasons for the denial shall be specifically set forth in the
notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.11 CLAIMS REVIEW PROCEDURE
Any Employee, Former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.10
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.10. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Each Employee who is an Eligible Employee on the Effective Date shall
automatically participate in the Plan commencing on the Effective Date. All
other Employees shall automatically become Participants as of the date they
become an Eligible Employee.
3.2 EFFECT OF PARTICIPATION UPON THE ACCEPTANCE OF ANY BENEFITS
UNDER THIS PLAN
An Eligible Employee shall automatically be bound by the terms and
conditions of the Plan and all amendments hereto.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as long as
the same is made pursuant to the Plan and the Act. Such determination shall be
subject to review as provided for in Section 2.8 and 2.9.
3.4 TERMINATION OF ELIGIBILITY
In the event a Participant shall go from a classification of an Eligible
Employee to a noneligible Employee, such Former Participant shall continue to
vest in his interest in the Plan for each Year of Service completed while a
noneligible Employee, until such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings/losses of the Trust
Fund.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant
in the Plan is erroneously omitted and discovery of such omission is not made
until after a contribution by his Employer for the year has been made, the
Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the Employer would have contributed with respect to
him had he not been omitted. Such contribution shall be made regardless of
whether or not it is deductible in whole or in part in any taxable year under
applicable provisions of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a
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contribution for the year has been made, the Employer shall not be entitled to
recover the contribution made with respect to the ineligible person regardless
of whether or not a deduction is allowable with respect to such contribution.
In such event, the amount contributed with respect to the ineligible person
shall constitute a Forfeiture for the Plan Year in which the discovery is made.
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ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 EMPLOYER'S CONTRIBUTION
(a) For each Plan Year, the Employer shall contribute to the Plan such
amount as may be determined by the Company's Board of Directors or its
delegatees, but, subject to (b) below, such amount as is necessary to meet
the Plan's Current Obligations.
(b) The Employer Contribution for any Plan Year shall not exceed the
maximum amount allowable as a deduction to the Employer under the
provisions of Code Section 404.
(c) However, to the extent necessary to provide the top heavy minimum
allocations, the Employer shall make a contribution even if it exceeds the
amount which is deductible under Code Section 404.
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
Employer Contributions will be paid in cash and/or in Company Stock as the
Company's Board of Directors or its delegatees may from time to time determine.
Company Stock will be valued at its then fair market value. Notwithstanding the
above, to the extent that the Plan has Current Obligations, the Employer
Contribution will be paid to the Plan in cash. The Employer Contribution with
respect to a Plan Year will be paid to the Plan at such times as may be required
to meet any obligations under an Exempt Loan, and in all events on or before the
date required to make such contribution a deduction on the Employer's federal
income tax return for the year.
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of each
Valuation Date all amounts allocated to each such Participant as set forth
herein. However, the Administrator may separately account for that portion
of each Participant's Account attributable to Top Heavy Plan Years.
(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the Employer
Contribution for each Plan Year. As soon as reasonably practicable after
the date of receipt by the Administrator for such information, the
Administrator shall, with respect to the Employer Contribution pursuant to
4.1(a), allocate such Employer Contribution to each eligible Participant's
Account in the same proportion that each such Participant's Compensation
for the Plan Year bears to the total Compensation of all eligible
Participants for such Plan Year.
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A Participant who is not an Employee on the last day of the Plan Year
shall not be an "eligible Participant", i.e., eligible to share in the
Employer Contribution or Forfeitures for that year, unless required
pursuant to Section 4.3(i) or 4.3(n).
(c) Stock dividends on Company Stock held in a Participant's Company
Stock Account shall be credited to his Company Stock Account when paid.
Cash dividends on Company Stock held in his Company Stock Account shall be
used to repay an Exempt Loan, if one exists at such time, and, if no Exempt
Loan exists, may, in the sole discretion of the Administrator, be credited
to his Participants Other Investments Account or distributed to the
Participant.
Company Stock acquired by the Plan with the proceeds of an Exempt Loan
shall only be allocated to each Participant's Company Stock Account upon
release from the Unallocated Company Stock Suspense Account as provided in
Section 4.3(g) herein. Company Stock acquired with the proceeds of an
Exempt Loan shall be an asset of the Trust Fund and maintained in the
Unallocated Company Stock Suspense Account.
Company Stock received by the Trust during a Plan Year with respect to
a contribution by the Employer for the preceding Plan Year shall be
allocated to the accounts of Participants as of the Anniversary Date of
such preceding Plan Year.
(d) As of each Anniversary Date or, if applicable, as of an earlier
Valuation Date, before allocation of Employer Contributions and Forfeitures
for such Plan Year, any earnings or losses (net appreciation or net
depreciation) of the Trust Fund shall be allocated in the same proportion
that each Participant's and Former Participant's Other Investment Accounts
(other than each Participant's Company Stock Account) bear to the total of
all Participants' and Former Participants' Other Investment Accounts (other
than Participants' Company Stock Accounts) as of such date. Earnings or
losses include the increase (or decrease) in the fair market value of
assets of the Trust Fund (other than Company Stock in the Participants'
Company Stock Accounts) since the preceding Anniversary Date (or applicable
Valuation Date).
Earnings or losses do not include the interest paid under any
installment contract for the purchase of Company Stock by the Trust Fund or
on any Exempt Loan used by the Trust Fund to purchase Company Stock, nor
does it include income received by the Trust Fund with respect to Company
Stock acquired with the proceeds of an Exempt Loan to the extent such
income is used to repay the loan; all income received by the Trust Fund
from Company Stock acquired with the proceeds of an Exempt Loan shall be
used to repay such loan.
(e) The Administrator shall establish accounting procedures for the
purpose of making the allocations, valuations and adjustments to
Participants' Accounts provided for in this Section. Should the
Administrator determine that the strict application of its accounting
procedures shall not result in an equitable and nondiscriminatory
allocation
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among the Participants' Accounts, it may modify its procedures for the
purpose of achieving an equitable and nondiscriminatory allocation in
accordance with the general concepts of the Plan and the provisions of this
Section, provided, however, that such adjustments to achieve equity shall
not reduce the Vested portion of a Participant's Account.
(f) Separate accounts shall be maintained for all inactive
Participants who have a Vested interest in the Plan. Such separate accounts
shall not require a segregation of the Plan assets and no Participant shall
acquire any right to or interest in any specific asset of the Trust as a
result of the allocations provided for in the Plan. All allocations shall
be made as of the Anniversary Date referred to in this Section.
(g) All Company Stock acquired by the Plan with the proceeds of an
Exempt Loan must be added to and maintained in the Unallocated Company
Stock Suspense Account. For each Plan Year during the duration of the loan,
the number of shares of Company Stock released shall equal the number of
encumbered shares held immediately before release for the current Plan Year
multiplied by a fraction, the numerator of which is the amount of principal
paid for the Plan Year and the denominator of which is the sum of the
numerator plus the principal to be paid for all future Plan Years (or, if
the requirements of Treas. Reg. Section 54.4975-7(b)(8)(ii) are not met,
then "principal and interest" shall be substituted for "principal" in
determining the fraction). As of each Anniversary Date, the Plan must
consistently allocate to each Participant's Account pursuant to Section
4.3(b), shares and fractional shares of Company Stock representing each
Participant's interest in the shares withdrawn from the Unallocated Company
Stock Suspense Account; provided, however, to the extent any cash dividends
on allocated shares of Company Stock have been applied to repay the loan
that year, the number of shares released shall first be allocated to the
accounts of those Participants equal in amount to the cash dividends
diverted from such accounts for repayment of the Exempt Loan. Income earned
with respect to Company Stock in the Unallocated Company Stock Suspense
Account shall be used to repay the Exempt Loan or used to purchase such
Company Stock. Any income which is not so used must be allocated as income
of the Plan.
(h) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any. The
remaining Forfeitures, if any, shall be allocated among the Participants'
Accounts of those Participants who are entitled to receive an Employer
Contribution for such Plan Year in the same proportion that each such
eligible Participant's Compensation for the year bears to the total
Compensation of all eligible Participants for the year. In the event the
allocation of Forfeitures provided herein shall cause the "annual addition"
(as defined in Section 4.4) to any Participant's Account to exceed the
amount allowable by the Code, the excess shall be reallocated in
accordance with Section 4.5.
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(i) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer Contributions and Forfeitures allocated to the Participant's
Account for each Non-Key Employee shall be equal to at least 3% of such
Non-Key Employee's "415 Compensation" (reduced by contributions and
forfeitures, if any, allocated to each Non-Key Employee in any defined
contribution plan included with this plan in a Required Aggregation Group).
However, if (i) the sum of the Employer Contributions and Forfeitures
allocated to the Participant's Account of each Key Employee for such Top
Heavy Plan Year is less than 3% of each Key Employee's "415 Compensation"
and (ii) this Plan is not required to be included in an Aggregation Group
to enable a defined benefit plan to meet the requirements of Code Sections
401(a)(4) or 410, the sum of the Employer Contributions and Forfeitures
allocated to the Participant's Account of each Non-Key Employee shall be
equal to the largest percentage allocated to the Participant's Account of
any Key Employee.
Except, however, no such minimum allocation shall be required in this
Plan for any Non-Key Employee who participates in another defined
contribution plan subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation Group.
(j) For purposes of the minimum allocations set forth above the
percentage allocated to the Participant's Account of any Key Employee shall
be equal to the ratio of the sum of the Employer Contributions and
Forfeitures allocated on behalf of such Key Employee divided by the "415
Compensation" for such Key Employee.
(k) For any Top Heavy Plan Year, the minimum allocations set forth
above shall be allocated to the Participant's Account of all Non-Key
Employees who are Participants and who are employed by the Employer on the
last day of the Plan Year, including Non-Key Employees who have (1) failed
to complete a Year of Service; (2) declined to make mandatory contributions
(if required) or elective deferrals to the Plan; and (3) been excluded from
participation because of their level of Compensation.
(l) In lieu of the above, in any Plan Year in which a Non-Key Employee
is a Participant in both this Plan and a defined benefit pension plan
included in a Required Aggregation Group which is top heavy, the Employer
shall not be required to provide such Non-Key Employee with both the full
separate defined benefit plan minimum benefit and the full separate defined
contribution plan minimum allocation.
Therefore, for any Plan Year when the Plan is a Top Heavy Plan, Non-
Key Employees who are participating in this Plan and a defined benefit plan
maintained by the Employer shall receive a minimum monthly accrued benefit
in the defined benefit plan equal to the product of (1) 1/12th of "415
Compensation" averaged over a five consecutive "limitation years" (or
actual "limitation years" if less) which produce the highest average and
(2) the lesser of (i) 2% multiplied by Years of Service when the plan is
top heavy or (ii) 20%.
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(m) For the purposes of this Section, "415 Compensation" shall be as
defined in Section 4.4(e), and shall be limited to $150,000 in all Plan
Years (unless adjusted in such manner as permitted under Code Section
401(a)(17).
(n) Notwithstanding anything herein to the contrary, Participants
terminating for reasons of death, Total and Permanent Disability or
Retirement shall share in the allocations of Employer Contributions and
Forfeitures provided for in this Section for such Plan Year of termination
regardless of whether they are employed by an Affiliated Employer at the
end of the Plan Year.
(o) If a Former Participant is reemployed after five consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to pre-
break service; and
(2) one account representing his status in the Plan attributable
to post-break service.
4.4 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall equal
the lesser of: (1) $30,000 (or, if greater, one-fourth of the dollar
limitation in effect under Code Section 415(b)(1)(A)) or (2) 25% of the
Participant's "415 Compensation" for such "limitation year".
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer Contributions, (2) Employee
contributions, (3) Forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit plan (as defined in Code Section 419(e)) maintained by the
Employer. Except, however, the "415 Compensation" percentage limitation
referred to in paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code
Section 419A(f)(2)) after separation from service which is otherwise
treated as an "annual addition", or (2) any amount otherwise treated as an
"annual addition" under Code Section 415(l)(1).
(c) For purposes of applying the limitations of Code Section 415, the
transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the
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following are not Employee contributions for the purposes of
Section 4.4(b)(2): (1) rollover contributions (as defined in Code
Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (2) repayments of
loans made to a Participant from the Plan; (3) repayments of distributions
received by an Employee pursuant to Code Section 411(a)(7)(B) (cash-outs);
(4) repayments of distributions received by an Employee pursuant to Code
Section 411(a)(3)(D) (mandatory contributions); and (5) Employee
contributions to a simplified employee pension excludable from gross income
under Code Section 408(k)(6).
(d) If no more than one-third of the Employer Contributions to this
Plan for a Plan Year which are deductible under Code Section 404(a)(9) are
allocated to Highly Compensated Employees, the limitations of paragraph (a)
shall not apply to:
(1) Forfeitures of Company Stock which were acquired with the
proceeds of an Exempt Loan, or
(2) Employer Contributions to this Plan which are deductible under
Code Section 404(a)(9)(B) and charged against the Participant's
accounts.
(e) For purposes of applying the limitations of Code Section 415, "415
Compensation" shall include the Participant's wages, salaries, fees for
professional services, and other amounts received for personal services
actually rendered in the course of employment with an Employer maintaining
the Plan (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a nonaccountable plan (as
described in Regulation 1.62-2(c)) for a Plan Year.
"415 Compensation" shall exclude (1)(A) contributions made by the
Employer to a plan of deferred compensation to the extent that, before the
application of the Code Section 415 limitations to the Plan, the
contributions are not includable in the gross income of the Employee for
the taxable year in which contributed, (B) Employer contributions made on
behalf of an Employee to a simplified employee pension plan described in
Code Section 408(k) to the extent such contributions are excludable from
the Employee's gross income, (C) any distributions from a plan of deferred
compensation; (2) amounts realized from the exercise of a non-qualified
stock option or when restricted stock (or property) held by an Employee
either becomes freely transferable or is no longer subject to a substantial
risk of forfeiture; (3) amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option; and (4) other
amounts that receive special tax benefits, such as premiums for group term
life insurance (but only to the extent that the premiums are not includable
in the gross income of the Employee), or contributions made by the Employer
(whether or not under a salary reduction agreement) towards the purchase of
any annuity contract described in Code Section 403(b) (whether or not the
contributions are excludable from the gross income of the Employee). "415
Compensation" shall be
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limited to $150,000 (unless adjusted in the same manner as permitted under
Code Section 415(d)).
(f) For purposes of applying the limitations of Code Section 415, the
"limitation year" shall be the Plan Year.
(g) The dollar limitation under Code Section 415(b)(1)(A) stated in
paragraph (a)(1) above shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
(h) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined benefit plan, and all qualified defined contribution
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined contribution plan.
(i) For the purpose of this Section, if the Employer is a member of a
controlled group of corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section 414(b) and (c) as
modified by Code Section 415(h)), is a member of an affiliated service
group (as defined by Code Section 414(m)), or is a member of a group of
entities required to be aggregated pursuant to Regulations under Code
Section 414(o), all Employees of such Employers shall be considered to be
employed by a single Employer.
(j) For the purpose of this Section, if this Plan is a Code Section
413(c) plan, all Employers of a Participant who maintain this Plan will be
considered to be a single Employer.
(k) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan
shall equal the maximum "annual additions" for the "limitation year"
minus any "annual additions" previously credited to such Participant's
accounts during the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan not
subject to Code Section 412 maintained by the Employer which have the
same Anniversary Date, "annual additions" will be credited to the
Participant's accounts under the defined contribution plan subject to
Code Section 412 prior to crediting "annual additions" to the
Participant's accounts under the defined contribution plan not subject
to Code Section 412.
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(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the maximum
"annual additions" for the "limitation year" minus any "annual
additions" previously credited under subparagraphs (1) or (2) above,
multiplied by (B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's accounts
under this Plan without regard to the limitations of Code Section 415
and (ii) the denominator of which is such "annual additions" for all
plans described in this subparagraph.
(l) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans maintained
by the Employer, the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any "limitation year" may not exceed
1.0.
(m) The defined benefit plan fraction for any "limitation year" is a
fraction, the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
"limitation year" under Code Sections 415(b) and (d) or 140 percent of the
highest average compensation, including any adjustments under Code Section
415(b).
Notwithstanding the above, if the Participant was a Participant as of
the first day of the first "limitation year" beginning after December 31,
1986, in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will not
be less than 125 percent of the sum of the annual benefits under such plans
which the Participant had accrued as of the close of the last "limitation
year" beginning before January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all "limitation years"
beginning before January 1, 1987.
(n) The defined contribution plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the annual additions to
the Participant's Account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
"limitation years" (including the annual additions attributable to the
Participant's nondeductible Employee contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
annual additions attributable to all welfare benefit funds, as defined in
Code Section 419(e), and individual medical accounts, as defined in Code
Section 415(l)(2), maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is
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the lesser of 125 percent of the dollar limitation determined under Code
Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35
percent of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of
the first "limitation year" beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an
amount equal to the product of (1) the excess of the sum of the fractions
over 1.0 times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of
the last "limitation year" beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made after
May 5, 1986, but using the Code Section 415 limitation applicable to the
first "limitation year" beginning on or after January 1, 1987. The annual
addition for any "limitation year" beginning before January 1, 1987 shall
not be recomputed to treat all Employee contributions as annual additions.
(o) Notwithstanding the foregoing, for any "limitation year" in which
the Plan is a Top Heavy Plan, 100 percent shall be substituted for 125
percent in paragraph (l) and (m) unless the extra minimum allocation is
being provided pursuant to Section 4.3(i). However, for any "limitation
year" in which the Plan is a Super Top Heavy Plan, 100 percent shall be
substituted for 125 percent in any event.
(p) If the sum of the defined benefit plan fraction and the defined
contribution plan fraction shall exceed 1.0 in any "limitation year" for
any Participant in this Plan, the Administrator shall limit, to the extent
necessary, the "annual additions" to such Participant's accounts for such
"limitation year." If, after limiting the "annual additions" to such
Participant's accounts for the "limitation year," the sum of the defined
benefit plan fraction and the defined contribution plan fraction still
exceed 1.0, the Administrator shall then adjust the numerator of the
defined benefit plan fraction so that the sum of both fractions shall not
exceed 1.0 in any "limitation year" for such Participant.
(q) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in
this Section shall at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's Compensation or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall be applicable, the
"annual additions" under this Plan would
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<PAGE>
cause the maximum "annual additions" to be exceeded for any Participant,
the Administrator shall (1) hold any "excess amount" remaining after the
return of any voluntary Employee contributions in a "Section 415 suspense
account" (2) allocate and reallocate the "Section 415 suspense account" in
the next "limitation year" (and succeeding "limitation years" if necessary)
to all Participants in the Plan before any Employer or Employee
contributions which would constitute "annual additions" are made to the
Plan for such "limitation year" or (3) reduce Employer Contributions to the
Plan for such "limitation year" by the amount of the "Section 415 suspense
account" allocated and reallocated during such "limitation year".
Notwithstanding the foregoing, if the Company maintains another defined
contribution plan, the annual addition excess amount shall be "cured" under
such other plan first.
(b) For purposes of this Article, "excess amount" for any Participant
for a "limitation year" shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under the terms of the
Plan without regard to the limitations of Code Section 415 over (2) the
maximum "annual additions" determined pursuant to Section 415.
(c) For purposes of this Section, "Section 415 suspense account" shall
mean an unallocated account equal to the sum of "excess amounts" for all
Participants in the Plan during the "limitation year". The "Section 415
suspense account" shall not share in any earnings or losses of the Trust
Fund.
(d) The Plan may not distribute "excess amounts" to Participants or
Former Participants.
4.6 DIRECTED DIVERSIFICATION
(a) Each "Qualified Participant" may elect within 90 days after the
close of each Plan Year during the "Qualified Election Period" to direct
the Administrator in writing to transfer in cash (such election must be
accompanied by an appropriate reinvestment direction) 25 percent of the
Participant's Company Stock Account (to the extent such portion exceeds the
amount to which a prior election under this subparagraph applies) to the
Employer's qualified 401(k) plan, provided that such plan offers at least
three investment options, other than a Company stock fund, that qualify for
diversification purposes under Section 401(a)(28) of the Code. In the case
of the election year in which the Qualified Participant can make his last
election, the preceding sentence shall be applied by substituting "50
percent" for "25 percent". If the "Qualified Participant" elects to direct
the Administrator to transfer and reinvest his Company Stock Account, such
direction shall be effective no later than 180 days after the close of the
Plan Year to which such direction applies. In lieu of so directing the
Administrator, the "Qualified Participant" may elect a distribution of the
portion of his Company Stock Account covered by the election within
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90 days after the last day of the period during which the election can be
made. Any such distribution of Company Stock shall be subject to Section
7.11.
(b) For the purposes of this Section the following definitions shall
apply:
(1) "Qualified Participant" means any Participant or Former
Participant who has completed 10 Years of Service as a Participant in
this Plan (or the Employer's predecessor ESOP terminated in 1996) and
has attained age 55.
(2) "Qualified Election Period" means the five Plan Year period
beginning with the Plan Year after the Plan Year in which the
Participant attains age 55 (or, if later, beginning with the Plan Year
after the first Plan Year in which the Participant first became a
"Qualified Participant").
4.7 SUSPENSE ACCOUNT
All Employer Contributions, Forfeitures and net income (or net loss) of the
Trust Fund shall be held in a suspense account until allocated to the applicable
Participants' Accounts.
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ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY
(a) The Plan is designed to invest primarily in Company Stock.
(b) With due regard to subparagraph (a) above, the Administrator may
direct the Trustee to invest funds under the Plan in other property as
described in the Trust Agreement or direct the Trustee to hold such funds
in cash or cash equivalents.
(c) The Plan may not obligate itself to acquire Company Stock from a
particular holder thereof at an indefinite time determined upon the
happening of an event such as the death of the holder.
(d) The Plan may not obligate itself to acquire Company Stock under a
put option binding upon the Plan. However, at the time a put option is
exercised, the Plan may be given an option to assume the rights and
obligations of the Employer under a put option binding upon the Employer.
(e) All purchases or sales of Company Stock and the price of such
purchases or sales shall be made as the Administrator instructs the
Trustee. All purchases of Company Stock shall be made at a price which, in
the judgment of the Administrator, does not exceed the fair market value
thereof. All sales of Company Stock shall be made at a price which, in the
judgment of the Administrator, is not less than the fair market value
thereof. The valuation rules set forth in Article VI shall be applicable.
5.2 APPLICATION OF CASH
Employer Contributions received by the Trust Fund in cash shall first be
applied to pay any required obligations under an Exempt Loan.
5.3 TRANSACTIONS INVOLVING COMPANY STOCK
(a) No portion of the Trust Fund attributable to (or allocable in lieu
of) Company Stock acquired by the Plan in a sale to which Code Section 1042
applies may accrue or be allocated directly or indirectly under any plan
maintained by the Employer meeting the requirements of Code Section 401(a):
(1) during the "Nonallocation Period", for the benefit of;
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(i) any taxpayer who makes an election under Code Section
1042(a) with respect to Company Stock,
(ii) any individual who is related to the taxpayer or the
decedent (within the meaning of Code Section 267(b)), or
(2) for the benefit of any other person who owns (after
application of Code Section 318(a)) more than 25 percent of;
(i) any class of outstanding stock of the Employer which
issued such Company Stock, or
(ii) the total value of any class of outstanding stock of the
Employer.
(b) Except, however, subparagraph (a)(1)(ii) above shall not apply to
lineal descendants of the taxpayer, provided that, the aggregate amount
allocated to the benefit of all such lineal descendants during the
"Nonallocation Period" does not exceed more than five percent of the
Company Stock (or amounts allocated in lieu thereof) held by the Plan which
are attributable to a sale to the Plan by any person related to such
descendants (within the meaning of Code Section 267(c)(4)) in a transaction
to which Code Section 1042 applied.
(c) A person shall be treated as failing to meet the stock ownership
limitation under paragraph (a)(2) above if such person fails such
limitation:
(1) at any time during the one year period ending on the date of
sale of Company Stock to the Plan, or
(2) on the date as of which Company Stock is allocated to
Participants in the Plan.
(d) For purposes of this Section, "Nonallocation Period" means the 10
year period beginning on the later of:
(1) the date of the sale of the Company Stock, or
(2) the date of the Plan allocation attributable to the final
payment of the Exempt Loan incurred in connection with such sale.
5.4 LOANS TO THE TRUST
(a) The Plan may, but only upon the direction of the Administrator,
borrow money for any lawful purpose, provided, the proceeds of an Exempt
Loan are used within a reasonable time after receipt only for any or all of
the following purposes:
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(1) To acquire Company Stock.
(2) To repay such loan.
(3) To repay a prior Exempt Loan.
(b) All loans to the Trust which are made or guaranteed by a
disqualified person must satisfy all requirements applicable to Exempt
Loans including but not limited to the following:
(1) The loan must be at a reasonable rate of interest;
(2) Any collateral pledged to the creditor by the Plan shall
consist only of the Company Stock purchased with the borrower funds;
(3) Under the terms of the loan, any pledge of Company Stock shall
provide for the release of shares so pledged on a pro-rata basis
pursuant to Section 4.3(g);
(4) Under the terms of the loan, the creditor shall have no
recourse against the Plan except with respect to such collateral,
earnings attributable to such collateral, Employer Contributions
(other than contributions of Company Stock) that are made to meet the
ESOP's obligations under the Exempt Loan and earnings attributable to
such collateral and the investment of such contributions;
(5) The loan must be for a specific term and may not be payable
at the demand of any person, except in the cause of a default.
(6) In the event of default upon an Exempt Loan, the value of the
Trust Fund transferred in satisfaction of the Exempt Loan shall not
exceed the amount of default. If the lender is a disqualified person,
an Exempt Loan shall provide for a transfer of Trust Funds upon
default only upon and to the extent of the failure of the Plan to meet
the payment schedule of the Exempt Loan; and
(7) Exempt Loan payments during a Plan Year must not exceed an
amount equal to: (A) the sum, over all Plan Years, of all Employer
Contributions made by the Employer to the Plan with respect to such
Exempt Loan and earnings on such Employer Contributions, less (B) the
sum of the Exempt Loan payments in all preceding Plan Years. A
separate accounting shall be maintained for such Employer
Contributions and earnings until the Exempt Loan is repaid.
(c) The term "disqualified person" means a person who is a Fiduciary,
a person providing services to the Plan, an Employer, any of whose
Employees are covered by the
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Plan, an employee organization any of whose members are covered by the
Plan, an owner, direct or indirect, of 50% or more of the total combined
voting power of all classes of voting stock, or an officer, director, 10%
or more shareholder, or a Highly Compensated Employee.
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ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Valuation Date
to determine the net worth of the assets comprising the Trust Fund as it exists
on the Valuation Date prior to taking into consideration any contribution to be
allocated for that Plan Year. In determining such net worth, the Trustee shall
value the assets comprising the Trust Fund at their fair market value as of the
Valuation Date and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund. The Administrator
shall have the duty of determining the fair market value of Company Stock and,
notwithstanding the foregoing, the fair market value of Company Stock shall be
determined only as of each Anniversary Date unless the Administrator expressly
directs that it be valued as of any other Valuation Date.
6.2 METHOD OF VALUATION
Valuations must be made in good faith and based on all relevant factors for
determining the fair market value of securities. In the case of a transaction
between a Plan and a disqualified person, value must be determined as of the
date of the transaction. For all other Plan purposes, value must be determined
as of the most recent Valuation Date under the Plan. An independent appraisal
will not in itself be a good faith determination of value in the case of a
transaction between the Plan and a disqualified person. However, in other
cases, a determination of fair market value based on at least an annual
appraisal independently arrived at by a person who customarily makes such
appraisals and who is independent of any party to the transaction will be deemed
to be a good faith determination of value. Company Stock not readily tradeable
on an established securities market shall be valued by an independent appraiser
appointed by the Administrator meeting requirements similar to the requirements
of the Regulations prescribed under Code Section 170(a)(1).
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ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 BENEFITS UPON RETIREMENT
A Participant who terminates his employment due to his Retirement shall be
distributed a benefit in accordance with Section 7.5 equal in value to the
Vested balance in the Participant's Accounts as of his Benefit Commencement
Date, such balance to be determined as of the Valuation Date immediately
preceding the Participant's Benefit Commencement Date. In addition, such
Participant shall be entitled to receive any benefit allocated to such
Participant pursuant to Section 4.3(n) as of the Anniversary Date for the Plan
Year of his Retirement.
7.2 BENEFITS UPON DEATH
(a) Upon the death of a Participant before his termination of his
employment, the Participant's Beneficiary shall be distributed a benefit in
accordance with Section equal in value to the Vested balance in the
Participant's Accounts as of the Benefit Commencement Date, such Vested
balance to be determined as of the Valuation Date immediately preceding
such Benefit Commencement Date. In addition, such Beneficiary shall be
entitled to receive any benefit allocated to such Participant pursuant to
Section 4.3(n) as of the Anniversary Date for the Plan Year of the
Participant's death.
(b) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of the
account of a deceased Participant as the Administrator may deem desirable.
The Administrator's determination of death and of the right of any person
to receive payment shall be conclusive.
(c) The Beneficiary of the death benefit payable pursuant to this
Section shall be the Participant's spouse; provided, however, the
Participant may designate a Beneficiary other than his spouse only if:
(1) the spouse has waived her right to be the Participant's
Beneficiary, or
(2) the Participant has no spouse, or
(3) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on a form
provided by the Administrator. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary by filing written
notice of such revocation or change with the Administrator. However, the
Participant's spouse must again consent in writing to any such change or
revocation unless the original consent acknowledged that the spouse had the
right to limit consent only to a specific Beneficiary and that the spouse
voluntarily elected to
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relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall be
payable to his estate. In the event of a divorce, such divorce shall
automatically rescind any designation of such former spouse as the
Participant's Beneficiary under the Plan except to the extent provided
otherwise in a qualified domestic relations order.
(d) Any consent by the Participant's spouse to waive any rights to the
death benefit must be in writing, must acknowledge the effect of such
waiver, and be witnessed by a Plan representative or a notary public.
Further, the spouse's consent must be irrevocable and must acknowledge the
specific nonspouse Beneficiary.
7.3 BENEFITS UPON DISABILITY
In the event a Participant's employment is terminated due to a Total and
Permanent Disability, such Participant shall be distributed a benefit in
accordance with Section 7.5 equal in value to the Vested balance in the
Participant's Accounts as of his Benefit Commencement Date, such balance to be
determined as of the Valuation Date immediately preceding his Benefit
Commencement Date. In addition, the Participant shall be entitled to receive
any benefit allocated to such Participant pursuant to Section 4.3(n) as of the
Anniversary Date for the Plan Year of his termination.
7.4 BENEFITS UPON TERMINATION
(a) Each Participant whose employment is terminated for any reason
other than Total and Permanent Disability, Retirement, or death shall be
distributed a benefit in accordance with Section 7.5 equal in value to the
sum of his Vested interest in the balance of his Participant's Accounts as
of his Benefit Commencement Date, such balance to be determined as of the
Valuation Date immediately preceding his Benefit Commencement Date.
(b) For purposes of this Section, a Participant's Vested interest in
Participant's Accounts shall be determined by such Participant's Years of
Service (for Vesting purposes) in accordance with the following schedule:
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Years of Service Vested Interest
---------------- ---------------
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
If a portion of a Participant's Account is forfeited, Company Stock
allocated to the Participant's Company Stock Account must be forfeited only
after the Participant's Other Investments Account has been depleted. If
interest in more than one class of Company Stock has been allocated to a
Participant's Account, the Participant must be treated as forfeiting the
same proportion of each such class.
(c) The computation of a Participant's nonforfeitable percentage of
his interest in the Plan shall not be reduced as the result of any direct
or indirect amendment to this Article. In the event that the Plan is
amended to change or modify any vesting schedule, a Participant with a
least three Years of Service as of the expiration date of the election
period may elect to have his nonforfeitable percentage computed under the
Plan without regard to such amendment. If a Participant fails to make such
election, then such Participant shall be subject to the new vesting
schedule. The Participant's election period shall commence on the adoption
date of the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(d) Paragraph (b) above not withstanding, a Participant shall have a
100% Vested interest in his Participant's Accounts upon attainment of his
Normal Retirement Age as an Employee.
(e) (1) If any Former Participant shall be reemployed by the Employer
before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had
not occurred.
(2) If any Former Participant shall be reemployed by the Employer
before five consecutive 1-Year Breaks in Service, and such Former
Participant had received a distribution of his entire Vested interest
prior to his reemployment, his forfeited account shall be reinstated
only if he repays the full amount distributed to him before
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<PAGE>
the earlier of five years after the first date on which the
Participant is subsequently reemployed by the Employer or the close of
the first period of five consecutive 1-Year Breaks in Service
commencing after the distribution. In the event the Former Participant
does repay the full amount distributed to him, the undistributed
portion of the Participant's Account must be restored in full,
unadjusted by any gains or losses occurring subsequent to the
Anniversary Date or other Valuation Date preceding his termination.
(3) If any Former Participant is reemployed after a 1-Year Break
in Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the following
rules:
(i) If a Former Participant has a 1-Year Break in Service,
his pre-break and post-break service shall be used for computing
Years of Service for eligibility and for vesting purposes only
after he has been employed for one Year of Service following the
date of his reemployment with the Employer;
(ii) Any Former Participant who under the Plan does not have a
nonforfeitable right to any interest in the Plan resulting from
Employer Contributions shall lose credits otherwise allowable
under (i) above if his consecutive 1-Year Breaks in Service equal
or exceed the greater of (A) five or (B) the aggregate number of
his pre-break Years of Service;
(iii) After five consecutive 1-Year Breaks in Service, a
Former Participant's Vested account balance attributable to pre-
break service shall not be increased as a result of post-break
service;
(iv) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant to
(ii) above completes one Year of Service for eligibility purposes
following his reemployment with the Employer, he shall participate
in the Plan retroactively from his date of reemployment;
(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant to
(ii) above completes one Year of Service for eligibility purposes
following his reemployment with the Employer (a 1-Year Break in
Service previously occurred, but employment had not terminated),
he shall participate in the Plan retroactively from his
reemployment commencement date.
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<PAGE>
7.5 DISTRIBUTION OF BENEFITS
(a) Payment of a Participant's benefit hereunder shall be made or
begin as soon as administratively feasible after the Participant's or
Beneficiary's Benefit Commencement Date.
(b) If elected by the Participant (or his Beneficiary), the
Administrator shall direct the Trustee to distribute to the Participant (or
his Beneficiary) any amount to which he is entitled under the Plan in one
lump-sum payment. If no election is made, payment shall be made as provided
in paragraph (c) below.
(c) Subject to Sections 7.5(b) and (d), this Plan shall distribute to
a Participant (or his Beneficiary) his Vested account in substantially
equal (with respect to the Company Stock Account, in terms of number of
shares of Company Stock) annual installments over a five year period. In
the case of a Participant with an account balance in the Plan in excess of
$500,000, the five year period shall be extended one additional year (but
not more than five additional years) for each $100,000 or fraction thereof
by which such balance exceeds $500,000. The dollar limits shall be adjusted
at the same time and in the same manner as provided in Code Section 415(d).
Distribution of the Participant's Account shall be made or begin, subject
to the consent requirement to paragraph (d) below if applicable, not later
than one year after the close of the Plan Year (i) in which the Participant
separates from service on account of retirement on or after his Normal
Retirement Age, Total and Permanent Disability or death, or (ii) which is
the fifth Plan Year following the Plan Year in which the Participant
otherwise separates from service.
(d) Any distribution to a Participant who has a Vested benefit which
exceeds, or at the time of any prior distribution exceeded, $3,500 shall
require such Participant's consent if such distribution commences prior to
the later of his Normal Retirement Age or age 62. With regard to this
required consent:
(1) The Participant must be informed of his right to defer receipt
of the distribution. If a Participant fails to consent, it shall be
deemed an election to defer the commencement of payment of any
benefit. However, any election to defer the receipt of benefits shall
not apply with respect to distributions which are required under
Section 7.5(h).
(2) Subject to Section 7.15, notice of the rights specified under
this paragraph shall be provided no less than 30 days and no more than
90 days before the first day on which all events have occurred which
entitle the Participant to such benefit.
(3) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and must not be
made more than 90 days
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<PAGE>
before the first day on which all events have occurred which entitle
the Participant to such benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to the
distribution.
If the value of a Participant's Vested benefit does not exceed $3,500
and has never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the Trustee to cause the entire Vested benefit
to be paid to such Participant in a lump sum without regard to the
Participant's election.
(e) Notwithstanding anything herein to the contrary, cash dividends on
shares of Company Stock allocated to Participants' Accounts may be paid to
Participants or their Beneficiaries, as determined in the sole discretion
of the Administrator, within 90 days after the close of the Plan Year in
which the dividend is paid.
(f) Except as limited by Sections 7.5 and 7.6, whenever the Trustee is
to make a distribution or to commence a series of payments on or before a
Valuation Date, the distribution or series of payments may be made or begun
on such date or as soon thereafter as is practicable, but in no event later
than 180 days after the Anniversary Date. Except, however, the payment of
benefits shall begin not later than the 60th day after the close of the
Plan Year in which the latest of the following events occurs:
(1) the date on which the Participant attains the Normal
Retirement Age specified herein,
(2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan, or
(3) the date the Participant terminates his service with the
Employer.
(g) Any part of a Participant's benefit which is retained in the Plan
after the Valuation Date on which his participation ends will continue to
be treated as a Company Stock Account or as an Other Investments Account as
provided in Article IV. However, neither account will be credited with any
further Employer Contributions or Forfeitures.
(h) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits shall be made in accordance with
the following requirements and shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder (including Regulation Section
1.401(a)(9)-2), the provisions of which are incorporated herein by
reference:
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<PAGE>
(1) A Participant's benefits shall be distributed to him not later
than April 1st of the calendar year following the later of (i) the
calendar year in which the Participant attains age 70 1/2 or (ii) the
calendar year in which the Participant retires, provided, however,
that this clause (ii) shall not apply in the case of a Participant who
is a "five percent owner" at any time during the five Plan Year period
ending in the calendar year in which he attains age 70 1/2 or, in the
case of a Participant who becomes a "five percent owner" during any
subsequent Plan Year, clause (ii) shall no longer apply and the
required beginning date shall be the April 1st of the calendar year
following the calendar year in which such subsequent Plan Year ends.
Alternatively, distributions to a Participant must begin no later than
the applicable April 1st as determined under the preceding sentence
and must be made over a period certain measured by the life expectancy
of the Participant (or the life expectancies of the Participant and
his designated Beneficiary) in accordance with Regulations.
Notwithstanding the foregoing, clause (ii) above shall not apply to
any Participant unless the Participant had attained age 70 1/2 before
January 1, 1988 and was not a "five percent owner" at any time during
the Plan Year ending with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
(i) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse may not be redetermined.
7.6 HOW PLAN BENEFITS WILL BE DISTRIBUTED
(a) Distribution of a Participant's benefit from his Company Stock
Account shall be made in whole shares of Company Stock (with any fractional
share paid in cash) or in cash, whichever is elected by the Participant or
his Beneficiary.
(b) Any balance in a Participant's Other Investments Account will
be distributed solely in cash.
(c) The Trustee will make distribution from the Trust only on
instructions from the Administrator.
(d) Notwithstanding anything contained herein to the contrary, if the
Employer's charter or by-laws restrict ownership of substantially all
shares of Company Stock to Employees and the Trust Fund, as described in
Code Section 409(h)(2), the Administrator, in his sole discretion, may
distribute a Participant's Account entirely in cash or distribute entirely
in Company Stock subject to a requirement that such Company Stock may be
resold to the Employer pursuant to Section 7.11.
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<PAGE>
(e) Except as otherwise provided in Section 7.12, Company Stock
distributed by the Trustee may be restricted as to sale or transfer by the
by-laws or articles of incorporation of the Employer, provided restrictions
are applicable to all Company Stock of the same class. If a Participant is
required to offer the sale of his Company Stock to the Employer before
offering to sell his Company Stock to a third party, in no event may the
Employer pay a price less than that offered to the distributee by another
potential buyer making a bona fide offer and in no event shall the Trustee
pay a price less than the fair market value of the Company Stock.
(f) Except as otherwise provided in this Article, a Participant is not
entitled to any payment, withdrawal or distribution under the Plan during
his participation. If any such partial distribution is made, the
Participant's benefit when computed will be reduced by the amount of any
such advance.
(g) If Company Stock acquired with the proceeds of an Exempt Loan
(described in Section 5.4 hereof) is available for distribution and
consists of more than one class, a Participant or his Beneficiary must
receive substantially the same proportion of each such class.
(h) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Regulations thereunder. If it is determined,
pursuant to Regulations, that the distribution of a Participant's interest
has begun and the Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of distribution
selected pursuant to Section 7.5 as of his date of death. If a Participant
dies before he has begun to receive any distributions of his interest under
the Plan or before distributions are deemed to have begun pursuant to
Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse (determined as of
the date of the Participant's death) is his Beneficiary, then in lieu of
the preceding rules, distributions must be made over a period not extending
beyond the life expectancy of the spouse and must commence on or before the
later of (1) December 31st of the calendar year immediately following the
calendar year in which the Participant died; or (2) December 31st of the
calendar year in which the Participant would have attained 70 1/2. If the
surviving spouse dies before distributions to such spouse begin, then the
5-year distribution requirement of this section shall apply as if the
spouse was the Participant.
(i) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse may not be redetermined.
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7.7 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary, or to the custodian for such
Beneficiary under the Uniform Gift to Minors Act or Gift to Minors act, if such
is permitted by the laws of the state in which said Beneficiary resides. Such a
payment to the legal guardian, custodian or parent of a minor Beneficiary shall
fully discharge the Trustee, Employer, and Plan from further liability on
account thereof.
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to
a Participant or his Beneficiary hereunder shall, at the expiration of five
years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further diligent effort,
to ascertain the whereabouts of such Participant or his Beneficiary, the amount
so distributable shall be treated as a Forfeiture pursuant to the Plan. In the
event a Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored.
7.9 RIGHT OF FIRST REFUSAL
(a) If any Participant or Former Participant, his Beneficiary or any
other person to whom shares of Company Stock are distributed from the Plan
(the "Selling Participant") shall, at any time, desire to sell some or all
of such shares (the "Offered Shares") to a third party (the "Third Party"),
the Selling Participant shall give written notice of such desire to the
Administrator and the Employer, which notice shall contain the number of
shares offered for sale, the proposed terms of the sale and the names and
addresses of both the Selling Participant and Third Party. Both the Trust
Fund and the Employer shall each have the right of first refusal for a
period of 14 days from the date the Selling Participant gives such written
notice to the Employer and the Administrator (such 14 day period to run
concurrently against the Trust Fund and the Employer) to acquire the
Offered Shares. As between the Trust Fund and the Employer, the Trust Fund
shall have priority to acquire the shares pursuant to the right of first
refusal. The selling price and terms shall be the same as offered by the
Third Party.
(b) If the Trust Fund and the Employer do not exercise their right of
first refusal within the required 14 day period provided above, the Selling
Participant shall have the right, at any time following the expiration of
such 14 day period, to dispose of the Offered Shares to the third Party'
provided, however, that (i) no disposition shall be made to the Third Party
on terms more favorable to the Third Party than those set forth in the
written notice delivered by the Selling Participant above, and (ii) if such
disposition shall not be made to a third party on the terms offered to the
Employer and the Trust Fund, the offered Shares shall again be subject to
the right of first refusal set forth above.
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(c) The closing pursuant to the exercise of the right of first refusal
under Section 7.9(a) above shall take place at such place agreed upon
between the Administrator and the Selling Participant, but not later than
10 days after the Employer or the Trust Fund shall have notified the
Selling Participant of the exercise of the right of first refusal. At such
closing, the Selling Participant shall deliver certificates representing
the Offered Shares duly endorsed in blank for transfer, or with stock
powers attached duly executed in blank with all required transfer tax
stamps attached or provided for, and the Employer or the Trust Fund shall
deliver the purchase price, or an appropriate portion thereof, to the
Selling Participant.
(d) Except as provided in this Paragraph (d), no Company Stock
acquired with the proceeds of an Exempt Loan complying with the
requirements of Section hereof shall be subject to a right of first
refusal. Company Stock, which is acquired with the proceeds of an Exempt
Loan, which is distributed to a Participant or Beneficiary shall be subject
to the right of first refusal, provided for in Paragraph (a) of this
Section only so long as the Company Stock is not publicly traded. The term
"publicly traded" refers to a securities exchange registered under
section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) or that is
quoted on a system sponsored by a national securities association
registered under Section 15A(b) of the Securities Exchange Act (15 U.S.C.
780). In addition, in the case of Company Stock which was acquired with the
proceeds of a loan described in Section 5.4, the selling price and other
terms under the right must not be less favorable to the seller than the
greater of the value of the security determined under Regulation 54.4975-
11(d)(5), or the purchase price and other terms offered by a buyer (other
than the Employer or the Trust Fund), making a good faith offer to purchase
the security. The right of first refusal must lapse no later than 14 days
after the security holder gives notice to the holder of the right that an
offer by a third party to purchase the security has been made. The right of
first refusal shall comply with the provisions of Paragraphs (a), (b) and
(c) of this Section, except to the extent those provisions may conflict
with the provisions of this paragraph.
7.10 STOCK CERTIFICATE LEGEND
Certificates for shares distributed pursuant to the Plan shall contain the
following legend:
"The shares represented by this certificate are transferable only upon
compliance with the terms of the STERLING CHEMICALS ESOP, a copy of said
Plan being on file in the office of the Company."
7.11 PUT OPTION
(a) If Company Stock which was not acquired with the proceeds of an
Exempt Loan is distributed to a Participant and such Company Stock is not
readily tradeable on an established securities market, a Participant has a
right to require the Employer to repurchase the Company Stock distributed
to such Participant under a fair valuation formula. Such Stock shall be
subject to the provisions of Section 7.11(c).
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(b) Company Stock which is acquired with the proceeds of an Exempt
Loan and which is not publicly traded when distributed, or if it is subject
to a trading limitation when distributed, must be subject to a put option.
For purposes of this paragraph, a "trading limitation" on a Company Stock
is a restriction under any Federal or State securities law or any
regulation thereunder, or an agreement (not prohibited by Section 7.12)
affecting the Company Stock which would make the Company Stock not as
freely tradeable as stock not subject to such restriction.
(c) The put option must be exercisable only by a Participant, by the
Participant's donees, or by a person (including an estate or its
distributee) to whom the Company Stock passes by reason of a Participant's
death. (Under this paragraph, Participant means a Participant or Former
Participant and the Beneficiaries of the Participant or Former Participant
under the Plan.) The put option must permit a Participant to put the
Company Stock to the Employer. Under no circumstances may the put option
bind the Plan. However, it shall grant the Plan an option to assume the
rights and obligations of the Employer at the time that the put option is
exercised. If it is known at the time a loan is made that Federal or state
law will be violated by the Employer's honoring such put option, the put
option must permit the Company Stock to be put, in a manner consistent with
such law, to a third party (e.g., an affiliate of the Employer or a
shareholder other than the Plan) that has substantial net worth at the time
the loan is made and whose net worth is reasonably expected to remain
substantial.
The put option shall commence as of the day following the date the
Company Stock is distributed to the Former Participant and end 60 days
thereafter and if not exercised within such 60-day period, an additional
60-day option shall commence on the first day of the fifth month of the
Plan Year next following the date the stock was distributed to the Former
Participant (or such other 60-day period as provided in regulations
promulgated by the Secretary of the Treasury). However, in the case of
Company Stock that is publicly traded without restrictions when distributed
but ceases to be so traded within either of the 60-day periods described
herein after distribution, the Employer must notify each holder of such
Company Stock in writing on or before the tenth day after the date the
Company Stock ceases to be so traded that for the remainder of the
applicable 60-day period the Company Stock is subject to the put option.
The number of days between the tenth day and the date on which notice is
actually given, if later than the tenth day, must be added to the duration
of the put option. The notice must inform distributees of the terms of the
put options that they are to hold. The terms must satisfy the requirements
of this paragraph.
The put option is exercised by the holder notifying the Employer in
writing that the put option is being exercised; the notice shall state the
name and address of the holder and the number of shares to be sold. The
period during which a put option is exercisable does not include any time
when a distributee is unable to exercise it because the party bound by the
put option is prohibited from honoring it by applicable Federal or state
law. The price at which a put option must be exercisable is the value of
the Company Stock determined in
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accordance with Section 6.12. Payment under the put option involving a
"Total Distribution" shall be paid in substantially equal monthly,
quarterly, semiannual or annual installments over a period certain
beginning not later than 30 days after the exercise of the put option and
not extending beyond 5 years. The deferral of payment is reasonable if
adequate security and a reasonable interest rate on the unpaid amounts are
provided. The amount to be paid under the put option involving installment
distributions must be paid not later than 30 days after the exercise of the
put option. Payment under a put option must not be restricted by the
provisions of a loan or any other arrangement, including the terms of the
employer's articles of incorporation, unless so required by applicable
state law.
For purposes of this Section, "Total Distribution" means a
distribution to a Participant or Former Participant within one taxable year
of the entire Vested Participant's Account.
(d) An arrangement involving the Plan that creates a put option must
not provide for the issuance of put options other than as provided under
this Section. The Plan (and the Trust Fund) must not otherwise obligate
itself to acquire Company Stock from a particular holder thereof at an
indefinite time determined upon the happening of an event such as the death
of the holder.
7.12 NONTERMINABLE PROTECTIONS AND RIGHTS
No Company Stock, except as provided in Section 7.9(d) and Section 7.11(b),
acquired with the proceeds of a loan described in Section 5.4 hereof may be
subject to a put, call, or other option, or buy-sell or similar arrangement when
held by and when distributed from the Trust Fund, whether or not the Plan is
then an ESOP. The protections and rights granted in this Section are
nonterminable, and such protections and rights shall continue to exist under the
terms of this Plan so long as any Company Stock acquired with the proceeds of a
loan described in Section 5.4 hereof is held by the Trust Fund or by a
Participant or other person for whose benefit such protections and rights have
been created, and neither the repayment of such loan nor the failure of the Plan
to be an ESOP, nor an amendment of the Plan shall cause a termination of said
protections and rights.
7.13 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant in
this plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For purposes of this Section, "alternate payee," "qualified domestic
relations order" and "earliest retirement age" shall have the meaning set forth
under Code Section 414(p).
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7.14 PAYMENT OF DISTRIBUTION DIRECTLY TO ELIGIBLE RETIREMENT PLAN
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Distributee's election under this Section, a
Distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee
in a Direct Rollover.
(b) For purposes of this Section the following definitions shall
apply:
(1) "Eligible Rollover Distribution": An 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).
(2) "Eligible Retirement Plan": An Eligible Retirement Plan is an
individual retirement account described in Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts
the Distributee's Eligible Rollover Distribution. However, in the case
of an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
(3) "Distributee": A 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.
(4) "Direct Rollover": A Direct Rollover is a payment by the Plan
to the Eligible Retirement Plan specified by the Distributee.
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7.15 30-DAY WAIVER
If a distribution is one to which Sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Regulations is given, provided
that:
(1) the Plan Administrator 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
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
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ARTICLE VIII
TRUSTEE
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) With respect to Company Stock, the Company Stock Account, or an
Exempt Loan, except as directed solely by the Administrator,
(1) the Trustee shall not sell, acquire or dispose of Company
Stock or
(2) enter into any Exempt Loan.
Upon direction of the Administrator, up to 100% of the Trust Fund
may be invested in Company Stock.
(b) With respect to the Other Investments Account, the Trustee shall
invest such Participant's Accounts as directed by the Participant in the
funds then made available under the Trust for such directions.
(c) At the direction of the Administrator, the Trustee shall pay
benefits required under the Plan to be paid to Participants, or, in the
event of their death, to their Beneficiaries.
(d) The Trustee shall maintain records of receipts and disbursements,
and furnish to the Employer and/or Administrator for each Plan Year a
written annual report according to Section 3.2 of this Trust Agreement.
(e) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
8.2 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as part of the Plan as
sets at such time and in such manner as the Administrator shall direct.
Provided, however, that if any agreement entered into by the Trustee, upon the
direction of the Administrator, provides for voting of any shares of Company
Stock pledged as security for any obligation of the Plan, then such shares of
Company Stock shall be voted in accordance with such agreement. If the
Administrator fails or refuses to give the Trustee timely instructions as to how
to vote any Company Stock held by the Trustee and which the Administrator
otherwise has the right to vote, the Trustee shall not vote such Company Stock,
except as otherwise required by the Act, and shall consider the Administrator's
failure or refusal to give timely instructions as an exercise of the
Administrator's rights and a directive to the Trustee not to vote said Company
Stock. The Trustee shall not vote Company Stock
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when a Participant or Beneficiary, pursuant to this Section, fails to exercise a
right to vote Company Stock.
Notwithstanding the foregoing, if the Employer has a registration-type
class of securities, each Participant or Beneficiary shall be entitled, in lieu
of the Administrator, to direct the Trustee as to the manner in which the
Company Stock allocated to the Company Stock Account of such Participant or
Beneficiary is to be voted. If the Employer does not have a registration-type
class of securities, each Participant or Beneficiary in the Plan shall be
entitled, in lieu of the Administrator, to direct the Trustee as to the manner
in which voting rights on shares of Company Stock which are allocated to the
Company Stock Account of such Participant or Beneficiary are to be exercised
with respect to any corporate matter which involves the voting of such shares
with respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as prescribed in Regulations. For purposes of this Section the term
"registration-type class of securities" means" (A) a class of securities
required to be registered under Section 12 of the Securities Exchange Act of
1934; and (B) a class of securities which would be required to be so registered
except for the exemption from registration provided in subsection (g)(2)(H) of
such Section 12.
The Trustee shall notify each Participant or Beneficiary of each tender or
exchange offer and utilize its best efforts to distribute or cause to be
distributed to such Participant or Beneficiary in a timely manner all
information received by the Trustee as a recordholder of shares of Company Stock
in connection with any such tender or exchange offer. Each Participant or
Beneficiary shall have the right from time to time with respect to the shares of
Company stock allocated to his account, to instruct the Trustee in writing as to
the manner in which to respond to any tender or exchange offer which shall be
pending or which may be made in the future for all shares of Company Stock or
any portion thereof. A Participant's or Beneficiary's instructions shall remain
in force until superseded in writing by the Participant or Beneficiary. The
Trustee shall tender or exchange such shares of Company Stock as and to the
extent so instructed. Unless and until shares of Company Stock are tendered or
exchanged, the individual instructions received by the Trustee from Participant
or Beneficiaries shall be held in strict confidence by the Trustee and shall not
be divulged or released to any person, including, but not limited to officers or
Employees of the Employer, or of any other Participating Employer; provided,
however, that the Trustee shall advise the Employer, at any time upon request,
of the total number of shares not subject to instructions to tender or exchange.
The Trustee shall not make recommendations to Participants or Beneficiaries on
whether to instruct the Trustee to tender or exchange.
The Trustee shall not vote, sell, convey or transfer any allocated shares
of Company Stock for which no directions are timely received from Participants
or Beneficiaries pursuant to the immediately preceding paragraph, and shares of
Company Stock held by the Trustee which are not allocated to Participants'
Company Stock Accounts shall be voted by the Trustee only in the manner directed
by the Administrator.
VIII-2
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ARTICLE IX
AMENDMENT, TERMINATIONS, AND MERGERS
9.1 AMENDMENT
The Company shall have the right at any time to amend the Plan by action of
its Board of Directors. In addition, the Chief Executive Officer of the Company
shall have the authority to amend the Plan, provided such amendment does not
materially increase the Company's obligations hereunder or are of a ministerial
or technical compliance nature. However, no such amendment shall authorize or
permit any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to purposes other
than for the exclusive benefit of the Participants or their Beneficiaries or
estates; no such amendment shall cause any reduction in the amount credited to
the account of any Participant or cause or permit any portion of the Trust Fund
to revert to or become the property of the Employer; and no such amendment which
affects the rights, duties or responsibilities of the Trustee and Administrator
may be made without the Trustee's and Administrator's written consent. The
Trustee shall not be required to execute any such amendment unless the Trust
provisions contained herein are as part of the Plan and the amendment affects
the duties of the Trustee hereunder.
In addition, no such amendment shall have the effect of terminating the
protections and rights set forth in Section , unless such termination shall then
be permitted under the applicable provisions of the Code and Regulations; such a
termination is currently expressly prohibited by Regulation 54.4975-
11(a)(3)(ii).
For the purposes of this Section, a Plan amendment which has the effect of
(1) eliminating or reducing an early retirement benefit or a retirement-type
subsidy, (2) eliminating an optional form of benefit (as provided in
Regulations) or (3) restricting, directly or indirectly, the benefit provided to
any Participant prior to the amendment shall be treated as reducing the amount
credited to the account of a Participant except that an amendment described in
clause (2) above (other than an amendment having an effect described in clause
(1) above) shall not be treated as reducing the amount credited to the account
of a Participant to the extent so provided in Regulations. Any Plan amendment
which modifies distribution options in a nondiscriminatory manner shall not be
treated as reducing the amount credited to the account of a Participant.
9.2 TERMINATION
The Board of Directors of the Company shall have the right at any time
to terminate the Plan by delivering to the Trustee and Administrator written
notice of such termination. Upon any termination (full or partial) or complete
discontinuance of contributions, all amounts credited to the affected
Participants' Accounts shall become 100% Vested and shall not thereafter be
subject to forfeiture and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof. Upon
such termination of the Plan, the Employer, by written notice to the Trustee and
Administrator, may direct either:
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(a) complete distribution of the assets in the Trust Fund to the
Participants in a manner consistent with the requirements of Sections 7.5
and 7.6; or
(b) continuation of the Trust created by this agreement and the
distribution of benefits at such time and in such manner as though the Plan
had not been terminated.
9.3 MERGER OR CONSOLIDATION
This Plan may be merged or consolidated with, or its assets and/or
liabilities maybe transferred to any other Plan and Trust only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the Plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation.
IX-2
<PAGE>
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the Employer
and any participant or to be a consideration or an inducement for the employment
of any Participant or Employee. Nothing contained in this Plan shall be deemed
to give any Participant or Employee the right to be retained in the service of
the Employer or to interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him as a Participant of this Plan.
10.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall
be payable out of the Trust Fund to any person (including a Participant or
his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; and no such benefit shall be in
any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any such person, nor shall it be subject to
attachment or legal process for or against such person, and the same shall
not be recognized by the Trustee, except to such extent as may be required
by law.
(b) This provision shall not apply to a "qualified domestic relations
order" defined in Code Section 414(p), and those other domestic relations
orders permitted to be so treated by the Administrator under the provisions
of the Retirement Equity Act of 1984. The Administrator shall establish a
written procedure to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders.
Further, to the extent provided under a "qualified domestic relations
order", (i) a Former spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes under the Plan and (ii) the Plan may
include distribution prior to the Participant's attainment of his "earliest
retirement age."
10.3 CONSTRUCTION OF PLAN
This Plan shall be construed and enforced according to the Act and the laws
of the State of Delaware, other than its laws respecting choice of law, to the
extent not preempted by the Act.
10.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply,
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<PAGE>
and whenever any words are used herein in the singular or plural form, they
shall be construed as though they were also used in the other form in all cases
where they would so apply.
10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator may
be a party, and such claim suit, or proceeding is resolved in favor of the
Trustee or Administrator, they shall be entitled to be reimbursed from the Trust
Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan or of the Trust, by
termination of either, by power or revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Section 403(c)(2)(A) of the Act, the
Employer may demand repayment of such excessive contribution at any time
within one year following the time of payment and the Trustees shall return
such amount to the Employer within the one year period. Earnings of the
Plan attributable to the excess contributions may not be returned to the
Employer but any losses attributable thereto must reduce the amount so
returned.
10.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such Fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Section 412(a)(2) of the Act), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
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<PAGE>
10.8 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
10.9 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
10.10 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are the Company and the Administrator.
The named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under the Plan.
In general, the Company shall have the sole responsibility for making the
contributions provided for under Section 4.1; and shall have the sole authority
to appoint and remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend or terminate, in whole or in part, the
Plan. The Administrator shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically described in
the Plan, including the acquisition, holding and/or disposition of Company Stock
and the entering into any Exempt Loans. The Administrator shall also have the
sole responsibility of management of the assets of the Other Investments Account
held under the Trust, except those assets in such accounts, the management of
which has been assigned to an Investment Manager, who shall be solely
responsible for the management of the assets assigned to it, all as specifically
provided in the Plan.
10.11 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
10.12 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions to
this Plan are conditioned upon the initial qualification of the Plan under
Code Section 401. If the Plan receives an adverse determination with
respect to its initial qualification, then the Plan may return such
contributions to the Employer within one year after such determination,
provided the application for the determination is made by the time
prescribed by law for filing the
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Employer's return for the taxable year in which the Plan was adopted, or
such later date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except Sections
3.6 and 4.3(d), any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the Employer
under the Code and, to the extent any such deduction is disallowed, the
Employer may, within one year following the disallowance of the deduction,
demand repayment of such disallowed contribution and the Trustee shall
return such contribution within one year following the disallowance of the
deduction, demand repayment of such disallowed contribution and the Trustee
shall return such contribution within one year following the disallowance.
Earnings of the Plan attributable to the excess contribution may not be
returned to the Employer, but any losses attributable thereto must reduce
the amount so returned.
10.13 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner.
10.14 SECURITIES AND EXCHANGE COMMISSION APPROVAL
The Company may request an interpretative letter from the Securities and
Exchange Commission stating that the transfer of Company Stock contemplated
hereunder does not involve transactions requiring a registration of such Company
Stock under the Securities Act of 1933. In the event that a favorable
interpretative letter is not obtained, the Employer reserves the right to amend
the Plan and Trust retroactively to their Effective Dates in order to obtain a
favorable interpretative letter or to terminate the Plan.
10.15 INDEMNIFICATION
Neither the Employer, any of its officers or directors, nor the
Administrator shall be personally liable for any action or inaction with respect
to any duty or responsibility imposed upon such person by the terms of the Plan,
unless such action or inaction is judicially determined to be a breach of that
person's fiduciary responsibility with respect to the Plan under any applicable
law. The Employer may indemnify or purchase insurance to underwrite indemnity
for the Administrator and/or the Employer's board of directors against any
personal liability or expense except for their own gross negligence.
10.16 CONTROLLING LAW
All legal questions pertaining to the Plan, all construction and all
Regulations shall be determined in accordance with the laws of the State of
Delaware and the United States. All contributions shall be deemed to have been
made under such laws. Notwithstanding anything in this
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Agreement to the contrary, the effective dates provided for herein for the
application of any Code Section to this Plan shall be extended in accordance
with any act of Congress or any effective Regulation, Ruling or other measure of
like import.
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ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Company and Trustee, any other Affiliated Employer may adopt this Plan and all
of the provisions hereof, and participate herein and be known as a Participating
Employer, by a properly executed document evidencing said intent and will of
such Participating Employer.
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the same
Trustee as provided in this Plan.
(b) The Trustee, unless directed otherwise by the Administrator, shall
commingle and hold as one Trust Fund all contributions made by
Participating Employers.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or a
Participating Employer, shall not affect such Participant's rights under
the Plan, and all amounts credited to such Participant's Account as well as
his accumulated service time with the transferor or predecessor, and his
length of participation in the Plan, shall continue to his credit.
(d) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Employee-Participants of the Participating
Employer by which the forfeiting Participant was employed, except if the
Forfeiture is for an Employee whose Employer is a member of an affiliated
or controlled group, then said Forfeiture shall be allocated, based on
Compensation to all Participant Accounts of Participating Employers who are
members of the affiliated or controlled group. Should an Employee of one
("First") Employer be transferred to an associated ("Second") Employer (the
Employer, an affiliate or subsidiary), such transfer shall not cause his
Account balance (generated while an Employee of "First" Employer) in any
manner or by any amount to be forfeited. Such Employee's Participant
Account balance for all purposes of the Plan, including length of service,
shall be considered as though he had always been employed by the "Second"
Employer and as such had received contributions, forfeitures, earnings of
losses, and appre ciation or depreciation in value of assets totaling
amount so transferred.
(e) Any expenses of the Trust which are to be paid by the Employer or
borne by the Trust Fund shall be paid by each Participating Employer in the
same proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to the
credit of all Participants.
XI-1
<PAGE>
11.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a part of this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent.
Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.
11.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Participating
Employers, and in the event of any such transfer, the Employee involved shall
carry with him his accumulated service and eligibility. No such transfer shall
effect a termination of employment hereunder, and the Participating Employer to
which the Employee is transferred shall thereupon become obligated hereunder
with respect to such Employee in the same manner as was the Participating
Employer from whom the Employee was transferred.
11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution or Forfeiture subject to allocation during each Plan Year
shall be allocated among all Participants of all Participating Employers in
accordance with the provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer.
The Trustee may, but need not, register contracts so as to evidence that a
particular Participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Administrator will notify
the Trustee thereof. Notwithstanding anything herein seemingly to the contrary,
the Plan shall constitute a "single" Plan as to all Participating Employers and
not a separate plan as to any such Participating Employer.
11.6 AMENDMENT
Each amendment of this Plan shall be binding on each and every
Participating Employer and on the Trustee, unless its consent is necessary in
accordance with the terms of this Plan.
11.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Trust Fund assets allocable to the Participants of
such Participating Employer or to such new Trustee as shall have been designated
by such Participating Employer, in
XI-2
<PAGE>
the event that it has established a separate pension plan for its Employees. If
no successor is designated, the Trustee shall retain such assets for the
Employees of said Participating Employer pursuant to the provisions of Article
VII hereof. In no such event shall any part of the corpus or income of the
Trust as it relates to such Participating Employer be used for or diverted for
purposes other than for the exclusive benefit of the Employees of such
Participating Employer.
11.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary rules
or regulations, binding upon all Participating Employers and all Participants,
to effectuate the purpose of this Article.
11.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE
If any Participating Employer is prevented in whole or in part from making
a contribution to the Trust Fund which it would otherwise have made under the
Plan by reason of having no current or accumulated earnings or profits, or
because such earnings or profits are less than the contribution which it would
otherwise have made, then, pursuant to Code Section 404(a)(3)(B), so much of the
contribution which such Participating Employer was so prevented from making may
be made, for the benefit of the participating employees of such Participating
Employer, by the other Participating Employers who are members of the same
affiliated group within the meaning of Code Section 1504 to the extent of their
current or accumulated earnings or profits, except that such contribution by
each such other Participating Employer shall be limited to the proportion of its
total current and accumulated earnings or profits remaining after adjustment for
its contribution to the Plan made without regard to this paragraph which the
total prevented contribution bears to the total current and accumulated earnings
or profits of all the Participating Employers remaining after adjustment for all
contributions made to the Plan without regard to this paragraph.
XI-3
<PAGE>
ARTICLE XII
TOP-HEAVY STATUS
12.1 ARTICLE CONTROLS
Any Plan provisions to the contrary notwithstanding, the provisions of
this Article shall control to the extent required to cause the Plan to comply
with the requirements imposed under Code Section 416.
12.2 DEFINITIONS
For purposes of this Article, the following terms and phrases shall have
these respective meanings:
(a) Account Balance: As of any Valuation Date, the aggregate amount
credited to an individual's account or accounts under a qualified defined
contribution plan maintained by the Employer or an Affiliated Employer
(excluding employee contributions which were deductible within the meaning
of section 219 of the Code and rollover or transfer contributions made
after December 31, 1983 by or on behalf of such individual to such plan
from another qualified plan sponsored by an entity other than the Employer
or an Affiliated Employer), increased by (1) the aggregate distributions
made to such individual from such plan during a five-year period ending on
the Determination Date and (2) the amount of any contributions due as of
the Determination Date immediately following such Valuation Date.
(b) Accrued Benefit: As of any Valuation Date, the present value
(computed on the basis of the Assumptions) of the cumulative accrued
benefit (excluding the portion thereof which is attributable to employee
contributions which were deductible pursuant to section 219 of the Code, to
rollover or transfer contributions made after December 31, 1983 by or on
behalf of such individual to such plan from another qualified plan
sponsored by an entity other than the Employer or an Affiliated Employer,
to proportional subsidies or to ancillary benefits) of an individual under
a qualified defined benefit plan maintained by the Employer or an
Affiliated Employer increased by (1) the aggregate distributions made to
such individual from such plan during a five-year period ending on the
Determination Date and (2) the estimated benefit accrued by such individual
between such Valuation Date and the Determination Date immediately
following such Valuation Date. Solely for the purpose of determining top-
heavy status, the Accrued Benefit of an individual shall be determined
under (1) the method, if any, that uniformly applies for accrual purposes
under all qualified defined benefit plans maintained by the Employer or an
Affiliated Employer, or (2) if there is no such method, as if such benefit
accrued not more rapidly than under the slowest accrual rate permitted
under section 411(b)(1)(C) of the Code.
(c) Aggregation Group: The group of qualified plans maintained by the
Employer and each Affiliated Employer consisting of (1) each plan in which
a Key
XII-1
<PAGE>
Employee participates and each other plan which enables a plan in which a
Key Employee participates to meet the requirements of sections 401(a)(4) or
410 of the Code, or (2) each plan in which a Key Employee participates,
each other plan which enables a plan in which a Key Employee participates
to meet the requirements of sections 401(a)(4) or 410 of the Code and any
other plan which the Employer elects to include as a part of such group;
provided, however, that the Employer may not elect to include a plan in
such group if its inclusion would cause the group to fail to meet the
requirements of sections 401(a)(4) or 410 of the Code.
(d) Assumptions: The interest rate and mortality assumptions specified
for top-heavy status determination purposes in any defined benefit plan
included in the Aggregation Group including the Plan.
(e) Determination Date: For the first Plan Year of any plan, the last
day of such Plan Year and for each subsequent Plan Year of such plan, the
last day of the preceding Plan Year.
(f) Key Employee: A "key employee" as defined in section 416(i) of
the Code and the Treasury Regulations thereunder.
(g) Plan Year: With respect to any plan, the annual accounting
period used by such plan for annual reporting purposes.
(h) Remuneration: Compensation within the meaning of section 415(c)(3)
of the Code, as limited by section 401(a)(17) of the Code for Plan Years
beginning after December 31, 1988.
(i) Valuation Date: With respect to any Plan Year of any defined
contribution plan, the most recent date within the twelve-month period
ending on a Determination Date as of which the trust fund established under
such plan was valued and the net income (or loss) thereof allocated to
participants' accounts. With respect to any Plan Year of any defined
benefit plan, the most recent date within a twelve-month period ending on a
Determination Date as of which the plan assets were valued for purposes of
computing plan costs for purposes of the requirements imposed under section
412 of the Code.
12.3 TOP-HEAVY STATUS
(a) The Plan shall be deemed to be top-heavy for a Plan Year, if, as
of the Determination Date for such Plan Year, (1) the sum of Account
Balances of Participants who are Key Employees exceeds 60% of the sum of
Account Balances of all Participants unless an Aggregation Group including
the Plan is not top-heavy or (2) an Aggregation Group including the Plan is
top-heavy. An Aggregation Group shall be deemed to be top-heavy as of a
Determination Date if the sum (computed in accordance with section
416(g)(2)(B) of
XII-2
<PAGE>
the Code and the Treasury Regulations promulgated thereunder) of (1) the
Account Balances of Key Employees under all defined contribution plans
included in the Aggregation Group and (2) the Accrued Benefits of Key
Employees under all defined benefit plans included in the Aggregation Group
exceeds 60% of the sum of the Account Balances and the Accrued Benefits of
all individuals under such plans. Notwithstanding the foregoing, the
Account Balances and Accrued Benefits of individuals who are not Key
Employees in any Plan Year but who were Key Employees in any prior Plan
Year shall not be considered in determining the top-heavy status of the
Plan for such Plan Year. Further, notwithstanding the foregoing, the
Account Balances and Accrued Benefits of individuals who have not performed
services for the Employer at any time during the five-year period ending on
the applicable Determination Date shall not be considered.
12.4 TERMINATION OF TOP-HEAVY STATUS
If the Plan has been deemed to be top-heavy for one or more Plan Years
and thereafter ceases to be top-heavy, the provisions of this Article shall
cease to apply to the Plan effective as of the Determination Date on which it is
determined to no longer be top-heavy.
12.5 EFFECT OF ARTICLE
Notwithstanding anything contained herein to the contrary, the provisions
of this Article shall automatically become inoperative and of no effect to the
extent not required by the Code or the Act.
IN WITNESS WHEREOF, this Plan has been executed this August 21, 1996,
effective for all purposes as of the Effective Date.
STX CHEMICALS CORP.
(to be renamed Sterling Chemicals, Inc.)
By: /s/ Hunter Nelson
-----------------
Name: Hunter Nelson
Title: Vice President
XII-3
<PAGE>
EXHIBIT 10.17
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT ("Agreement") is made as of October 23, 1996,
by and between Sterling Chemicals Holdings, Inc., a Delaware corporation (the
"Company"), and ____________________ ("Indemnitee").
WHEREAS, the Certificate of Incorporation and Bylaws of the Company
provide for the indemnification of directors, officers and employees of the
Company and its direct and indirect subsidiaries to the maximum extent permitted
from time to time under applicable law and, along with the Delaware General
Corporation Law, contemplate that the Company may enter into agreements with
respect to such indemnification; and
WHEREAS, the Board of Directors of the Company has concluded that it is
reasonable, prudent and in the best interests of the Company's stockholders for
the Company to contractually obligate itself to indemnify certain of its
Authorized Representatives (defined below) so that they will serve or continue
to serve with greater certainty that they will be adequately protected; and
WHEREAS, the Board of Directors of the Company has authorized the
Company, acting through the Chairman of the Board or the President, to enter
into an Indemnity Agreement with (i) each director of the Company and its direct
and indirect subsidiaries, (ii) each officer of the Company and its direct and
indirect subsidiaries, and (iii) any employee of the Company or its direct and
indirect subsidiaries as may be determined by the Chairman of the Board or the
President to be appropriate;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee hereby agree as follows:
1. Definitions. For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms
shall have the following respective meanings:
"Authorized Representative" means (i) a director, officer, employee,
agent or fiduciary of the Company or any Subsidiary and (ii) a person serving at
the request of the Company or any Subsidiary as a director, officer, employee,
fiduciary or other representative of another Enterprise.
"Enterprise" means any corporation, partnership, limited liability
company, association, joint venture, trust, employee benefit plan or other
entity.
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<PAGE>
"Expenses" means all expenses, including (without limitation) reasonable
fees and expenses of counsel.
"Liabilities" means all liabilities, including (without limitation) the
amounts of any judgments, fines, penalties, excise taxes and amounts paid in
settlement.
"Proceeding" means any threatened, pending or completed claim, action
(including any action by or in the right of the Company), suit or proceeding
(whether formal or informal, or civil, criminal, administrative, legislative,
arbitrative or investigative) in respect of which Indemnitee is, was or at any
time becomes, or is threatened to be made, a party, witness, subject or target,
by reason of the fact that Indemnitee is or was an Authorized Representative or
a prospective Authorized Representative.
"Subsidiary" means, at any time, (i) any corporation of which at least a
majority of the outstanding voting stock is owned by the Company at such time,
directly or indirectly through subsidiaries, and (ii) any other Enterprise in
which the Company, directly or indirectly, owns more than a 50% equity interest
at such time.
2. Interpretation. (a) In this Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;
(iv) unless the context indicates otherwise, reference to any Section
means such Section hereof; and
(v) the words "including" (and with correlative meaning "include") means
including, without limiting the generality of any description preceding such
term.
(b) The Section headings herein are for convenience only and shall not
affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
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<PAGE>
(d) In the event of any ambiguity, vagueness or other similar matter
involving the interpretation or meaning of this Agreement, this Agreement shall
be liberally construed so as to provide to Indemnitee the full benefits
contemplated hereby.
(e) If the indemnification to which Indemnitee is entitled as respects
any aspect of any claim varies between two or more provisions of this Agreement,
that provision providing the most comprehensive indemnification shall apply.
3. Limitation on Personal Liability. To the fullest extent permitted
by applicable law, Indemnitee shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a director
of the Company, provided that the foregoing shall not eliminate or limit the
liability of Indemnitee (i) for any breach of Indemnitee's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law relating to unlawful
dividend payments and unlawful stock purchases or redemptions, or (iv) for any
transaction from which Indemnitee derived an improper personal benefit.
4. Indemnity. (a) Subject to the following provisions of this
Agreement, the Company shall hold harmless and indemnify Indemnitee against all
Expenses and Liabilities actually incurred by Indemnitee in connection with any
Proceeding; provided, however, that no indemnity shall be paid by the Company
pursuant to this Agreement:
(i) for amounts actually paid to Indemnitee pursuant to one or more
policies of directors and officers liability insurance maintained by the Company
or pursuant to a trust fund, letter of credit or other security or funding
arrangement provided by the Company; provided, however, that if it should
subsequently be determined that Indemnitee is not entitled to retain any such
amount, this clause (i) shall no longer apply to such amount;
(ii) in respect of remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that payment of such
remuneration was in violation of applicable law;
(iii) on account of Indemnitee's conduct which is finally adjudged to
constitute willful misconduct or to have been knowingly fraudulent, deliberately
dishonest or from which the Indemnitee derives an improper personal benefit; or
(iv) on account of any suit in which final judgment is rendered against
Indemnitee for an accounting of profits made from the sale or purchase by
Indemnitee of securities of the
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<PAGE>
Company pursuant to the provisions of Section 16(b) of the Securities Exchange
Act of 1934, as amended.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for only a portion (but not, however, for the
total amount) of any Expenses or Liabilities actually incurred by Indemnitee in
connection with any Proceeding, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses and Liabilities to which Indemnitee
is entitled. If the indemnification provided for herein in respect of any
Expenses or Liabilities actually incurred by Indemnitee in connection with any
Proceeding is finally determined by a court of competent jurisdiction to be
prohibited by applicable law, then the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount paid or payable by Indemnitee as a
result of such Expenses and Liabilities in such proportion as is appropriate to
reflect (i) the relative benefits received by the Company on the one hand and
Indemnitee on the other hand from the events, circumstances, conditions,
happenings, actions or transactions from which such Proceeding arose, (ii) the
relative fault of the Company (including its other Authorized Representatives)
on the one hand and of Indemnitee on the other hand in connection with the
events, circumstances and happenings which resulted in such Expenses and
Liabilities, such relative fault to be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the events, circumstances and/or happenings
resulting in such Expenses and Liabilities, and (iii) any other relevant
equitable considerations, it being agreed that it would not be just and
equitable if such contribution were determined by pro rata or other method of
allocation which does not take into account the foregoing equitable
considerations.
(c) The indemnification provided herein shall be applicable only to
Proceedings commenced after the date hereof, regardless, however, of whether
they arise from acts, omissions, facts or circumstances occurring before or
after the date hereof.
(d) The indemnification provided herein shall be applicable whether or
not negligence of Indemnitee is alleged or proved, and regardless of whether
such negligence be contributory or sole.
(e) Amounts paid by the Company to Indemnitee under this Section 4 are
subject to refund by Indemnitee as provided in Section 8.
5. Notification and Defense of Claims. (a) Promptly after the receipt
by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will,
if a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement of such Proceeding; provided,
however, that the omission to so notify the Company will not relieve the Company
(i) from any liability which it may have to Indemnitee under this Agreement
unless, and then only to the extent that, such omission results in insufficient
time being available to permit the Company or its counsel to effectively defend
-4-
<PAGE>
against or make timely response to any loss, claim, damage, liability or expense
resulting from such Proceeding or otherwise has a material adverse effect on the
Company's ability to promptly deal with such loss, claim, damage, liability or
expense or (ii) from any liability which it may have to Indemnitee otherwise
than under this Agreement.
(b) The following provisions shall apply with respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:
(i) The Company shall be entitled to participate therein at its own
expense.
(ii) Except as otherwise provided below, to the extent it may elect to
do so, the Company (jointly with any other indemnifying party similarly
notified) will be entitled to assume the defense thereof, with counsel of its
own selection reasonably satisfactory to Indemnitee. After notice from the
Company to Indemnitee of its election so to assume the defense thereof, the
Company will not be liable to Indemnitee under this Agreement for any Expenses
subsequently incurred by Indemnitee in connection with the defense of such
Proceeding other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ separate counsel in such
Proceeding but the fees and expenses of such counsel incurred after notice from
the Company of its assumption of the defense thereof shall be at the expense of
Indemnitee unless (1) the employment of separate counsel by Indemnitee has been
authorized by the Company; (2) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Proceeding; or (3) the Company shall not in fact
have employed counsel to assume the defense of such Proceeding, in each of which
cases the reasonable fees and expenses of Indemnitee's counsel shall be borne by
the Company. The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the conclusion provided for in (2) above. Nothing in this
subparagraph (ii) shall affect the obligation of the Company to indemnify
Indemnitee against Expenses and Liabilities paid in settlement for which it is
otherwise obligated hereunder.
(iii) The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any Proceedings or claims
effected without its prior written consent. The Company shall not settle any
Proceeding or claim in any manner which would impose any penalty or limitation
on Indemnitee without Indemnitee's prior written consent. Neither the Company
nor Indemnitee will unreasonably withhold or delay its consent to any proposed
settlement.
6. Advancement of Expenses, etc. If requested to do so by Indemnitee
with respect to any Proceeding, the Company shall advance to or for the benefit
of Indemnitee, prior to the final disposition of such Proceeding, the Expenses
actually incurred by Indemnitee in investigating, defending or appealing such
Proceeding. Any judgments, fines or amounts to be paid in settlement of any
Proceeding shall also be advanced by the Company upon request by
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<PAGE>
Indemnitee. Advances made by the Company under this Section 6 are subject to
refund by Indemnitee as provided in Section 8.
7. Right of Indemnitee to Bring Suit. (a) If a claim for
indemnification or a claim for an advance under this Agreement is not paid in
full by the Company within 30 days after receipt by the Company from Indemnitee
of a written request or demand therefor, Indemnitee may bring suit against the
Company to recover the unpaid amount of the claim. If, in any such action,
Indemnitee makes a prima facie showing of entitlement to indemnification under
this Agreement, the Company shall have the burden of proving that
indemnification is not required under this Agreement. The only defense to any
such action shall be that indemnification is not required by this Agreement.
(b) In the event that any action is instituted by Indemnitee to enforce
Indemnitee's rights or to collect monies due to Indemnitee under this Agreement
and if Indemnitee is successful in such action, the Company shall reimburse
Indemnitee for all Expenses incurred by Indemnitee with respect to such action.
8. Repayment Obligation of Indemnitee. If the Company advances or pays
any amount to Indemnitee under Section 4, 6 or 7 and if it shall thereafter be
finally adjudicated that Indemnitee was not entitled to be indemnified hereunder
for all or any portion of such amount, Indemnitee shall promptly repay such
amount or such portion thereof, as the case may be, to the Company. If the
Company advances or pays any amount to Indemnitee under Section 4, 6 or 7 and if
Indemnitee shall thereafter receive all or a portion of such amount under one or
more policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company.
9. Changes in Law. If any change after the date of this Agreement in
any applicable law, statute or rule expands the power of the Company to
indemnify Authorized Representatives, such change shall be within the purview of
Indemnitee's rights and the Company's obligations under this Agreement. If any
change after the date of this Agreement in any applicable law, statute or rule
narrows the right of the Company to indemnify an Authorized Representative, such
change shall, to the fullest extent permitted by applicable law, leave this
Agreement and the parties' rights and obligations hereunder unaffected.
10. Continuation of Indemnity. All agreements and obligations of the
Company hereunder shall continue during the period Indemnitee is an Authorized
Representative, and shall continue after Indemnitee has ceased to occupy such
position or have such relationship so long as Indemnitee shall be subject to any
possible Proceeding.
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<PAGE>
11. Nonexclusivity. The indemnification and other rights provided by
any provision of this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under (i) any statutory or common
law, (ii) the Company's certificate of incorporation, (iii) the Company's
bylaws, (iv) any other agreement or (v) any vote of stockholders or
disinterested directors or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while occupying any of the
positions or having any of the relationships referred to in this Agreement.
Nothing in this Agreement shall in any manner affect, impair or compromise any
indemnification Indemnitee has or may have by virtue of any agreement previously
entered into between Indemnitee and the Company.
12. Severability. If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable (i) the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be in any
way affected or impaired thereby and (ii) to the fullest extent possible, the
provisions of this Agreement shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable. Each
provision of this Agreement is a separate and independent portion of this
Agreement.
13. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties. No waiver of any of the provisions of this Agreement shall be binding
unless executed in writing by the person making the waiver nor shall such waiver
constitute a continuing waiver.
14. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed (i) if to the Company, at
its principal office address as shown on the signature page hereof or such other
address as it may have designated by written notice to Indemnitee for purposes
hereof, directed to the attention of the Secretary and (ii) if to Indemnitee, at
Indemnitee's address as shown on the signature page hereof or to such other
address as Indemnitee may have designated by written notice to the Company for
purposes hereof. Each such notice or other communication shall be deemed to
have been duly given if (a) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, (b)
transmitted by facsimile transmission, at the time that receipt of such
transmission is confirmed, or (c) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.
15. Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be governed by and construed and enforced in accordance with,
the internal laws of the State of Delaware without regard to principles of
conflicts of law.
16. Heirs, Successors and Assigns. (a) This Agreement shall be binding
upon, inure to the benefit of and be enforceable by (i) Indemnitee and
Indemnitee's personal or legal representatives, executors, administrators,
heirs, devisees and legatees and (ii) the Company and
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<PAGE>
its successors and assigns. This Agreement shall not inure to the benefit of any
other person or Enterprise.
(b) The Company agrees to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
assumption and agreement provided for in this Section 16 or which otherwise
becomes bound by all terms and provisions of this Agreement by operation of law.
ENTERED into on the day and year first above written.
THE COMPANY:
-----------
STERLING CHEMICALS HOLDINGS, INC.
By:
----------------------------------
Address: 1200 Smith Street Robert W. Roten
Suite 1900 President and Chief Executive Officer
Houston, Texas 77002
Attn: General Counsel
INDEMNITEE:
----------
---------------------------------
Address: [home address] [name]
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EXHIBIT 10.22
ARTICLES OF AGREEMENT
BETWEEN
STERLING CHEMICALS, INC.
ITS SUCCESSORS AND ASSIGNS
AND
TEXAS CITY, TEXAS
METAL TRADES COUNCIL, AFL-CIO
TEXAS CITY, TEXAS
MAY 1, 1996
TO
MAY 1, 1999
<PAGE>
ARTICLES OF AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article 1 - Union Security........................................... 2
Article 2 - Hours of Work............................................ 3
Article 3 - Overtime and Premium Time Regulations.................... 13
Article 4 - Vacation................................................. 10
Article 5 - Seniority................................................ 13
Article 6 - Work Outside of Regular Classification................... 20
Article 7 - Supervisors Doing Hourly Work............................ 21
Article 8 - Work Classifications -- Temporary Vacancies.............. 21
Article 9 - Staffing of New Units.................................... 21
Article 10 - Jurisdiction of Work..................................... 22
Article 11 - Leadmen.................................................. 23
Article 12 - Stewards................................................. 23
Article 13 - Contract Work -- Construction and Maintenance............ 24
Article 14 - Pay Day.................................................. 24
Article 15 - Payroll Disputes......................................... 24
Article 16 - Physical Examinations.................................... 25
Article 17 - Discriminations.......................................... 25
Article 18 - Union Representatives.................................... 25
Article 19 - Jurisdictional Disputes.................................. 26
Article 20 - Jury Service............................................. 26
Article 21 - Election Day Regulations................................. 27
Article 22 - Replacement of Clothing.................................. 28
Article 23 - Layoff Notice -- Separation Allowance.................... 28
Article 24 - Leave of Absence......................................... 30
Article 25 - Sanitation and Safety.................................... 31
Article 26 - Bulletin Boards.......................................... 33
Article 27 - Company Rules............................................ 33
Article 28 - Funeral Leave............................................ 33
Article 29 - Strikes and Lockouts..................................... 34
Article 30 - Grievance Procedure...................................... 35
Article 31 - Arbitration Procedure.................................... 38
Article 32 - Abrogation of Contract Articles.......................... 38
Article 33 - Non-occupational Accident and Sickness Plan.............. 39
Article 34 - Contract Period.......................................... 42
Exhibit A-1 - Forty (40) Hour Master Shift Schedule.................... 45
Exhibit AX-1 - Forty (40) Hour Master Shift Schedule.................... 46
Exhibit A-2 - Forty (40) Hour Master Shift Schedule Two (2)
Shifts Only............................................. 47
Exhibit A-3B - Forty (40) Hour Master Shift Schedule.................... 48
Exhibit A-3 - Three (3) Shift Schedule................................. 49
Exhibit A-5 - Forty (40) Hour Weekend Day Schedule..................... 50
</TABLE>
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<TABLE>
<S> <C>
Exhibit A-6 - Normal. Day Schedule..................................... 50
Exhibit A-7 - Special Straight Day Schedule............................ 51
Exhibit A-9 - Special Pilot Plant and TBA Unit Schedule................ 52
Exhibit A-10 - Three (3) Shift Schedule (All Employees Except Group 1).. 53
Exhibit A-11 - Two (2) Shift Schedule (All Employees Except Group 1).... 53
Exhibit A-20 - Special Pilot Plant Schedule............................. 54
Exhibit B - Wage Rates............................................ 55,56
Exhibit C-1 - Merit Progression Schedule & Laboratory Analyst
Apprentice........................................... 57,58
Exhibit C-2 - Maintenance Apprentice Merit Progression Schedule........ 59
Exhibit C-3 - Instrument & Electrical Apprentice Merit Progression
Schedule................................................ 59
Exhibit C-4 - Chemical Operator Apprentice Merit Progression Rate...... 60
Exhibit C-5 - Pumper-Gauger Apprentice Merit Progression Rate.......... 60
ii
</TABLE>
<PAGE>
ARTICLES OF AGREEMENT
BETWEEN
STERLING CHEMICALS, INC.
ITS SUCCESSORS AND ASSIGNS
AND
THE TEXAS CITY, TEXAS METAL
TRADES COUNCIL, AFL-CIO
OF TEXAS CITY, TEXAS
1 This agreement is made between the Sterling Chemicals, Inc., its
successors and assigns, authorized to do business in Texas, hereinafter
referred to as the COMPANY, and the Texas City, Texas Metal Trades Council,
AFL-CIO, of Galveston County, Texas, hereinafter referred to as the UNION.
It is agreed by the following unions signatory to this Agreement that said
Council is their authorized representative for the purpose of negotiating
and administering this Agreement and for the purpose of modifying,
amending, or waiving any of the provisions of this Agreement:
Electrical Workers Local No. 527
Operating Engineers No. 347
Painters and Paperhangers No. 585
Bridge, Structural & Ornamental Iron Workers No. 135
International Association of Machinists No. 1446 Affiliated with District
No. 37
Sheet Metal Workers No. 54
Teamsters Local No. 1111
Carpenters Local No. 973
Instrument Lodge No. 903
International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths,
Forgers and Helpers No. 132
Heat & Frost Insulators and Asbestos Workers No. 111
Pipefitters Local No. 211
Operating Engineers No. 450
BASIC PRINCIPLES
2 The COMPANY and the UNION have a common and sympathetic interest in the
progress of industry. Therefore, a working system and harmonious relations
are necessary to improve the relationship between the COMPANY and the
UNION, and the Public. Progress in industry demands a mutuality of
confidence between the COMPANY and the UNION. All will benefit by a
continuous peace and by adjusting any differences by rational, common-sense
methods. The purpose of this Agreement is to establish harmonious
relations for the advancement of the mutual interest of the parties without
regard to race, sex, creed, color, age, or national origin in continuing
and improving the manufacture and production of products at said Texas City
plant. It is the understanding of the parties to this agreement that any
reference in said agreement to the masculine gender is understood to also
include those employees of the feminine gender. Now,
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therefore, in consideration of the mutual promises and agreements herein
contained, the parties hereto agree as follows:
RECOGNITION
3 The COMPANY hereby recognizes the Texas City, Texas Metal Trades Council
as the exclusive bargaining agency for all production and maintenance
employees, but excluding supervisory, technical, clerical, plant protection
and cafeteria employees and other conditions of employment. Supervisory
employees, in the production and maintenance departments, are those who are
above the classifications listed in Exhibit B, a part of this Contract.
ARTICLE 1
UNION SECURITY
SECTION 1
4 The COMPANY agrees to honor check-off cards signed by individual
employees, on forms agreed to by the COMPANY and the UNION, which authorize
the COMPANY to deduct from the employee's first pay check each month the
regular monthly UNION dues of the employee, or initiation fees as may be
authorized by the employee.
5 The COMPANY agrees to notify the UNION of all newly employed personnel
covered by this Agreement. Such notice shall be in writing and shall state
the name of the employee, their classification, their date of hire, their
address and telephone number.
SECTION 2
6 Check-off authorizations now in effect shall become irrevocable in
accordance with the terms of Section 3 of this article unless written
notice of revocation from the employee is received by the COMPANY within
the fifteen (15) day period prior to the expiration date of this Agreement.
A notice of this provision will be posted by the COMPANY and the UNION.
SECTION 3
7 Check-off authorizations shall be irrevocable for the period of one (1)
year, or until the termination of the Agreement, whichever occurs sooner.
It is further agreed that this authorization shall be automatically
renewed, and shall be irrevocable for successive periods of one (1) year
each unless written notice by registered mail of revocation from the
employee is received by the COMPANY not more than twenty (20) days nor less
than ten (10) days prior to the expiration of each period of one (1) year.
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<PAGE>
8 Employees withdrawing from a signatory union may cancel their dues
deduction authorization at any time by serving notice by letter to the
COMPANY canceling such authorization along with letters of approval from
the UNION and the signatory union to which the dues and initiation fees
were to be forwarded.
9 Employees who, as a result of a change in job assignment, transfer from
one signatory union to another signatory union, may cancel any prior dues
deduction authorization by submitting to the COMPANY a new dues deduction
authorization. Such new authorization must be transmitted through the
signatory union or its designated representative.
SECTION 4
10 Money deducted from pay checks as authorized herein for employees
bargained for by the UNION will be forwarded to each individual union
signatory to the Agreement. The UNION will furnish the COMPANY a list of
signatory unions showing the address and the individual to whom the check
should be forwarded and the regular monthly union dues of each Union. This
check will be forwarded not later than the 20th of the month in which the
money is deducted, along with a summary sheet in duplicate showing the name
of each employee from whose pay check dues and initiation fees were
deducted and the amount deducted.
11 In the event a signatory union ceases to be affiliated with UNION for any
reason, and UNION officially notifies COMPANY of same, the authorization of
employees for deductions of dues and initiation fees for such Union whose
affiliation with UNION has ceased, shall be immediately and automatically
revoked and any monies deducted from checks of said employees and held by
the COMPANY will be refunded to the employee from whose check the deduction
was made.
SECTION 5
12 In the event applicable laws governing union security are liberalized to
the extent that they allow a Maintenance of Membership clause, the COMPANY
agrees to meet with the UNION at that time and agree on the terms of a
Maintenance of Membership clause.
ARTICLE 2
HOURS OF WORK
SECTION 1 - ALL EMPLOYEES IN SENIORITY GROUPS 1, 2 AND 4
13 The period of time from 6:30 a.m. to 6:30 a.m. the following day shall
constitute a payroll day for all employees in the seniority groups above.
The period of time composed of seven (7) consecutive payroll days,
extending from 6:30 a.m. Monday to 6:30 a.m. the following Monday, shall
constitute a regular work week at this plant for all employees in the
seniority groups above.
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<PAGE>
The hours of work shall be as follows:
14 (a) DAY WORKERS - Eight (8) consecutive hours of work per day, exclusive
of a thirty (30) minute lunch period, shall constitute a day's work.
Hours of work shall be from 6:30 a.m. to 11:00 a.m. and from 11:30
a.m. to 3:00 p.m.
15 (b) SHIFT WORKERS - Eight (8) consecutive hours of work per day shall
constitute a day's work. Five (5) eight (8) hour shifts in any one
work week shall constitute a week's work. Shifts shall be from 6:30
a.m. to 2:30 p.m., 2:30 p.m. to 10:30 p.m., and 10:30 p.m. to 6:30
a.m. Shift workers will be permitted sufficient time to eat during
their shift without loss of pay for such period.
16 (c) X-1 SHIFT WORKERS - Eight (8) consecutive hours of work per day
shall constitute a day's work. Five (5) eight (8) hours shifts in
any one work week shall constitute a weeks' work. Shifts shall be
from 10:30 p.m. to 6:30 a.m., 6:30 a.m. to 2:30 p.m., and 2:30 p.m.
to 10:30 p.m. The payroll week for employees on the X-1 shift starts
at 10:30 p.m., Sunday, and runs until 10:30 p.m. the following
Sunday. The payroll day starts at 10:30 p.m. and runs until 10:30
p.m. of the following day. Shift workers are permitted sufficient
time to eat during their shift without loss of pay for such period.
SECTION 2 - ALL EMPLOYEES IN THE MAINTENANCE CRAFTS SENIORITY AND SENIORITY
GROUP 3
17 The period of time from 7:00 a.m. to 7:00 a.m. the following day shall
constitute a payroll day for all employees in the seniority groups above.
18 The period of time composed of seven (7) consecutive payroll days,
extending from 7:00 a.m. Monday to 7:00 a.m. the following Monday, shall
constitute a regular work week at this plant for all employees in the
seniority groups above.
The hours of work shall be as follows:
19 (a) DAY WORKERS - All Employees in the Maintenance Crafts Seniority and
Seniority Group 3 - Eight (8) consecutive hours of work per day,
exclusive of a thirty (30) minute lunch period, shall constitute a
day's work. Hours of work shall be from 7:00 a.m. to 11:00 a.m. and
from 11:30 a.m. to 3:30 p.m.
20 (b) SHIFT WORKERS - All Employees in the Maintenance Crafts Seniority
and Seniority Group 3 - Eight (8) consecutive hours of work per day
shall constitute a day's work. Five (5) eight (8) hour shifts in any
one work week shall constitute a week's work. Shifts shall be from
7:00 a.m. to 3:00 p.m., 3:00 p.m. to 11:00 p.m., and 11:00 p.m. to
7:00 a.m. Shift workers will be permitted sufficient time to eat
during their shift work without loss of pay for such period.
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<PAGE>
SECTION 3
21 Employees may be scheduled as shift workers if and when required in the
operation of the plant, and when so working, shall be governed by the above
conditions relating to a shift worker.
22 Straight day maintenance employees temporarily assigned to shift work,
when being reassigned to straight days, will normally be reassigned at the
beginning of the work week.
23 All work schedules presently in effect will be included in Exhibit A and
attached hereto. Any changes in these schedules will be mutually agreed to
by COMPANY and UNION.
24 The normal work week shall consist of forty (40) hours of work and the
normal work day of eight (8) hours of work providing work is available.
25 Any new schedules mutually agreed to by the COMPANY and UNION shall be
added to Exhibit A and made a part of this Agreement.
26 An employee may be excused without pay for a period up to two (2) hours
at the beginning or end of the day shift, Monday through Friday (except
holidays falling Monday through Friday) for the purpose of a doctor or
dentist appointment. Such excuse will be granted if it is scheduled with
enough advance notice so that proper relief can be scheduled and the
absence does not impair plant operations.
ARTICLE 3
OVERTIME AND PREMIUM TIME REGULATIONS
SECTION 1
27 Time worked under any of the following classifications listed below will
be paid for at the rate of one and one-half times the regular hourly rate.
28 (a) Time worked outside an employee's regular scheduled work shift
within the twenty-four (24) hour period beginning with the time the
employee starts to work or is scheduled to report for work, whichever
is earlier.
29 (b) The excess hours over forty (40) which are worked in any work week.
The time accumulated on the following categories is counted toward the
forty (40) hours:
1. The first eight (8) hours worked in each work day.
2. The first eight (8) hours worked on the first shift of a new
schedule when the employee's schedule has been changed without an
advance notice of
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<PAGE>
forty-eight (48) hours of the time the employee is required to
first report for work under the new schedule.
3. The first eight (8) hours worked on a new schedule when the
employee's schedule is changed so that eight (8) hours' rest is
not provided between the last shift on the old schedule and the
first shift on the new schedule.
30 (c) Time worked on employee's scheduled day of rest unless such work
resulted from a change in schedule of which the employee received
forty-eight (48) hours advance notice.
31 (d) The first eight (8) hours worked on the first shift of a new schedule
when employee's schedule is changed without notice forty-eight (48)
hours in advance of the time the employee is required to first report
for work under the new schedule.
32 (e) The first eight (8) hours worked on a new schedule when employee's
schedule is changed so that eight (8) hours' rest is not provided
between the last shift of the old schedule and the first shift on the
new schedule.
33 (f) Day workers, when scheduled as shift workers, shall be paid at the
rate of time and one-half for the first shift worked unless the
employee has received forty-eight (48) hours' notice of such change in
schedule.
SECTION 2
34 (a) Two and one-half times will be paid for work performed on the
following holidays: New Year's Day, President's Birthday, Good Friday,
Monday after Easter, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Friday after Thanksgiving Day, Christmas Eve and
Christmas Day.
35 FOR DAY WORKERS: If any of these holidays fall on a Sunday, the Monday
immediately following shall be recognized as the holiday. If holidays
fall on Saturday, they will be observed on the preceding Friday. The
exception shall be Christmas Eve which shall be observed on the last
working day before Christmas.
36 FOR SHIFT WORKERS: All holidays listed above will be recognized on the
calendar day on which it falls. For the purpose of determining pay
for an employee who works on a day observed as a holiday which falls
on one of the employee's scheduled days of rest, "regular scheduled
hours of work" for that day shall mean the same hours the employee was
assigned to work on the last regularly scheduled day of work
immediately prior to the holiday. Payment will be made according to
(b) 1 below.
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37 (b) Employees will be paid for the holidays listed above not worked an
amount equivalent to eight (8) times the employee's straight-time
hourly rate, subject to the following conditions:
1. Such pay shall be computed on the basis of payroll day and not
calendar day.
2. To be eligible for such pay, an employee must report for work on
their last regular scheduled working day immediately preceding
the holiday and their first regular scheduled working day
immediately following this holiday.
For purposes of determining eligibility for holiday pay only
under this section, employees absent either the day before, the
day after, or both days, because of vacation, death in the
immediate family, occupational injury or illness while under a
doctor's care, jury duty or excused absence will be considered as
having worked on such day or days and will be entitled to holiday
pay provided they have complied with the other requirements of
Article 3, Section 2. Immediate family will be interpreted to
mean those members of the family covered under Article 28 -
Funeral Leave.
3. An employee who is instructed to work on a holiday but fails to
report will receive no pay for the holiday.
4. Payment for holidays not worked shall not apply to employees on
approved leave of absence, off because of sickness or
occupational injury (unless under a doctor's care and the holiday
falls on an unpaid waiting period day), or layoff.
38 (c) When an employee works on both of their scheduled days of rest, they
shall be paid twice their straight-time rate for work performed on the
second scheduled day of rest.
(d) An employee working greater than sixteen (16) consecutive hours for
those on eight (8) hour shift schedules or eighteen (18) consecutive
hours for those on twelve (12) hour shift schedules will be paid at
double time for subsequent consecutive work hours up to the employee's
next regularly scheduled shift, which will be paid at straight time.
If the employee works additional consecutive hours, the beginning of
each regularly scheduled shift will restart the counting of continuous
hours.
SECTION 3
39 In the event any hours worked fall within two or more classifications
listed above, only one application can be made.
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<PAGE>
40 Employees shall not be laid off during regular working hours to deprive
them of any time which they have gained by working overtime. Overtime
worked shall be equally distributed among the employees within their own
craft or department as nearly as is practicable. Where employees in a
department so request, an overtime record shall be posted in the
department.
SECTION 4 - OVERTIME LUNCH ALLOWANCE
41 (a) An employee scheduled in with at least four (4) hours' notice or held
over from their regular shift, with or without notice after working
ten (10) continuous hours, will be furnished a lunch at the next lunch
period or a lunch allowance of $8.00 (at the employee's option). For
each successive four (4) hours worked thereafter, they will be given a
lunch allowance. The meal allowance schedule is as follows: $8.00;
effective 5/1/89. Where it is known an employee will work at least
ten (10) hours, the lunch may be eaten at the lunch period prior to
the time the lunch is actually earned.
The granting of a meal allowance, except as provided in paragraph (c)
below, will not negate the right of the employee to eat at, or as soon
after the job permits, a normal meal period (see paragraph (b) below)
when the meal period falls within the period of time for which the
lunch allowance is being given.
42 (b) Any employee on an emergency call-in (one less than four (4) hours'
notice) who works up to any of the following times shall be furnished
with a lunch as soon after such time as possible: 6:30 a.m., 11:00
a.m., 5:30 p.m., or 1:00 a.m.
43 An employee on an emergency call-in (one less than four (4) hours'
notice) before 8:00 p.m. that is required to work five (5) hours
between the 5:30 p.m. and 1:00 a.m. meal periods will receive a lunch
or lunch allowance at the COMPANY'S option. If the employee is to
continue working after the end of the second shift, the employee has
the option of a lunch or lunch allowance. This lunch or lunch
allowance is in addition to the 1:00 a.m. meal period.
44 (c) When an employee who has been working overtime, either as a result of
a holdover or because of a call-in, becomes entitled to a lunch within
the meaning of this article and the COMPANY decides at such time to
send the employee home because: (1) the employee has been relieved by
another employee; or (2) the employee is no longer needed at the
plant, the COMPANY shall have the option of furnishing such employee
the lunch or giving the employee a lunch allowance in lieu of the
lunch.
45 (d) Overtime lunches provided by the plant cafeteria will be ordered from
the Overtime Meal Menu-Cafeteria. Meals on off-hours or weekend when
plant cafeteria is closed will be ordered from a downtown restaurant
on the standard
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Overtime Meal Menu. The menu will be revised after consultation with
the UNION to reduce cost. It is the COMPANY'S intent to provide
wholesome and nutritionally balanced meals.
SECTION 5
46 Shift differential shall be added to the earnings of the employees required
to work during the hours indicated in the following schedule for each hour
worked during such periods:
47 (a) All employees in Seniority Groups 1, 2 and 4.
1. Shift Workers:
6:30 a.m. to 2:30 p.m. No differential
2:30 p.m. to 10:30 p.m 50c differential
10:30 p.m. to 6:30 a.m $1.00 differential
2. Day Workers
6:30 a.m. to 3:00 p.m. No differential
3:00 p.m. to 10:30 p.m. 50c differential
10:30 p.m. to 6:30 a.m. $1.00 differential
48 (b) All employees in the Maintenance Crafts Seniority and Seniority
Group 3.
1. Shift Workers:
7:00 a.m. to 3:00 p.m. No differential
3:00 p.m. to 11:00 p.m. 50c differential
11:00 p.m. to 7:00 a.m. $1.00 differential
2. Day Workers:
7:00 a.m. to 3:30 p.m. No differential
3:30 p.m. to 11:00 p.m. 50c differential
11:00 p.m. to 7:00 a.m. $1.00 differential
SECTION 6
49 Employees who are called out or scheduled out and report to work at an
assigned time outside their regularly scheduled shift will be paid a
minimum of four (4) hours pay at the appropriate overtime rate for the work
so performed. In the case of a call-in, the employee, after completing the
work for which the employee is called, will be released unless other
emergency work develops. Emergency work is defined for this purpose as
work which would require another call-in if the employee did not perform
it. If the employee fails to perform the other emergency work, the
employee will be paid only for the time worked. Should a scheduled in
require the employee to work into the employee's regularly scheduled shift,
the hours worked outside the regular shift will be paid at the applicable
overtime rate and the four (4) hour guarantee at 1 1/2 will not be paid
unless worked.
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SECTION 7
50 Employees who work less than two (2) hours past their regular shift shall
not be required to punch out until their ride home is available.
SECTION 8
51 When an employee has worked sixteen (16) continuous hours and up to or
within the employee's regular shift, the employee will be allowed to go
home and will be paid at the straight-time for the remaining hours of the
employee's regular shift.
ARTICLE 4
VACATION
52 (a) Based on a work week of five (5) working days or shifts, the vacation
allowance shall be ten (10) working days, in which case vacation
credits will be given at the rate of 5/6 of a day per month of
service. Fractional credits shall be figured to the nearest full day.
Vacation credits are not accumulative during the probationary period
specified in Article 5, Section 2, but after such period the new
employee's vacation credits shall be calculated from the date of
employment. Vacation credits accumulated after April 1st of the
current year shall not be taken until April 1st of the following year.
53 Each employee who completes five (5) or more years of continuous
service will be granted three (3) weeks vacation per year. Such
vacation may be taken at any time during the vacation year in which
the employee reaches the fifth (5th) year of continuous service.
After receiving a first vacation of three weeks, the employee will
accrue one and one-fourth (1 1/4) days vacation per month of service
or a maximum of fifteen (15) working days per year.
54 Each employee who completes ten (10) or more years of continuous
service will be granted four (4) weeks of vacation per year. Such
vacation may be taken at any time during the vacation year in which
the employee reaches the tenth (10th) year of continuous service.
After receiving a first vacation of four (4) weeks, the employee will
accrue one and two-thirds (1-2/3) days vacation per month of service
or a maximum of twenty (20) working days per year.
55 Each employee who completes twenty (20) or more years of continuous
service will be granted five (5) weeks vacation per year. Such
vacation may be taken at any time during the vacation year in which
the employee reaches the twentieth (20th) year of continuous service.
After receiving a first vacation of five weeks, the employee will
accrue two and one-twelfth (2 1/12) days vacation per month of service
or a maximum of twenty-five (25) working days per year.
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56 Each employee who completes thirty (30) or more years of continuous
service will be granted six (6) weeks of vacation per year. Such
vacation may be taken at any time during the vacation year in which
the employee reaches the thirtieth (30th) year of continuous service.
After receiving a first vacation of six (6) weeks, the employee will
accrue two and one-half (2 1/2) days vacation per month of service or
a maximum of thirty (30) working days per year.
57 (b) The vacation pay for employees entitled to vacation is computed on the
basis of rate of pay per hour at the time of vacation at straight-
time.
58 (c) Vacation pay may be drawn in advance any time within the week just
prior to said vacation if requested by the employee.
59 (d) Vacation period shall be from April 1 each year through March 31 of
the next year.
60 (e) The employee with the greatest bargaining unit seniority within the
group or craft, wherever possible, shall be allowed preference as to
time of vacation. In the various operating departments, vacation
preference will be granted on the basis of bargaining unit seniority
within the department. When an employee elects to split their
vacation, then they shall be allowed seniority preference only on one
(1) portion of the split vacation until all employees have exercised
their seniority preference.
61 (f) Prior to April 1st, employee shall designate their choices of dates
for their vacations and a vacation schedule for the year will be made
up in accordance with other provisions of this article.
62 An employee may place up to two (2) weeks (ten days) of their vacation
in a vacation bank prior to April 1 with such days to be taken at any
time during the vacation year when requested by the employee. Five
(5) bank days may taken with one (1) hour's notice. Twenty-two (22)
hours' notice for the other five (5) bank days will be required except
in cases of emergencies. All normal requests for bank days must be
made to the employee's supervisor. Emergency requests will be subject
to approval by the department superintendent or designee. Bank days
will be granted only when, in the judgment of the COMPANY, such days
do not conflict or impair plant operations. Bank days will be taken
in any combination of whole days without restriction by vacation
splits. All bank days must be taken during the vacation year and
shall not be cumulative. When, in the opinion of the COMPANY, it
appears that vacation bank days are accumulating in a group,
department or craft and will create a problem near the end of the
vacation year, employees will be requested to schedule their remaining
bank days in order not to conflict with or impair plant operations.
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63 Vacation may be split into as many periods as the employee has weeks
of vacation. In calculating vacation splits, the bank days will
constitute one split. Employees with ten (10) or more years of
service will be eligible for one (1) additional split. Vacation
schedules established April 1st will not be altered after this date to
give preference to the senior employee. Employees shall be permitted
to begin or end their vacations on a regularly scheduled day off.
64 (g) Vacations shall be given employees on such dates or as near as may be
practicable when, in the judgment of the COMPANY, such dates do not
conflict with or impair plant operations.
65 (h) Vacation during any vacation period must be taken during the vacation
period and shall not be cumulative.
1. For the purpose of taking extended vacation, employees with five
(5) or more years of service will be permitted, one (1) time
every five (5) years, to hold over one (1) week of vacation from
one (1) vacation period and take it during the next vacation
period in conjunction with the full vacation due that vacation
period. Employees desiring to exercise this option will so
advise the COMPANY during the vacation scheduling period in the
year in which they desire to hold over the one (1) week.
2. Employees with ten (10) to nineteen (19) years of service have
the option to holdover one (1) week of vacation from one (l)
vacation period and take it during the next vacation period.
Employees desiring to exercise this option must notify the
COMPANY by February 1st prior to the end of the vacation year in
which it was originally expected to be taken. This request does
not increase the number of bank days.
66 (i) An employee who is "Combo 80" (minimum age 55 with 80 points) or who
has at least 20 years of COMPANY service, may carry over from one
vacation period to the next up to two weeks of vacation in full week
increments. A maximum of six weeks may be carried over in this
manner.
67 (j) Any employee leaving the service of the COMPANY entering State or
Federal military service shall so notify the COMPANY, and shall be
paid the vacation credits earned up to the time of induction. Such
employee shall not be taken off the payroll until actually inducted in
military service, State or Federal.
68 (k) In calculating time for vacation credits, no deductions shall be made
for time lost due to sickness. No deductions shall be made for
approved absences totaling one (1) month or less in any vacation year.
Employees off on approved absences for more than one (1) month shall
be paid only earned vacation credits.
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69 (l) In case an employee is dismissed or leaves the COMPANY's service
voluntarily, they will receive vacation pay to the extent of the
credits accumulated at the time of their dismissal or voluntary
separation.
70 (m) In case an employee resigns without notice or is discharged for cause,
they will receive only pay for vacation earned during the previous
year but not taken. Such employee will not be eligible to receive
vacation accrued in the current vacation year up to the time of their
removal from the payroll.
71 (n) When a holiday is observed on an employee's scheduled vacation day,
they will have the option of an extra day vacation or an extra eight
(8) hours' pay at their regular straight-time rate.
72 (o) When an employee transfers from one craft or group to another, the
employee will carry with them their vacation as scheduled for that
year. The transfer of this vacation schedule will not interfere with
the rights of any other employee to their vacation as previously
scheduled.
ARTICLE 5
SENIORITY
SECTION 1 - DEFINITIONS
73 (a) By the term "seniority" is meant the status of the employee's length
of service as such.
74 (b) Four types of seniority shall be recognized:
1. GROUP SENIORITY. This shall consist of the seniority accumulated
by an employee working in any of the groups listed below.
2. DEPARTMENT SENIORITY. For matters directly affecting any of the
departments in Group 1, employees in their respective operating
departments shall be listed on the Seniority List by order of
Group 1 seniority within their respective department.
3. MAINTENANCE CRAFT SENIORITY. This shall consist of the seniority
accumulated by an employee in the particular maintenance craft in
which the employee is working.
4. BARGAINING UNIT SENIORITY. This shall consist of seniority
accumulated by an employee in any of the groups or crafts listed
below.
75 (c) For purposes of paragraph (b) above, group, department, and
maintenance craft seniority shall cover the following:
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1. GROUP SENIORITY
GROUP 1 - All hourly employees in the following operating
departments and any other which may be added and which are
designated as operating departments by the COMPANY, Departments
13/14/15/16, 513, 19/25/27/29, 44/50, 48/56, 51, 53, and Power.
GROUP 2 - All hourly employees of the Control Laboratory.
GROUP 3 - All hourly employees of the Storeroom.
GROUP 4 - All hourly employees of the Materials Handling
Department.
2. DEPARTMENT SENIORITY
For matters directly affecting departments in Group 1, employees
in the various operating departments shall be listed on
department seniority lists by Group 1 seniority within their
respective departments. Any reference to departmental seniority
in other sections of the contract will refer to the Group 1
seniority of employees within the department.
3. MAINTENANCE CRAFT SENIORITY - All hourly employees in each of the
maintenance crafts. The maintenance crafts shall include, but
shall not be limited to the following titles:
Pipefitters Ironworkers
Asbestos Workers Carpenters
Boilermakers Instrument Men
Painters Electrical Workers
Laborers Operating Engineers
Machinists Truck Drivers
SECTION 2 - COMMENCEMENT
76 All new employees shall be required to work a trial or probationary period
of one-hundred thirty-five (135) calendar days continuous service before
the seniority rules outlined herein shall apply to them, and after such
period, the new employee's seniority shall be retroactive to the date they
were employed.
SECTION 3 - SENIORITY LISTS
77 The COMPANY agrees to compile and furnish the UNION a seniority list
quarterly, showing the seniority of each employee in bargaining unit, and
the COMPANY further agrees that it will add names and the seniority status
of all employees to said list after they have completed their probationary
period and are considered permanent employees.
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SECTION 4 - WHEN SENIORITY DOES NOT APPLY OR IS NOT AFFECTED
78 (a) Seniority privileges shall not apply to probationary employees.
79 (b) The Seniority of an employee shall not be affected when they are
promoted to a supervisory classification unless they remain in that
capacity for a period in excess of ninety (90) calendar days after
which time they shall lose their seniority as a member of the
bargaining unit.
80 (c) The seniority of an employee shall not be affected when they are
promoted temporarily to a supervisory classification unless they
remain in that capacity for a period in excess of ninety (90) working
days in a calendar year, after which time they shall lose their
seniority as a member of the bargaining unit.
81 (d) Employees, other than temporary employees, who are called into active
military or naval service with any branch of the Federal government
shall not lose their seniority rights or their status with the
COMPANY. Such employees, however, shall file an application with the
COMPANY for reinstatement, within ninety (90) days after they have
received an Honorable Discharge from such service and if their
physical and mental condition is satisfactory, such employee shall be
reinstated to their former position or one to which their seniority
entitles them, unless the COMPANY's circumstances have so changed as
to make it impossible or unreasonable to do so.
SECTION 5 - WHEN GROUP, DEPARTMENT, CRAFT AND BARGAINING UNIT SENIORITY IS
LOST
All seniority shall be lost by an employee under the following
circumstances:
82 (a) When they are discharged by the COMPANY.
83 (b) When they quit the service of the COMPANY on their own volition.
84 (c) When they are laid off for a period exceeding thirty-six (36) months
without being recalled.
85 (d) When an employee overstays their leave of absence without notifying
the COMPANY and receiving an extension of time.
SECTION 6 - WHEN GROUP, DEPARTMENT, CRAFT, AND BARGAINING UNIT SENIORITY IS
NOT BROKEN
86 Seniority of the employee shall not be broken because of: (1) layoffs
(except as provided in Section 5 (c) of this article); (2) authorized
leaves of absence; (3) absences on account of sickness not exceeding a
period of twenty-four (24) months; (4) any cessation of work
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at the COMPANY's plant which is beyond the control of the employee not
exceeding a period of thirty-six (36) months.
SECTION 7 - CONSOLIDATION OF DEPARTMENTS
87 When two or more departments are consolidated, the employees of these
departments may claim seniority in the consolidated department, it being
understood, however, that no employee may claim a classification in the
consolidated department higher than the one occupied in the department in
which the employee was previously employed.
SECTION 8 - PROMOTIONS
88 When a new vacancy or new job occurs in a department or craft, such vacancy
or new job shall be filled from employees within that department or craft.
When skill and ability are approximately equal, then the senior qualified
employee shall fill the vacancy. If departmental seniority is equal, group
seniority shall govern.
89 It is understood and agreed, however, that where skill and ability are
questioned, a senior employee may request the opportunity to fill such
vacancy or new job, in which event, the COMPANY agrees to consult with the
UNION concerning the matter. If it is determined that the request has
merit, the employee will be given a trial period of thirty (30) working
days to prove to the satisfaction of the COMPANY their skill and ability in
such position. The above privilege shall not be granted to craft
apprentices.
SECTION 9 - JOB BIDDING PROCEDURE
90 When a permanent vacancy must be filled from outside the group or craft in
which the vacancy exists and no layoff exists for such group or craft, then
the job will be posted and filled in accordance with the following
procedure:
91 JOB POSTING - The job vacancy will be posted for seven (7) calendar days at
each of the main gates and on departmental bulletin boards within the
bargaining unit.
92 JOB BIDDING - Each employee who desires to bid for the posted job may do so
by going to the Employment Office and signing a job bidding form within the
seven (7) day period.
93 Any employee who knows that they will be absent from the plant (for reasons
such as vacation, jury duty, etc.) may submit to the Employment Office a
pre-bid indicating those jobs they desire should a vacancy be posted during
their absence. The employee submitting a pre-bid will be considered for a
vacancy only if their pre-bid is received prior to the seven (7) day period
outlined in the job vacancy announcement. Each pre-bid shall be effective
only for the duration of the individual's specific absence.
94 SELECTION - Posted vacancies will be filled by the qualified bidder with
the greatest bargaining unit seniority. Successful bidders will be
transferred to their new job within
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120 calendar days following the date of notification of successful bid
unless the COMPANY demonstrates, subject to the grievance and arbitration
provisions of the contract, that to move said successful bidder would
create a situation where the employee's job cannot be manned in a safe
manner.
95 The successful bidder will enter the new job classification at the
appropriate rate as indicated on the job vacancy announcement.
96 The provisions of Section 11 of this Article will apply to employees who
are transferred from one group or craft to another in accordance with the
job bidding procedure.
97 BIDDING RULES - Because of the extended period of training for apprentice
plans and the expense involved in such extended training, no employee shall
be allowed to transfer to a bona fide apprentice opening if the employee
could not, prior to the eligibility for early retirement, complete a number
of years that is equal to twice the number of years required for apprentice
training. This rule will not apply to members of the class who are
presently in a classification with a top rate lower than the top rate of
the apprentice crafts or groups. Anyone hired into an apprentice
classification must remain, after topping out, in that classification for a
period equal to the training period before bidding to another
classification.
98 If the COMPANY determines that the senior employee bidding on a posted job
is not qualified, the employee may file a grievance contesting such
determination at Step 3 of the grievance procedure, which may, if not
satisfactorily resolved, be submitted to arbitration in accordance with the
arbitration procedure as outlined in Article 31. Nothing contained herein
shall interfere with the filling of the vacancy with another employee or
with a new hire, pending settlement of a grievance.
99 Employees whose bids have been denied on the basis of qualifications will
not be considered again for transfer to the same group or craft until they
have shown proof that their qualifications now fit the requirements of the
job.
100 A successful bidder will not be eligible for another transfer until they
have reached the top rate of their classification and served an additional
period of time equal to the time required to reach the top rate.
101 A successful bidder who refuses to accept a tendered transfer will not be
reconsidered for any other transfer for a period of one (1) year after date
of refusal.
102 An employee who has been returned to their last previous group or craft for
inability to perform work of the new classification as provided in Section
11, Article 5 of the Articles of Agreement will not be considered for any
further transfer for a period of one (1) year from the date of return to
their last previous group or craft.
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103 An employee shall be limited to one transfer to a group or craft having a
lower top rate or one transfer to group or craft having an equal top rate.
Subsequent lateral or downward transfer to another group or craft shall be
approved only when in the best interest of the employee and by mutual
agreement of COMPANY and UNION.
104 NO QUALIFIED BIDDERS - If none of the bidders are qualified for a posted
job, or if there are no bidders, the COMPANY shall have the right to fill
the job as it sees fit.
SECTION 10 - TRANSFERS
105 When surplus Group 1 employees exist in one operating department and
openings exist in another, transfers from the surplus department will be on
a volunteer-by-seniority basis. Those employees with the most Group 1
seniority in the department being destaffed who wish to transfer out of the
department to another operating department will be allowed to volunteer.
If not enough employees volunteer to transfer, then the necessary number
will be destaffed by moving the junior employee based on Group 1 seniority
within the department being destaffed. In either case, the employee may be
recalled to their original departments at the COMPANY's discretion for up
to one year from the date of transfer. If employees are to recalled to
their original departments, those transferred involuntarily will be
recalled first, according to Group 1 seniority; those who transferred
voluntarily will be recalled in inverse order of Group 1 seniority.
106 If an operating unit is shut down or temporarily under reduced operation
resulting in an excess of employees in any group, the UNION and the COMPANY
will meet and discuss a plan whereby these employees may be put to work so
as to prevent layoff. Employees in these groups may be assigned as helpers
to maintenance craftsmen, helpers in other groups, or as laborers.
107 Within Group 1, only those employees from the affected operating unit will
be so re-assigned. In addition: (1) there shall be no loss of overtime
incurred by the maintenance employees or other groups because of such
assignment; (2) no operator will be assigned to help maintenance within
their own operating department during a routine shutdown for repair unless
they are currently assigned to maintenance as a result of a previous
assignment; (3) no assignment to a group or craft shall cause the layoff or
prevent the recall of an employee within that group or craft; (4) no such
assignment shall be for less than five (5) days or more than eighty-nine
(89) days unless the UNION and the COMPANY mutually agree to extend the
time period.
108 No craftsman will perform the work of another craft except when a surplus
exists in a particular craft. When a surplus in a craft or crafts exists,
the COMPANY and UNION will meet, or otherwise discuss, a plan whereby the
surplus craftsmen may be put to work so as to minimize the use of
contractors, and/or prevent a layoff.
109 Surplus craftsmen will be assigned to other crafts and may work up to the
level of their individual skill and ability, under the direction of a
journeyman in the craft to which they
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have been assigned. Assignments will be filled by volunteers or by
conscript of the less senior craftsmen. Individuals so assigned may choose
layoff from the plant rather than reassignment. Assignments will not affect
vacation, benefits, or craft seniority position; or recall rights of laid
off employees if work is expected to last more than ninety (90) days. No
such assignment shall be for less than five (5) days, unless the craftsman
is unexpectedly needed back in his regular craft. Assignments longer than
eighty-nine (89) days may be made if the COMPANY and UNION agree.
SECTION 11 - LAYOFFS
110 Layoffs in all groups and maintenance craft departments shall be in inverse
order of group or craft seniority, depending on the need for employees in
that particular group or craft, it being understood that in any group or
craft the top classification will not be filled by an employee not having
both skill and ability and group or craft seniority.
111 An employee transferred from one group or craft shall retain seniority in
their former group or craft but will not be allowed to exercise their
seniority, nor shall the COMPANY be allowed to transfer the employee back
to their old group or craft unless the employee is being laid off for
reduction in force or because their work performance has been such that the
employee would be laid off for inability to perform the work.
112 Employees being laid off for reduction in force may exercise the retained
seniority in their old group or craft to forestall layoff.
113 Except for Chief or Leadman classifications, an employee exercising
retained seniority to return to their former group or craft after transfer
shall return to the same job classification they formerly occupied.
114 An employee being laid off for inability to perform the work prior to
reaching top pay in the classification in the group or craft to which they
were transferred will be considered to have accumulated seniority in their
old group or craft up to the time they were declared unable to perform such
work and will be allowed to exercise that seniority in their old group or
craft to forestall layoff. An employee transferring to a one rate job will
be given a trial period of ninety (90) days and, if unable to perform the
work, will be considered to have accrued seniority in their old group or
craft during that period. They will be allowed to exercise such seniority
in order to forestall layoff.
115 Discharge for cause or termination for any reason other than those referred
to above will not be reason for the employee to exercise their seniority
rights in the old group or craft.
SECTION 12 - REHIRING
116 Rehiring shall be in inverse order of layoffs. Employees being recalled
shall be notified by registered letter, return receipt requested, mailed to
the last address on record in the COMPANY's files. If the COMPANY does not
receive a reply to said letter from the
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employee, within ten (10) days from the date of its delivery as shown on
the return receipt, stating that they will return to work within ten (10)
days from said delivery date; or, if they fail to so return to work
although they have sent such a reply, the next eligible employee will be
placed in the vacancy.
117 In special cases, an employee, when replying within ten (10) days to the
COMPANY's notice requesting them to return to work, may be given an
extension of time by the COMPANY beyond the ten (10) day limit specified
above. Failure to so reply or failure to so report to work will abrogate
all rehiring and seniority rights on the part of said employee. In case of
an emergency, the COMPANY may temporarily fill any vacancy without waiting
for any period of time to expire. After the emergency has expired, such
vacancies will be filled according to the regular procedure.
118 Where the period of recall is in the best judgment of the COMPANY to be
less than ninety (90) calendar days, the recalled employees may decline
recall and not lose subsequent recall rights.
SECTION 13 - GRIEVANCES
119 In all cases where the UNION or the employee claims that the principle of
seniority has been violated, such grievance must be taken up within ten
(10) days of the alleged violation and shall be handled according to the
procedure set out in Article 30 hereof. In the event the employee grieved
is not actively working on the day of such violation, the period of
limitation shall begin on the day the employee returns to work.
ARTICLE 6
WORK OUTSIDE OF REGULAR CLASSIFICATION
120 Employees who, at the request of the COMPANY, are temporarily required to
do the work of classifications other than their own shall not suffer
reduction in rate of pay because of such transfer; however, employees who,
at the request of the COMPANY, are temporarily required to do work which
pays a higher top rate will receive, for their full shift, pay based on the
new top rate in the same proportion that their regular pay bears to the top
rate of their regular job if they work two (2) or more hours on such
advance status.
121 An employee working overtime in a higher classification will receive for
all overtime hours worked pay based on the new top rate in the same
proportion that their regular pay bears to the top rate of their regular
job if they work two (2) or more hours on such advance status.
122 When an employee has worked in an upgraded position on a daily basis
continuously for fifteen (15) work days or longer, they will receive pay
and benefits based on the upgrade rate during the continuous period of
service in the higher paying position in excess of fifteen (15) days. In
computing the fifteen (15) day period of time required, absence
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because of vacation, excused absence, sickness, jury duty, or funeral leave
shall not break continuous service but shall not be accumulated as time
worked in the upgraded position nor shall the employee receive pay and/or
benefits of the higher rate during the period of absence.
ARTICLE 7
SUPERVISORS DOING HOURLY WORK
123 Anyone employed by the COMPANY in the capacity of a foreman or supervisor
will be permitted to perform work normally performed by the hourly
employees in the plant for the following reasons only:
124 (a) When they are instructing or training employees.
125 (b) When difficulties arise in a department and it is necessary for the
supervisor to act for the safety of equipment and personnel.
126 (c) When supervisory or technical personnel are studying or testing
operations and equipment.
127 (d) When training technical personnel.
128 (e) When starting new or revised process and equipment.
ARTICLE 8
WORK CLASSIFICATIONS - TEMPORARY VACANCIES
129 Wage rates for all classifications of work within the bargaining unit shall
be mutually agreed to between the COMPANY and the UNION, set forth
separately, and attached to this Agreement and marked "Exhibit B".
130 In the event there is a shortage of personnel on any one shift in the
operating division due to temporary absence, and the vacancy is of a higher
classification than that of part of the employees present, the vacancy
shall be filled by temporarily reclassifying an employee on the same shift
to the higher classification or, if this is not feasible, by holding over
or obtaining another employee of the same classification in the same
department from another shift.
131 If it becomes necessary to fill a temporary vacancy in the lowest
classification in the operating division, the COMPANY may require an
employee who has least department seniority in a department to temporarily
transfer to the vacancy. This Article shall not prohibit the COMPANY,
however, from temporarily transferring an employee who is not junior in
department seniority if said employee is agreeable to the temporary
transfer.
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ARTICLE 9
STAFFING OF NEW UNITS
132 The COMPANY agrees to consult with the UNION in connection with the
staffing of new units or consolidation of departments in the operating
section.
ARTICLE 10
JURISDICTION OF WORK
133 The COMPANY and the UNION recognize that work coming within the
jurisdiction of a craft or a group shall be performed by members of said
craft or group only, with the exception of running repairs which may be
performed by operating personnel. Running repairs are generally defined as
minor repairs or adjustments, requiring no new parts or material, which can
be done while a unit, or part thereof, remains in operation.
134 In order to assure increased efficiency the UNION and COMPANY agree that
Operators and Pumper Gaugers may be assigned to: (a) drive a pickup, or
similar type vehicle, for the purpose of transporting their own manpower,
materials and/or laboratory samples; (b) remove and reinstall obstructions
such as guards, grating, floor plate and handrails, when necessary to
execute their primary task; (c) utilize their special knowledge of contents
and flows in installing signs to indicate content and flow direction of
water, steam, product, etc.; (d) connect and disconnect tank cars and tank
trucks as needed for the performance of their groups' work; (e) connect and
disconnect equipment if hook-ups are available for the purposes of chemical
cleaning, cleaning, vacuum, etc.; (f) remove and install manways, covers,
inspection ports required for the inspection, decontamination and cleaning
unless pneumatic tools (except 1/2 inch drive impact wrench for drums or
solid or slurry handling equipment) and heavy equipment are required; (g)
Operators may operate forklift trucks after proper training has taken place
in the performance of their primary task; (h) decontaminate, clean, flush
and dry containers such as tanks and tank cars but are not expected to
enter vessels to accomplish these tasks; (i) hook-up, disconnect and
relocate cylinders and loading/unloading hoses for tank cars and tank
trucks. The COMPANY and UNION agree it is not efficient to perform the
assignments as listed in this paragraph if said assignment would require
(1) the call-out of an Operator or Pumper Gauger for the purpose to perform
said task instead of a call-out of a maintenance employee, and (2) the
performance of a task by operations or materials handling employees which
has historically and normally been performed by maintenance utilizing power
tools.
135 In cases of emergency endangering life or property, any employee may
perform work outside of their classification while such an emergency
exists.
136 Effective 7-1-96, Pumper Gaugers will work together with barge and ship
personnel to hook-up and disconnect barges and ships.
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ARTICLE 11
LEADMEN
137 The classification of leadmen in any of the mechanical crafts in the
Maintenance Department shall be filled by appointment by the Maintenance
Superintendent and subject to the provisions of Section 8, Article 5.
138 When four (4) or more employees of a craft are employed on any shift, a
leadman shall be appointed from that craft. A leadman may have up to and
including ten (10) employees in their group.
139 Additional leadmen shall be appointed from any craft having more than ten
(10) employees employed in the ratio of at least one (1) to each additional
ten (10) employees, or fraction thereof, employed. This shall apply by
shift.
140 In crafts having less than four (4) employees employed, they shall work
under the direction of the Superintendent of Maintenance or designee.
141 A leadman shall perform the work of the craft as long as the number of
employees working under their direction does not exceed five (5).
142 The leadman shall pass onto the employees in their group the work
instructions received from supervision. It shall be the leadman's duty to
see that the work of the group is of workmanlike quality and that the work
progresses at a satisfactory rate and in a safe and neat manner.
ARTICLE 12
STEWARDS
143 The UNION may designate for each Department in Operations and each craft in
Maintenance, a shop steward who shall call to the attention of the foreman
or supervisor any questions of working conditions that may arise in their
department or craft.
144 Discussion between the Shop Steward and Foreman and the Supervisor shall be
at such time and place as not to interfere with work in the department or
craft.
145 If the Shop Steward and Foreman or Supervisor are unable to agree, the
matter will be referred to the Superintendent involved in accordance with
procedure for handling grievances as set out in Article 30, it being agreed
that the Shop Steward shall suffer no loss in pay for acting in that
capacity.
146 Any employee called in for discussion which might result in disciplinary
action or any entry to be made in their personnel file may be permitted to
have a steward present.
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ARTICLE 13
CONTRACT WORK - CONSTRUCTION AND MAINTENANCE
147 At no time shall maintenance employees do construction work not completed
on any project originated by a contractor. The maintenance employees may
be permitted to work on construction work within the boundary of the plant
operations provided that no construction be done beyond the capacity of the
equipment and personnel available at the plant.
148 The COMPANY shall, during the life of this Agreement, other things being
equal, award contracts for the execution of construction work in this plant
to contractors who pay the prevailing wage scale in the area and guarantee
to their employees the prevailing working conditions.
149 The UNION will be informed of any maintenance work that is to be
contracted out when maintenance employees are on the layoff list.
150 The COMPANY agrees to review annually with the UNION information showing by
crafts the work contracted out and the number of employees employed to
perform the work.
151 The COMPANY may contract out any maintenance, repair and/or renovation work
provided permanent employees covered hereby are not terminated or laid off
temporarily as a direct or indirect result of such work being contracted
out; nor shall any work contracted prevent the recall of employees on the
recall list.
ARTICLE 14
PAY DAY
152 It is further agreed between the parties to this Agreement that pay checks
shall be available to all employees weekly not later than 3:00 p.m.,
Thursday, the day designated as pay day. Not more than four (4) days' pay
shall be withheld in any period.
153 Weekly paychecks may be directly deposited with the Texas Star Federal
Credit Union if the individual bargaining unit employees sign a statement
so indicating and holding the COMPANY harmless if the Credit Union has not
credited their account by 3:00 p.m., Thursday.
ARTICLE 15
PAYROLL DISPUTES
154 The COMPANY further agrees that if any questions arise concerning time
credited or pay received by an employee, the time cards and other pertinent
records will be made available for examination to the employee and the shop
steward. In the event the difficulty cannot
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be resolved at that time, then the same shall be considered a grievance and
handled according to the regular grievance procedure.
ARTICLE 16
PHYSICAL EXAMINATIONS
155 An applicant for employment, before being hired, must meet certain minimum
standards of health and physical fitness. The physical examination will be
given by a licensed physician employed by the COMPANY.
156 Periodic examinations of employees will be carried on with the principal
idea of helping employees improve their own health condition and to enable
COMPANY to guard the health of its employees.
157 Employees who become physically unfit, from other than occupational
reasons, to do the work of their assigned classification, may be assigned
other work until able, in the opinion of the doctor retained by the
COMPANY, to resume the work of their designated classification.
ARTICLE 17
DISCRIMINATIONS
158 No members of a signatory union shall be discriminated against, discharged
or harassed on account of their activities or interest in their UNION while
carrying out in good faith the terms of this Agreement.
159 Charges of such discriminations, discharges or harassments, if any, shall
be handled according to the regular grievance procedure.
160 Whenever a supervisory employee places charges or letters of reprimand on
an employee's record, a copy of such charges or letters of reprimand must
be furnished to such employee. Any charges or letters of reprimand made
against an employee may be referred by the employee to the grievance
procedure for handling if the employee feels the charges or letters of
reprimand are unfounded or not justified.
161 If an employee has gone a period of twenty-four (24) months without
receiving a letter of warning or reprimand, no letters issued to the
employee previously (except those which involved disciplinary suspension)
will be used for the purpose of further disciplinary action.
ARTICLE 18
UNION REPRESENTATIVES
162 When in the opinion of a Steward or Plant Committeeman, or the COMPANY, the
counsel of a business representative of the Texas City, Texas Metal Trades
Council, or
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any of the organizations signatory to this Agreement, is advisable or
necessary to aid in the resolving of a grievance that has arisen, such
business representative shall be permitted to enter the premises of the
COMPANY, subject to the regulations governing visitors to this plant.
ARTICLE 19
JURISDICTIONAL DISPUTES
163 The UNION agrees that in the event a jurisdictional dispute arises between
any of the unions signatory hereto, crafts or groups with reference to
jurisdiction over work to be performed at this plant by employees of the
COMPANY, the signatory unions involved in such dispute shall fully inform
the COMPANY regarding their respective positions in the matter and meet
with the COMPANY to discuss and attempt to settle the dispute, should the
COMPANY so request.
164 If, after this discussion, the matter cannot be settled between the COMPANY
and the signatory unions, it shall be settled by the UNION in accordance
with its established procedure governing the settlement of jurisdictional
disputes.
165 The UNION further agrees that such settlement shall be made without
permitting the dispute to interfere in any way with the commencement,
progress or prosecution of the work and without increasing the cost of the
work to the COMPANY by reason of payment of wages to any employee for work
not performed.
166 In the event the settlement arrived at by the UNION does not meet the above
conditions as to the work and cost thereof, then it is agreed that the
matter may again be referred to the UNION for further consideration.
ARTICLE 20
JURY SERVICE
167 Employees kept away from work because of reporting for jury service or for
service as a witness under court subpoena will be paid their regular
straight-time hourly rate, exclusive of any overtime or other premium pay,
subject to the following provisions:
SECTION 1 - MORNING COURT APPEARANCE
168 (a) Employees working days are not required to report back for work if
dismissed from court duty at or after 10:00 a.m. Employees dismissed
before 10:00 a.m. are required to report for work and complete the
work day.
169 (b) Employees on the 10:30 p.m. to 6:30 a.m. (or 11:00 p.m. to 7:00 a.m.)
shift shall not be required to work the shift on the calendar day of
their first day in court, nor any other 10:30 p.m. to 6:30 a.m. (11:00
p.m. to 7:00 a.m.) shift falling on a day they are scheduled to be in
court.
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170 Employees scheduled to work the 2:30 p.m. to 10:30 p.m. or 3:00 p.m.
to 11:00 p.m. shift are not required to report for their shift if they
are released from court after 10:00 a.m.
171 Employees scheduled to work the 10:30 p.m. to 6:30 a.m. (or 11:00 p.m.
to 7:00 a.m.) shifts are not required to report for work on these
shifts if dismissed from court duty at or after 11:00 a.m.. If
released before noon, they are expected to work their scheduled
shifts.
SECTION 2 - AFTERNOON COURT APPEARANCE
172 (a) Employees working days are required to report for work at the
beginning of their shift and will be released a reasonable period of
time prior to their court appearance.
173 (b) Employees scheduled to work the 2:30 p.m. to 10:30 p.m. (or 3:00 p.m.
to 11:00 p.m.) shift are not required to report for work prior to an
appearance in court which begins after the start of their scheduled
shift and before 6:30 p.m. Employees scheduled to work the 2:30 to
10:30 p.m. (or 3:00 p.m. to 11:00 p.m.) shift who serve three (3) or
more hours in court or who are dismissed from court at or after 6:30
p.m. are not required to work the remainder of their scheduled shift
on that payroll day.
174 (c) Employees scheduled to work the 10:30 p.m. to 6:30 a.m. (or 11:00 p.m
to 7:00 a.m.) shift whose court appearance begins before 3:00 p.m. are
not required to work their graveyard shift on that calendar day.
Employees scheduled to work the 10:30 p.m. to 6:30 a.m. (or 11:00 p.m.
to 7:00 a.m.) shift are not required to work the shift falling on the
payroll day of an appearance in court if released from court at or
after 3:00 p.m.
SECTION 3
175 Employees are required to furnish proof from the court of such service,
showing the date and time served and amount paid for their services.
ARTICLE 21
ELECTION DAY REGULATIONS
176 It is further agreed that arrangements shall be made so that all employees
working days or day shifts who are requested to work overtime, shall have
sufficient time off to vote on election days covering City, State, and
National elections, and such time off shall not be deducted from the
employee's wage.
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ARTICLE 22
REPLACEMENT OF CLOTHING
177 Any employee required to perform work which results in the damage to
clothes or shoes by chemical or fire action, to such an extent they are no
longer suitable for wear, shall be furnished with suitable clothing or be
given a cash replacement allowance; reimbursement is to be at replacement
cost less depreciation for normal wear. Replacement cost shall mean the
cost to replace the clothing at the time it is ruined.
178 The COMPANY shall furnish coveralls to the Painters when required to
sandblast or use the spray machine and to the Insulators when they are
using spray guns for coating. All such clothing shall be returned, as
directed by the COMPANY, at the completion of an assignment or shift,
whichever is applicable.
179 All employees required to perform work which results in damage to clothes
and shoes by chemical or fire action will be furnished proper protective
clothing and equipment which is appropriate under the conditions
prevailing. All such clothing and equipment shall be returned, as directed
by the COMPANY, at the completion of an assignment or shift, whichever is
applicable.
180 All hourly employees will be issued appropriate clothing (Fire Retardant
Clothing (FRC) if required, cotton overalls, or lab coats). FRC will be
made available for all employees working in areas where it is required.
Cotton coveralls will be made available to employees working in areas where
FRC is not required; however, employees not required to wear FRC may choose
to wear their own clothes instead. Stores employees will work with their
supervision to determine the appropriate method of issuing and distributing
Company issued clothing.
ARTICLE 23
LAYOFF NOTICE - SEPARATION ALLOWANCE
181 Whenever it is necessary to lay off an employee or employees because of
lack of work due to curtailment of production, process changes, changing
requirements of craft work, or any other reason beyond control of the
COMPANY, such employee or employees shall be given ten (10) working days'
notice of such layoff. The COMPANY shall have the option of paying for
their time in lieu of notice.
182 In the event of a hurricane evacuation, acts of God or other situations
beyond the reasonable and direct control of the COMPANY, the notice
provisions of Article 23 will not apply.
183 If it is necessary to lay off employees because of any labor dispute
preventing normal operations of the plant, three (3) calendar days' notice
will be given. The COMPANY shall have the option of paying for this time
in lieu of notice.
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184 Hourly paid employees who are laid off as a result of economic curtailment,
will be eligible for a separation allowance in keeping with the following
provisions:
SECTION 1 - MODE OF COMPENSATION
185 The Separation Allowance is computed on the basis of years of continuous
service with the COMPANY. Continuous service for the purpose of this
agreement is defined as time spent working for the COMPANY computed from
the employee's last date of hire. The maximum allowance for any given
period of layoff shall be as follows:
ALLOWANCE SCHEDULE
YEARS OF CONTINUOUS SERVICE MAXIMUM ALLOWANCE
Less than 1 $ 500.00
1 through 4 1,000.00
5 through 9 2,000.00
10 through 14 3,000.00
15 through 19 4,000.00
20 and over 5,000.00
SECTION 2 - METHOD OF PAYMENT
186 The Separation Allowance will be paid in weekly installments of $300 until
the maximum allowance, as specified above, is paid providing the employee
continues to meet the eligibility requirements contained in the Eligibility
Section (3) of this Article.
187 Should an employee be recalled to active employment before exhausting this
maximum allowance, payments will cease as of the effective date of recall.
Any remaining balance will be available for payment in the event the
employee is subsequently laid off before meeting the full reinstatement
requirement specified below. However, in the event the employee meets the
requirements for full allowance reinstatement, the payments will not exceed
those specified in (1) above.
188 Any employee who is recalled to regular active employment after exhausting
the maximum allowance payments will be ineligible for further separation
payments until they have completed 78 continuous weeks of active
employment, at which time they will again become eligible for full benefits
under (1) above.
189 All monies paid as Separation Allowance will be subject to applicable taxes
and other required withholdings.
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SECTION 3 - ELIGIBILITY
190 Separation Allowance is not payable to any employee who:
191 (a) Resigns or abandons employment for any reason.
192 (b) Becomes deceased.
193 (c) Elects normal or early retirement.
194 (d) Is discharged.
195 (e) Accepts a position in Sterling which is not within this bargaining
unit.
196 (f) Is receiving either occupational or non-occupational disability
benefits until said benefits are exhausted, and only then, provided
the employee is still on layoff status.
197 (g) Receives total and permanent disability benefits.
198 (h) Is recalled from layoff.
199 The above Separation Allowance shall not be paid in the event that the lack
of work is due to a labor dispute or to fire, flood, water, or power
failure, or other act of God.
ARTICLE 24
LEAVE OF ABSENCE
200 The COMPANY shall grant leave of absence, up to ninety (90) days length,
for personal reasons upon request and explanation by the employee, provided
that, in the opinion of the COMPANY, the reason for the request is worthy
and such leave shall not be used, except with the permission of the
COMPANY, for the purpose of accepting other employment and such leave shall
not affect the seniority status of said employee and/or employees.
201 The COMPANY shall, upon at least ten (10) days notice given by the UNION,
grant leaves of absence not to exceed thirty (30) days, to employees to
attend UNION conventions or meetings, provided not more than a total of
three (3) employees from the plant or one (1) employee from a department
shall be away for that purpose at any one time.
202 The COMPANY shall, upon at least two (2) weeks notice given by the UNION,
grant leaves of absence not to exceed one (1) year in length to a maximum
of two (2) employees during any one period for purposes of accepting
employment with a union signatory to
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this Agreement. Employees on such leaves of absence will maintain their
seniority status while on leave providing they maintain continuous service
with said union. Such leaves of absence will be automatically extended on a
year-by-year basis for the duration of the Agreement, upon receipt by the
COMPANY, of a written request from the UNION at least two (2) weeks prior
to the expiration of each one (1) year period. Employees desiring to return
from such leaves will give the COMPANY at least two (2) weeks notice in
writing, and upon return will be required to take a pre-employment physical
as if they were new employees.
203 A pregnant employee who is not disabled, as defined in Article 33 of this
Agreement, may request leave of absence without pay. Said request may
cover periods prior to and/or following disability for pregnancy. These
requests will normally be granted for periods not exceeding three (3)
months after the term of pregnancy.
204 Employees elected or appointed to public office will be allowed an excused
absence, without pay, providing their absences do not create a cost to the
Company or impair normal operations.
ARTICLE 25
SANITATION AND SAFETY
SECTION 1
205 The COMPANY further agrees that it will furnish and maintain satisfactory
toilet facilities, wash bowls, lockers, emergency showers, and satisfactory
drinking fountains with running ice water in convenient places.
SECTION 2
206 All toilet and wash rooms shall be kept in clean and sanitary condition,
properly heated and ventilated, and suitable quarters with heat provided
for all employees to change clothes. There shall be facilities for drying
clothes. All staging, walks, ladders, and safety appliances shall be
constructed by competent mechanics and kept in a safe manner. Proper
lighting and ventilating shall be provided for all enclosed working places.
The employer shall furnish suitable guards around welders for the
protection of the employees' eyes. Prompt ambulance service and first aid
to injured employees shall be provided for each shift.
SECTION 3
207 The Plant Safety Engineer and the stewards in the various departments and
crafts shall cooperate in the enforcement of all rules and practices in the
furtherance of safe working conditions in this plant.
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208 The present practice of holding safety meetings, which every employee in
the plant may attend at intervals, will be continued as a means of
promoting safety and educating the employees in safe practices.
SECTION 4
209 Inspection of any job for safety purpose may be secured upon the request of
any employee assigned to that job; such inspection to be made by the Plant
Safety Engineer or Night Superintendent with the employee involved. If the
result of this inspection indicates an unsafe condition, the job will be
postponed until proper steps have been taken to remedy the condition
unless, in the opinion of the supervisor, postponing the job creates a
greater hazard.
SECTION 5
210 When an employee accompanies an OSHA representative, while on COMPANY time
during an in-plant investigation, said employee shall not suffer any loss
of pay.
SECTION 6
211 The COMPANY agrees to pay the initial cost of one pair of prescription
safety glasses purchased through the Safety Department. Such glasses may
be tinted or clear. Where the employee's prescription is from a licensed
physician and states that the employee's eye condition makes it mandatory
that they wear dark glasses during daylight hours, the COMPANY will agree
to purchase for the employee an additional pair of shaded glasses. It is
also understood that the COMPANY will pay the cost of new safety glasses
when an employee's prescription is changed.
212 The Company will pay 100% for the initial eye exam from an approved
provider. The Company will pay 75% for subsequent eye exams in two (2)
year intervals from an approved provider.
213 Additionally, up to two (2) pair of non-prescription safety sunglasses will
be provided each year from an approved list.
214 The Company payment toward frames for prescription safety glasses will be
$25.00 effective May 1, 1996.
SECTION 7
215 The COMPANY will make available to each employee represented by the Texas
City, Texas Metal Trades Council, for their own use, two (2) pairs of
approved chemical resistant safety shoes per contract year. The COMPANY
will pay eighty-five percent (85%) of the cost of the approved shoes.
Where the employee, in lieu of the above, wishes to purchase, for their own
use, other chemical resistant safety shoes, they may do
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so. However, the employee will pay the additional cost over eighty-five
percent (85%) of the highest priced shoe on the approved list. Annually,
the Business Manager of the Texas City, Texas Metal Trades Council and
Company management will each appoint members to a committee which will meet
to review the appropriateness of the approved shoe list.
SECTION 8
216 An employee required to perform work in a slicker suit or fresh air mask
will, when necessary, be given an opportunity to rest depending on the
intensity of the work and the weather and the temperature conditions at the
time.
ARTICLE 26
BULLETIN BOARDS
217 It is further agreed that the COMPANY shall provide bulletin boards in
locations to be agreed upon between the Plant/Union Committee and the
COMPANY for the posting of UNION notices. The board shall be covered with
glass and under lock, the key of which shall remain in the possession of a
UNION representative. These boards shall be used for the display of the
following notices: UNION meetings, UNION appointments, UNION elections, and
UNION social affairs. Any and all other notices to be posted on said
boards must first have the approval of the Plant Manager. It is agreed
that no UNION matter of any kind shall be posted in and about the plant
except on said boards.
ARTICLE 27
COMPANY RULES
218 It is further agreed by both parties to this Agreement that fair treatment,
good service, and due diligence in observance of the rules as promulgated
by the COMPANY are essential to the maintenance of satisfactory working
conditions and wages described in this Agreement and for efficient
production provided that such rules as may be promulgated by the COMPANY
shall not in any way conflict with the terms of this Agreement.
ARTICLE 28
FUNERAL LEAVE
219 Employees with ninety (90) days of continuous service will be given a three
(3) day leave of absence to attend the funeral of their spouse, child,
parent, brother, sister, parent-in-law, brother-in-law, sister-in-law, son-
in-law, daughter-in-law, grandparent, grandchild, stepchild, stepmother,
stepfather, or spouse's grandparent. These shall be three (3) consecutive
calendar days, one (1) of which must be the day of the funeral. Employees
will be paid for any such days lost from work at their regular straight-
time hourly rate, exclusive of any overtime or other premium pay, provided
such are their regularly-scheduled work days. No employee shall receive
funeral leave pay for any day that is not a regularly-scheduled work day
nor for any day on which they are absent from work or on leave for any
other purpose.
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220 Upon the death of a relative of an employee or employee's spouse where said
relative has been a long term resident of the employee's household
immediately prior to death and/or confinement to a health facility, funeral
leave provisions shall apply the same as that which applies to the death of
a person defined above within the immediate family.
221 Upon return to work, employees shall complete and sign a COMPANY "Funeral
Leave Pay" form and submit satisfactory proof of relationship to the
deceased and of actual attendance at the funeral.
222 An employee will be excused without the loss of straight time earnings to
serve as an active pallbearer on the day of the funeral of an employee or
retired employee of the Texas City Plant. The request for the employee to
serve must be from a member of the deceased employee's immediate family and
no more than six (6) employees may be excused for such pallbearer service
at any one funeral. Where the employee or employees to be excused would
result in the impairment of plant operations, the COMPANY reserves the
right to limit the number of employees absent.
ARTICLE 29
STRIKES AND LOCKOUTS
223 All members of the UNION agree to conform to the rules and regulations of
the COMPANY insofar as they do not violate the conditions of these Articles
of Agreement. No member of the UNION employed by the COMPANY shall be
discriminated against for upholding UNION principles not inconsistent with
the terms of this Agreement. The COMPANY and the UNION desire that
production shall continue without interruptions. The COMPANY and the UNION
further agree that good employer/employee relations cannot exist unless
there is a serious effort on the part of both the COMPANY and the UNION to
settle in a peaceable manner all disputes that may arise. Therefore, as a
means of promoting continued production and employment and improved
employer/employee relationships, the COMPANY and the UNION agree that the
grievance procedure and arbitration procedure provided in this Contract
shall be used to peaceably settle without strike disputes that are covered
by such grievance and arbitration procedure.
224 It is agreed that there will be no lockout by the COMPANY or strike or work
stoppage by the UNION.
225 In the event of such strike or work stoppage, there shall be no liability
on the part of the UNION, its officers or agents, if such strike or work
stoppage was not authorized, encouraged or condoned by the UNION.
226 The UNION agrees to cooperate with the COMPANY and use means at its
disposal to settle such strike or work stoppage and request such employees
to return to work.
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227 This provision shall no longer be binding on the COMPANY or the UNION if
either party has served proper notice requesting changes or modifications
of this Agreement in accordance with the terms of Article 34 and either
party has given written notice that is discontinuing negotiations.
ARTICLE 30
GRIEVANCE PROCEDURE
228 (a) The parties to this Agreement agree that any dispute, complaints, or
grievance, except those pertaining to discharge, arising out of the
interpretation or application of the terms of this Agreement, shall be
settled promptly in accordance with the following procedure:
229 STEP 1 - Any employee or group of employees, either individually or
with, or through, their steward, may discuss with the immediate
supervisor any complaint or other matter which they feel requires
clarification. The supervisor shall have five (5) days in which to
render a verbal decision to said employee(s) and the steward involved,
if any. Should the decision fail to bring about a satisfactory
settlement in the matter, it may become a grievance and may be handled
in accordance with Step 2.
230 It is understood that when a group of employees desire a clarification
on a matter in which they are commonly involved, one employee in the
group, with or without, or through the steward, if desired, shall be
designated by the group to discuss the matter with the supervisor.
Matters which do not affect the employees as a group in a common
manner, or which may require individual adjustment, shall be presented
on an individual basis.
231 STEP 2 - Within five (5) days of receipt of the verbal decision at
Step 1, the employee or group of employees, either individually or
through their steward, may file the grievance, on forms provided by
the COMPANY, through the immediate supervisor to the general
supervisor of the department involved. Within five (5) days of
receipt of the grievance, the superintendent, the supervisor, and a
representative of the Personnel Department shall meet with the
employee and their steward for the purpose of discussing the
grievance. The general supervisor shall have five (5) days in which
to render a decision. If the decision brings about a satisfactory
settlement of the matter, it shall be reduced to writing and shall be
delivered to the employee, the steward and the UNION. If the decision
fails to bring about a satisfactory settlement, it shall not be
reduced to writing and may, within five (5) days, be appealed to Step
3 through the general supervisor.
232 STEP 3 - Within five (5) days of the appeal to Step 3, the general
superintendent of the department involved, a representative of the
Personnel Department, and such other representatives of management as
the COMPANY may desire, shall meet with the employee, the steward
involved, the appropriate Plant/Union
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Committeeman and the Business Manager of the UNION or designee, for
the purpose of discussion the grievance. Within five (5) days
following such meeting, the COMPANY shall answer the grievance in
writing and the answer shall be delivered to the employee, the steward
involved, the Plant/Union Committeeman involved, and the UNION.
233 If the decision fails to bring about a satisfactory settlement of the
matter, it may be appealed in writing to the Plant Manager or
designee, within ten (10) days of the decision and will be handled in
accordance with Step 4.
234 STEP 4 - A grievance appealed to Step 4 will be entered on the agenda
of the next meeting of the Plant/Union and the Plant Management
Committees if the appeal is received at least ten (10) days prior to
its scheduled meeting. If received within the ten (10) day period
prior to a meeting, it shall be placed on the agenda for the following
meeting.
235 An employee having a grievance in regard to contractual supplemental
sick pay benefits may file a grievance directly with the Supervisor,
Labor Relations, who shall have five (5) days' time in which to
investigate and answer the grievance. Should the answer fail to bring
about a satisfactory settlement to the grievance, then the employee
may, within five (5) days, appeal the grievance directly to Step 4 of
the grievance procedure.
236 After discussion of the grievance by the Plant/Union and Plant
Management Committees, it shall be answered, in writing, to the UNION
within ten (10) days. If the grievance is settled at Step 4, the
answer shall reflect the settlement. If the grievance has not been
settled, then the COMPANY's answer shall state why the grievance is
denied.
237 (b) It is understood and agreed that no complaint, dispute, or grievance
shall be submitted to either the COMPANY or UNION after a lapse of ten
(10) days from the time the incident causing the complaint, dispute,
or grievance shall have occurred or become known to the employee.
238 (c) The COMPANY and the UNION recognize that is desirable and mutually
beneficial to have regular monthly meetings for the purpose of
discussing any grievances placed on the agenda for the respective
meeting. For this purpose, the representatives of the UNION shall
consist of a committee designated by the UNION and shall be called the
Plant/Union Committee, of which there shall be sixteen (16) employee
members. Employees in the probationary period of
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employment shall not be eligible for membership on the Plant/Union
Committee. The following groups of employees shall each be represented
on the Plant/Union Committee by an employee of the group designated by
the UNION:
Machinists
Pipefitters
Asbestos Workers
Boilermakers
Ironworkers
Carpenters
Electrical Workers
Instrumentmen
Painters
Operating Engineers
Laborers
Truck Drivers & Helpers, Stores Clerks, and Chief Stores Clerk
Plant 1 production employees and Group 4
Plant 2 and Power production employees
Plant 3 production employees
Group 2 employees
239 (d) If an employee is discharged, the COMPANY, within three (3) days of
the discharge, shall, on request of the employee provide the employee
with a written statement of the reason or reasons for the action
taken. If the UNION desires to protest the discharge, the UNION,
instead of following the procedure set forth in Steps 1 and 2 of the
Article, may, within ten (10) days after the discharge in question,
file directly with the COMPANY, a written request for a hearing. Such
hearing shall be held within two (2) days after receipt by the COMPANY
of such written request. At such hearing, evidence may be presented
on behalf of the one discharged and by the COMPANY.
240 If the evidence presented by the UNION to the COMPANY warrants the
reinstatement of the discharged employee or employees, such
reinstatement shall be to their former position without loss of
seniority or vacation credits. All other terms of the reinstatement
may be agreed upon between the COMPANY and the UNION at this time. If
the COMPANY and the UNION cannot agree that the discharge was
justified, the dispute may be referred to arbitration in accordance
with the procedure set forth in (e) of this Article.
241 (e) If a grievance or discharge protest cannot be settled to the mutual
satisfaction of the COMPANY and UNION in Steps 1 through 4 or as
provided in (d) above, the UNION shall have forty-five (45) days
during which to notify the COMPANY of their desire to arbitrate the
dispute.
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242 (f) All time limits noted in this Article are exclusive of Saturdays,
Sundays and holidays. Extensions of time limits as set forth in this
Article, may be requested by either the COMPANY or the UNION to take
care of unusual cases.
ARTICLE 31
ARBITRATION PROCEDURE
243 It is further agreed that if the COMPANY and the UNION cannot mutually
settle any controversies, differences or disputes that arise regarding
discharges or dismissals, or interpretations and application of this
Agreement, the COMPANY or the UNION, upon the request of the opposite party
to this Agreement to arbitrate such controversies, differences or disputes
shall, in accordance with Step 4 of Article 30, meet and name one (1)
representative each as arbitrators and within five (5) days after the
appointment of said two (2) arbitrators, an attempt shall be made to
mutually settle such controversies, differences or disputes by the two (2)
arbitrators. In the event they cannot mutually settle the dispute within
five (5) days from their appointment, the said two (2) arbitrators shall
agree upon a third (3rd) arbitrator and the dispute shall be settled by a
majority of said arbitrators, which decision shall be final and binding
upon both parties to this Agreement. In the event the two (2) arbitrators
cannot mutually agree on the third (3rd) arbitrator within ten (10) days,
the Director of Federal Mediation and Conciliation Service for Region X
shall be requested to submit a list of five (5) arbitrators. The UNION and
the COMPANY will, within ten (10) days, eliminate from the list four (4)
names by each, alternately eliminating one (1). The name remaining shall
then become the third (3rd) arbitrator.
244 Grievances appealed to arbitration but not scheduled for hearing within 12
months of the appeal are considered to be dropped.
245 The COMPANY and the UNION shall bear the expenses of their respective
arbitrators. All other expenses of the arbitration shall be borne by and
divided equally between the UNION and the COMPANY.
246 The decision of the majority of the Arbitration Committee shall be rendered
within sixty (60) days after the hearing and shall be final and binding
upon the parties hereto. Such decision shall be within the scope and terms
of this Agreement and shall not change any of its terms or conditions. The
Arbitrators shall, in their decision, specify whether or not the decision
is retroactive or the effective date thereof.
ARTICLE 32
ABROGATION OF CONTRACT ARTICLES
247 Should any part hereof, or any provisions herein contained, be rendered or
declared invalid by reason of any existing or subsequently enacted
legislation or by a decree of a court of competent jurisdiction, such
invalidation of such part or portion of this Agreement shall not invalidate
the remaining portion hereof and they shall remain in full force and
effect.
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ARTICLE 33
NON-OCCUPATIONAL ACCIDENT AND SICKNESS PLAN
SECTION 1
248 The Sick Benefit Plan is provided to aid employees in meeting their
expenses while suffering from illness or from a non-occupational accident
in accordance with the following schedule:
PLANT MAXIMUM NUMBER
SERVICE CREDIT OF WEEKS BENEFIT
Six months to 1 year 12 weeks
Over 1 year 26 weeks
249 Plant Service Credit shall mean employment with the COMPANY which is
credited to the employee from the records of the COMPANY.
250 This credit shall start with the employee's hiring date with the COMPANY
and shall be known as the anniversary date for the purposes of
administering this plan.
251 Plant Service Credit shall in remain if effect for one-year absence on
account of illness. It shall then be broken until the employee returns to
work. Plant Service Credit shall not accumulate after one (1) month
absence due to approved Leave of Absence. No credit shall be given for
absence due to layoff or strikes.
SECTION 2
252 Maximum Number of Weeks Benefits is determined by the employee's Service
Credit, and all disability periods occurring within the Service Credit year
will be totaled for the purpose of computing the Maximum Benefits allowed
for that year.
253 Unused benefits during a Service Credit year may not be carried over to the
next Service Credit Year.
254 An employee whose continuous absence due to an illness or injury extends
from one (1) service year to another shall be entitled to a maximum of
twenty-six (26) weeks benefits for that disability. An employee whose
continuous absence exceeds such maximum benefits must return to work for a
period of sixty (60) days for a related disability or one (1) day for an
unrelated disability in order to receive further benefits to which they may
be entitled. Total benefits will not exceed twenty-six (26) weeks in a
service year.
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SECTION 3
255 The Plan provides benefits based on a normal work week of forty (40) hours
and a normal day of eight (8) hours. In case the number of hours in the
normal work week or work day is changed, the benefits listed below will be
changed in direct proportion to the change in the scheduled working hours.
256 The sick benefits provided for herein shall be less any amount or amounts
of disability benefits which may be provided for through the State or
Federal legislation or increased weekly benefits provided in the Group
Insurance Plan.
SECTION 4
257 The Plan will provide benefit payments based on the employee's base hourly
rate, exclusive of all premium pay. Benefit payments will be made for an
employee's disability extending beyond the waiting period for each
scheduled work day up to the maximum number of weeks for which the employee
is eligible according to the schedule in Section 1. The waiting period
will be based on sick occurrences during the previous twelve (12) months.
DAYS SICK OCCURRENCES
WAITING PERIOD IN PREVIOUS 12 MONTHS
0 2 or less
1 3
1 4
2 5 or more
258 Should an employee become sick and leave the plant during the first four
hours of their regularly scheduled hours of work, such day shall be counted
as a part of the waiting period for the purposes of sick leave benefits.
However, when an employee is off twenty-one (21) consecutive calendar days,
they shall receive benefits for one (1) day's waiting period.
259 The COMPANY will provide sick leave benefits in an amount equal to 90% of
an employee's base straight-time earnings for work days lost.
260 An employee with greater than one (1) year of COMPANY service who does not
use any sick leave in a given service year will accumulate an extra week of
sick leave for each year in which no sick leave is taken up to a maximum of
ten (10) additional weeks of sick leave.
261 If an employee who has so accumulated a extra week(s) of sick leave should
subsequently become ill or injured, the "accumulated" sick time will be
used first.
40
<PAGE>
262 If an employee uses all "accumulated" and all twenty-six (26) weeks of
normal sick leave as provided in Section 1 and Section 2 of this article
and continues on sick leave, the maximum number of subsequent sick benefit
weeks at 65% of straight time earnings will be proportionately adjusted and
reduced by one week for each week of "accumulated" sick leave paid at the
higher level of compensation.
263 In order to implement this plan, any employee who does not use any sick
leave during their service year in effect on May 1, 1989 will receive an
extra week of sick leave.
SECTION 5
264 (a) An employee must present evidence satisfactory to the COMPANY, showing
that an absence is due to illness or accident within the meaning of
this Plan on forms provided by the COMPANY.
265 (b) An employee's absence must be reported to the Human Resources
Department by the third day of absence by the employee, the doctor, or
a member of the family. Failure to comply will be considered an
absence without leave.
266 (c) Employees must adopt such remedial measures as may be commensurate
with their disability and permit such reasonable examinations and
inquiries by the COMPANY's Medical Department representative as, in
its judgment, may be necessary to ascertain the employee's condition.
SECTION 6
Payments will not be made for:
267 (a) Any period of disability during which the employee is not under
treatment by a licensed physician or a licensed chiropractor.
268 (b) Any disability caused directly or indirectly by war or riot.
269 (c) Any sickness or injury due to the employee's
(1) willful intention to injure oneself or another;
(2) venereal diseases;
(3) intoxication or the use of drugs except when in an EAP approved
treatment program for substance abuse.
270 (d) Any disability occurring while the employee is working for wages or
profit.
271 (e) Any disability due to misconduct.
41
<PAGE>
272 (f) Any disability when an employee is absent because of layoffs, strikes,
or leave of absence or on vacation. Any employee who is injured or
becomes sick during vacation and is unable to return to work at the
end of the vacation shall qualify for benefits in accordance with the
Plan.
273 (g) All benefits under this plan shall cease immediately when employment
with the COMPANY is terminated for any reason.
SECTION 7
274 The COMPANY reserves the right to withhold benefit payments to any employee
who is guilty of submitting a false claim or of abuse of the privileges
covered and may take disciplinary action including discharge.
ARTICLE 34
CONTRACT PERIOD
275 This agreement shall become effective on the date of signing and shall
remain in effect until 4:00 p.m. May 1, 1999, and the same shall
automatically renew itself from year to year thereafter unless either party
shall have given the other written notice of desired changes or termination
at least sixty (60) days before the anniversary date.
276 The COMPANY and UNION also agree that any subsequent agreement reached
within the duration of this Agreement will be in compliance with applicable
Federal laws, regulations, guidelines and standards.
42
<PAGE>
STERLING CHEMICALS, INC.
- --------------------------------------------------------------------------
Director of Manufacturing
- --------------------------------------------------------------------------
Human Resources Manager
TEXAS CITY, TEXAS METAL
TRADES COUNCIL, AFL-CIO
- --------------------------------------------------------------------------
President
- --------------------------------------------------------------------------
Business Manager
ELECTRICAL WORKERS LOCAL NO. 527
By
------------------------------------------------------------------------
OPERATING ENGINEERS NO. 347
By
------------------------------------------------------------------------
PAINTERS & PAPERHANGERS NO. 585
By
------------------------------------------------------------------------
BRIDGE, STRUCTURAL & ORNAMENTAL IRON WORKERS NO. 135
By
------------------------------------------------------------------------
INTERNATIONAL ASSOCIATION OF MACHINISTS NO. 1446, AFFILIATED WITH DISTRICT
NO. 37
By
------------------------------------------------------------------------
SHEET METAL WORKERS NO. 54
By
------------------------------------------------------------------------
43
<PAGE>
TEAMSTERS LOCAL NO. 1111
By
------------------------------------------------------------------------
CARPENTERS LOCAL NO. 973
By
------------------------------------------------------------------------
INSTRUMENT LODGE NO. 903
By
------------------------------------------------------------------------
INTERNATIONAL BROTHERHOOD OF BOILER MAKERS, IRON SHIP BUILDERS, BLACKSMITHS,
FORGERS AND HELPERS NO. 132
By
------------------------------------------------------------------------
HEAT & FROST INSULATORS & ASBESTOS WORKERS NO. 111
By
------------------------------------------------------------------------
PIPEFITTERS LOCAL NO. 211
By
------------------------------------------------------------------------
OPERATING ENGINEERS NO. 450
By
------------------------------------------------------------------------
44
<PAGE>
*EXHIBIT A-1--FORTY HOUR MASTER SHIFT SCHEDULE
ALL EMPLOYEES EXCEPT MAINTENANCE EMPLOYEES
277
MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS
1 xx11111 1xx2222 22xx333 333xx11 1111xx2 22222xx x33333x
2 11xx222 222xx33 3333xx1 11111xx x22222x xx33333 3xx1111
3 2222xx3 33333xx x11111x xx22222 2xx3333 33xx111 111xx22
4 x33333x xx11111 1xx2222 22xx333 333xx11 1111xx2 22222xx
5 3xx1111 11xx222 222xx33 3333xx1 11111xx x22222x xx33333
5-A 3xx1111 11xx111 112xx11 1113xx1 11111xx x11112x xx11113
6 111xx22 2222xx3 33333xx x11111x xx22222 2xx3333 33xx111
7 22222xx x33333x xx11111 1xx2222 22xx333 333xx11 1111xx2
8 xx33333 3xx1111 11xx222 222xx33 3333xx1 11111xx x22222x
9 33xx111 111xx22 2222xx3 33333xx x11111x xx22222 2xx3333
9-A 33xx111 111xx11 1122xx1 11133xx x11111x xx11122 2xx1113
10 1111xx2 22222xx x33333x xx11111 1xx2222 22x3333 333xx11
11 x22222x xx33333 3xx1111 11xx222 222xx33 3333xx1 11111xx
12 2xx3333 33xx111 111xx22 2222xx3 33333xx x11111x xx22222
13 333xx11 1111xx2 22222xx x33333x xx11111 1xx2222 22xx333
13-A 333xx11 1111xx1 11222xx x11333x xx11111 1xx1122 22xx113
14 11111xx x22222x xx33333 3xx1111 11xx222 222xx33 3333xx1
15 xx22222 2xx3333 33xx111 111xx22 2222xx3 33333xx x11111x
16 22xx333 333xx11 1111xx2 22222xx x33333x xx11111 1xx2222
17 3333xx1 11111xx x22222x xx33333 3xx1111 11xx222 222xx33
17-A 3333xx1 11111xx x12222x xx13333 3xx1111 11xx122 222xx13
18 x11111x xx22222 2xx3333 33xx111 111xx22 2222xx3 33333xx
19 1xx2222 22xx333 333xx11 1111xx2 22222xx x33333x xx11111
20 222xx33 3333xx1 11111xx x22222x xx33333 3xx1111 11xx222
21 33333xx x11111x xx22222 2xx3333 33xx111 111xx22 2222xx3
45
<PAGE>
278
EXHIBIT A X-1
40 HOUR MASTER SHIFT SCHEDULE
STERLING CHEMICALS
X1 SHIFT SCHEDULE
Hours of Shifts
- ---------------
1. 10:30-6:30
2. 6:30-2:30 "UO Shift--Shift Breaker Works Mon.-Fri.
3. 2:30-10:30 6:30-2:30 Sat. and Sun. Off
.. Days Off
I II III IV V VI VII VIII
MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS
A-1 33..222 222..11 11111.. ..33333 33..222 222..11 11111.. ..33333
A-2 33..222 22.2.11 11111.. ..33333 33..222 22.2.11 11111.. ..33333
A-3 33..222 2.22.11 11111.. ..33333 33..222 2.22.11 11111.. ..33333
A-4 33..222 .222.11 11111.. ..33333 33..222 .222.11 11111.. ..33333
A-5 33.2.22 222..11 11111.. ..33333 33.2.22 222..11 11111.. ..33333
B-1 ..33333 33..222 222..11 11111.. ..33333 33..222 222..11 11111..
B-2 ..33333 33..222 22.2.11 11111.. ..33333 33..222 22.2.11 11111..
B-3 ..33333 33..222 2.22.11 11111.. ..33333 33..222 2.22.11 11111..
B-4 ..33333 33..222 .222.11 11111.. ..33333 33..222 .222.11 11111..
B-5 ..33333 33.2.22 222..11 11111.. ..33333 33.2.22 222..11 11111..
C-1 11111.. ..33333 33..222 222..11 11111.. ..33333 33..222 222..11
C-2 11111.. ..33333 33..222 22.2.11 11111.. ..33333 33..222 22.2.11
C-3 11111.. ..33333 33..222 2.22.11 11111.. ..33333 33..222 2.22.11
C-4 11111.. ..33333 33..222 .222.11 11111.. ..33333 33..222 .222.11
C-5 11111.. ..33333 33.2.22 222..11 11111.. ..33333 33..222 222..11
D-1 222..11 11111.. ..33333 33..222 222..11 11111.. ..33333 33..222
D-2 22.2.11 11111.. ..33333 33..222 22.2.11 11111.. ..33333 33..222
D-3 2.22.11 11111.. ..33333 33..222 2.22.11 11111.. ..33333 33..222
D-4 .222.11 11111.. ..33333 33..222 .222.11 11111.. ..33333 33..222
D-5 222..11 11111.. ..33333 33.2.22 222..11 11111.. ..33333 33.2.22
UO 22222.. 22222.. 22222.. 22222.. 22222.. 22222.. 22222.. 22222..
SHIFT BEGINNING AT 10:30 PM IS CONSIDERED THE FIRST SHIFT OF THE FOLLOWING DAY
(E.G.) THE SHIFT BEGINNING AT 10:30 PM FRIDAY IS THE FIRST SHIFT SATURDAY
46
<PAGE>
EXHIBIT A-2
FORTY HOUR MASTER SHIFT SCHEDULE (TWO SHIFTS ONLY)
279
MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS
1xx2222 22xx111 111xx22 2222xx1 11111xx x22222x xx11111
222xx11 1111xx2 22222xx x11111x xx22222 2xx1111 11xx222
11111xx x22222x xx11111 1xx1222 22xx111 111xx22 2222xx1
x11111x xx22222 2xx1111 11xx222 222xx11 1111xx2 22222xx
1xx2222 22xx111 111xx22 2222xx1 11111xx x22222x xx11111
222xx11 1111xx2 22222xx x11111x xx22222 2xx1111 11xx222
1111xx2 22222xx x11111x xx22222 2xx1111 11xx222 222xx11
x22222x xx11111 1xx2222 22xx111 111xx22 2222xx1 11111xx
22xx111 111xx22 2222xx1 11111xx x22222x xx11111 1xx2222
47
<PAGE>
EXHIBIT A-3B
FORTY HOURS MASTER SHIFT SCHEDULE
THREE SHIFT SCHEDULE
ALL EMPLOYEES EXCEPT MAINTENANCE
280
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
M T W T F S S M T W T F S S M T W T F S S M T W T F S S M T W T F S S M T W T F S S M T W T F S S
3 4 5 6 7 8 9 10111213141516 17181920212223 24252627282930 31 1 2 3 4 5 6 7 8 910111213 14151617181920
14151617181920 21222324252627 28293031 1 2 3 4 5 6 7 8 910 11121314151617 18192021222324 252627282930 1
23242526272829 3031 1 2 3 4 5 6 7 8 9101112 13141516171819 20212223242526 27282930 1 2 3 4 5 6 7 8 910
1 2 3 4 5 6 7 8 91011121314 15161718192021 22232425262728 293031 1 2 3 4 5 6 7 8 91011 12131415161718
10111213141516 17181920212223 24252627282930 31 1 2 3 4 5 6 7 8 910111213 14151617181920 21222324252627
19202122232425 262728293031 2 3 4 5 6 7 8 9101112131415 16171819202122 23242526272829 3031 1 2 3 4 5
272829 1 2 3 4 5 6 7 8 91011 12131415161718 19202122232425 262728293031 1 2 3 4 5 6 7 8 9101112131415
EXHIBIT A-30
1 A 2 2 2 2 2 x x x 1 1 1 1 1 x x 3 3 3 3 3 x x x 2 2 2 2 2 2 x x 1 1 1 1 1 x x 3 3 3 3 3 3 x x 2 2 2
2 B 3 3 3 x x 2 2 2 2 2 2 x x 1 1 1 1 1 x x 3 3 3 3 3 3 x x x 2 2 2 2 2 x x x 1 1 1 1 1 x x 3 3 3 3 3
3 C 1 x x 3 3 3 3 3 3 x x 2 2 2 2 2 2 x x 1 1 1 1 1 x x 3 3 3 3 3 3 x x 2 2 2 2 2 2 x x x 1 1 1 1 1 x
4 D x x 1 1 1 1 1 x x 3 3 3 3 3 3 x x 2 2 2 2 2 2 x x 3 3 3 1 1 x x 3 3 3 3 3 3 x x 2 2 2 2 2 2 x x 1
5 E 1 1 1 1 1 x x 1 1 1 1 1 x x 1 1 1 1 1 x x 1 1 1 1 1 x x 1 1 1 1 1 x x 1 1 1 1 1 x x 1 1 1 1 1 x x
* * * * * * *
</TABLE>
<TABLE>
<S> <C> <C> <C>
M T W T F S S M T W T F S S M T W T F S S
21222324252627 28 1 2 3 4 5 6 7 8 910111213
2 3 4 5 6 7 8 9101112131415 16171819202122
11121314151617 18192021222324 25262728293031
19202122232425 2627282930 1 2 3 4 5 6 7 8 9
282930 1 2 3 4 5 6 7 8 91011 12131415161718
6 7 8 9101112 13141516171819 20212223242526
16171819202122 23242526272829 30 1 2 3 4 5 6
EXHIBIT A-30
1 A 2 2 2 x x 1 1 1 1 1 x x 3 3 3 3 3 3 x x 2
2 B 3 x x 2 2 2 2 2 2 x x 1 1 1 1 1 x x 3 3 3
3 C x 3 3 3 3 3 x x x 2 2 2 2 2 2 x x 1 1 1 1
4 D 1 1 1 1 x x 3 3 3 3 3 3 x x x 2 2 2 2 2 x
5 E 1 1 1 1 1 x x 1 1 1 1 1 x x 1 1 1 1 1 x x
* * *
</TABLE>
EACH EMPLOYEE IS SCHEDULED OFF TWO DAYS IN EACH WORK WEEK
THESE TWO DAYS NEED NOT BE CONSECUTIVE
48
<PAGE>
EXHIBIT A-3
THREE SHIFT SCHEDULE
281
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS
22222xx x11111x x33333x xx22222 2xx1111 1xx3333 33xx222 222xx11 111xx33 3333xx2
333xx22 2222xx1 1111xx3 33333xx x22222x xx11111 xx33333 3xx2222 22xx111 11xx333
1xx3333 33xx222 222xx11 111xx33 3333xx2 22222xx x11111x x33333x xx22222 2xx1111
xx11111 xx33333 3xx2222 22xx111 11xx333 333xx22 2222xx1 1111xx3 33333xx x22222x
* * * * * * * * * *
*No Day Coverage
</TABLE>
49
<PAGE>
282
EXHIBIT A-5
40 HR. MASTER SHIFT SCHEDULE
MTWTFSS MTWTFSS MTWTFSS MTWTFSS
11111XX XX11111 11111XX 11111XX
11111XX 11111XX XX11111 11111XX
11111XX 11111XX 11111XX XX11111
XX11111 11111XX 11111XX 11111XX
Monday-Friday, 7:00 a.m. to 3:30 p.m., no paid lunch.
Saturday, Sunday and Holidays, 7:00 a.m. to 3:00 p.m., paid lunch
283
EXHIBIT A-6
NORMAL DAY SCHEDULE
Monday through Friday
7:00 a.m. to 11:00 a.m.
11:30 a.m. to 3:30 p.m.
May also be used for operators, pumper-gaugers, and analysts
for training purposes other than direct on-the-job training
50
<PAGE>
EXHIBIT A-7
SPECIAL STRAIGHT DAY SCHEDULE
FOR
PRODUCTION DEPARTMENT
284
MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS
11111xx x11111x xx11111 1xx1111 11xx111 111xx11 1111xx1
51
<PAGE>
*EXHIBIT A-9
SPECIAL PILOT PLANT AND TBA UNIT SCHEDULE
285
MTWTFSS MTWTFSS MTWTFSS
11111xx 22222xx 33333xx
22222xx 33333xx 11111xx
33333xx 11111xx 22222xx
*As per letter of 5/8/56
52
<PAGE>
286
EXHIBIT A-10--THREE SHIFT SCHEDULE
ALL EMPLOYEES EXCEPT GROUP 1
(will be used for start-ups, shutdowns,
plant emergencies, and overhauls)
MTWTFSS MTWTFSS MTWTFSS
11111xx 22222xx 33333xx
22222xx 33333xx 11111xx
33333xx 11111xx 22222xx
287
EXHIBIT A-11--TWO SHIFT SCHEDULE
ALL EMPLOYEES EXCEPT GROUP 1
(will be used for start-ups, shutdowns,
plant emergencies, and overhauls)
MTWTFSS MTWTFSS
11111xx 22222xx
22222xx 11111xx
53
<PAGE>
288
EXHIBIT A-20
*SPECIAL PILOT PLANT SCHEDULE
MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS MTWTFSS
(22) 11111xx x11111x x11111x x11222x xx22222 xx11111 11xx111
(23) xx22222 2xx1111 1xx2221 1xx1111 1xx1111 11xx122 22111xx
*As per letter of 10/4/57
54
<PAGE>
EXHIBIT B
WAGE RATES
<TABLE>
<CAPTION>
EFFECTIVE
6:30 -- 7:00 A.M
MAY 1, 1996
======================================================================
$.40 2.5% 3.0% 289
5-1-96 5-1-97 5-1-98
======================================================================
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
PRODUCTION
- ----------------------------------------------------------------------
Chief Operator $22.44 $23.00 $23.69
- ----------------------------------------------------------------------
Operator 21.27 21.80 22.45
- ----------------------------------------------------------------------
Chief Pumper Gauger 22.44 23.00 23.69
- ----------------------------------------------------------------------
Pumper Gauger 21.27 21.80 22.45
- ----------------------------------------------------------------------
Chief Laboratory Analyst 22.44 23.00 23.69
- ----------------------------------------------------------------------
Laboratory Analyst 21.27 21.80 22.45
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
POWER & UTILITY
- ----------------------------------------------------------------------
Shift Engineer 22.44 23.00 23.69
- ----------------------------------------------------------------------
Operator 21.27 21.80 22.45
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
STORES
- ----------------------------------------------------------------------
Chief Stores Clerk
- ----------------------------------------------------------------------
Entry 21.06 21.59 22.24
- ----------------------------------------------------------------------
Max 21.77 22.31 22.98
- ----------------------------------------------------------------------
Stores Clerk
- ----------------------------------------------------------------------
Entry 19.53 20.02 20.62
- ----------------------------------------------------------------------
Max 20.53 21.04 21.67
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
MAINTENANCE
- ----------------------------------------------------------------------
Asbestos Worker Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Asbestos Worker 21.27 21.80 22.45
- ----------------------------------------------------------------------
Boilermaker Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Boilermaker 21.27 21.80 22.45
- ----------------------------------------------------------------------
Ironworker Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Ironworker 21.27 21.80 22.45
- ----------------------------------------------------------------------
Carpenter Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Carpenter 21.27 21.80 22.45
- ----------------------------------------------------------------------
Electrical Worker Leadman 22.58 23.14 23.83
- ----------------------------------------------------------------------
Electrical Worker 21.31 21.84 22.50
- ----------------------------------------------------------------------
Painter Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Painter 21.27 21.80 22.45
- ----------------------------------------------------------------------
Machinist Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Machinist 21.27 21.80 22.45
- ----------------------------------------------------------------------
Pipefitter Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Pipefitter 21.27 21.80 22.45
- ----------------------------------------------------------------------
Operating Engineer Leadman 22.44 23.00 23.69
- ----------------------------------------------------------------------
Operating Engineer 21.27 21.80 22.45
======================================================================
55
</TABLE>
<PAGE>
EXHIBIT B, Continued
<TABLE>
<CAPTION>
EFFECTIVE
6:30 -- 7:00 A.M
MAY 1, 1996
======================================================================
$.40 2.5% 3.0% 289
5-1-96 5-1-97 5-1-98
======================================================================
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
MAINTENANCE (CONT'D)
- ----------------------------------------------------------------------
Instrument Leadman 22.58 23.14 23.83
- ----------------------------------------------------------------------
Instrumentman 21.31 21.84 22.50
- ----------------------------------------------------------------------
Labor Leadman 21.10 21.63 22.28
- ----------------------------------------------------------------------
Truck Dispatcher 21.31 21.84 22.50
- ----------------------------------------------------------------------
Truck & Tractor Driver
- ----------------------------------------------------------------------
ENTRY 19.76 20.25 20.86
- ----------------------------------------------------------------------
MAX 20.16 20.66 21.28
- ----------------------------------------------------------------------
Truck Helper
- ----------------------------------------------------------------------
ENTRY 19.28 19.76 20.35
- ----------------------------------------------------------------------
MAX 19.54 20.03 20.63
- ----------------------------------------------------------------------
Laborer
- ----------------------------------------------------------------------
ENTRY* 17.84 18.29 18.84
- ----------------------------------------------------------------------
MAX 19.28 19.76 20.35
- ----------------------------------------------------------------------
Laborer Special 19.54 20.03 20.63
- ----------------------------------------------------------------------
*Advance to Maximum after three months working in classification.
======================================================================
</TABLE>
56
<PAGE>
EXHIBIT C-1
MERIT PROGRESSION SCHEDULE
<TABLE>
<CAPTION>
EFFECTIVE
6:30 -- 7:00 A.M
MAY 1, 1996
==========================================================
$.40 2.5% 3.0% 290
5-1-96 5-1-97 5-1-98
==========================================================
<S> <C> <C> <C> <C> <C>
Chief Stores Clerk $ 21.06 $ 21.59 $ 22.24 Hire
- ----------------------------------------------------------
21.29 21.82 22.47
- ----------------------------------------------------------
21.51 22.05 22.71
- ----------------------------------------------------------
21.77 22.31 22.98 Top
- ----------------------------------------------------------
- ----------------------------------------------------------
Stores Clerk 19.53 20.02 20.62 Hire
- ----------------------------------------------------------
19.75 20.24 20.85
- ----------------------------------------------------------
19.93 20.43 21.04
- ----------------------------------------------------------
20.06 20.56 21.18
- ----------------------------------------------------------
20.18 20.68 21.30
- ----------------------------------------------------------
20.41 20.92 21.55
- ----------------------------------------------------------
20.53 21.04 21.67 Top
- ----------------------------------------------------------
- ----------------------------------------------------------
Truck Driver 19.76 20.25 20.86 Hire
- ----------------------------------------------------------
19.94 20.44 21.05
- ----------------------------------------------------------
20.16 20.66 21.28 Top
- ----------------------------------------------------------
- ----------------------------------------------------------
Truck Helper 19.28 19.76 20.35 Hire
- ----------------------------------------------------------
19.41 19.90 20.50
- ----------------------------------------------------------
19.54 20.03 20.63 Top
==========================================================
</TABLE>
57
<PAGE>
EXHIBIT C-1, (CONT'D.)
LABORATORY ANALYST APPRENTICE
MERIT PROGRESSION RATE
<TABLE>
<CAPTION>
EFFECTIVE 2.5% 3.0% 290
MERIT PROGRESSION 5-1-96 5-1-97 5-1-98
====================================================================================
<S> <C> <C> <C> <C>
Start $16.50 $16.91 $17.42
- ------------------------------------------------------------------------------------
End of 6 Months 17.21 17.64 18.17
- ------------------------------------------------------------------------------------
End of 12 Months 17.96 18.41 18.96
- ------------------------------------------------------------------------------------
End of 18 Months 18.73 19.20 19.78
- ------------------------------------------------------------------------------------
End of 24 Months 19.54 20.03 20.63
- ------------------------------------------------------------------------------------
End of 30 Months 20.39 20.90 21.53
- ------------------------------------------------------------------------------------
End of 36 Months Journeyman rate Journeyman rate Journeyman rate
====================================================================================
</TABLE>
Effective May 1, 1996, all Apprentices hired after this date will be paid at
the above Merit Progression Rates, subject to across the board increases
occurring after May 1, 1996. Existing Apprentices will be "Grandfathered"
under the old progression rates per a separate list. These grandfathered
rates will not be reflected on the contract.
****************
Merit increases are granted after the completion of three (3) months' service
and are based on progress in job knowledge, ability and skill, attitude toward
the job and safe practices. The increase is effective on the Monday of the week
in which the anniversary date falls.
When increases are not granted, an explanation is given the employee by
supervision.
- --------------------------------------------------------------------------------
58
<PAGE>
EXHIBIT C-2
MAINTENANCE APPRENTICE
MERIT PROGRESSION RATE
ASBESTOS WORKER, BOILERMAKER, CARPENTER, IRONWORKER,
MACHINIST, OPERATING ENGINEER, PAINTER, PIPEFITTER
<TABLE>
<CAPTION>
MERIT EFFECTIVE 2.5% 3.0% 291
PROGRESSION 5-1-96 5-1-97 5-1-98
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Start $16.50 $16.91 $17.42
- ----------------------------------------------------------------------------
End of 6 Months 17.03 17.46 17.98
- ----------------------------------------------------------------------------
End of 12 Months 17.58 18.02 18.56
- ----------------------------------------------------------------------------
End of 18 Months 18.15 18.60 19.16
- ----------------------------------------------------------------------------
End of 24 Months 18.74 19.21 19.79
- ----------------------------------------------------------------------------
End of 30 Months 19.34 19.82 20.41
- ----------------------------------------------------------------------------
End of 36 Months 19.97 20.47 21.08
- ----------------------------------------------------------------------------
End of 42 Months 20.61 21.13 21.76
- ----------------------------------------------------------------------------
End of 48 Months Journeyman rate Journeyman rate Journeyman rate
============================================================================
</TABLE>
Effective May 1, 1996, all Apprentices hired after this date will be paid
at the above Merit Progression Rates, subject to across the board increases
occurring after May 1, 1996. Existing Apprentices will be "Grandfathered"
under the old progression rates per a separate list. These grandfathered
rates will not be reflected on the contract.
EXHIBIT C-3
INSTRUMENT & ELECTRICAL APPRENTICE
MERIT PROGRESSION RATE
<TABLE>
<CAPTION>
============================================================================
MERIT EFFECTIVE 2.5% 3.0% 292
PROGRESSION 5-1-96 5-1-97 5-1-98
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Start $16.50 $16.91 $17.42
- ----------------------------------------------------------------------------
End of 6 Months 16.93 17.35 17.87
- ----------------------------------------------------------------------------
End of 12 Months 17.37 17.80 18.33
- ----------------------------------------------------------------------------
End of 18 Months 17.82 18.27 18.82
- ----------------------------------------------------------------------------
End of 24 Months 18.28 18.74 19.30
- ----------------------------------------------------------------------------
End of 30 Months 18.76 19.23 19.81
- ----------------------------------------------------------------------------
End of 36 Months 19.25 19.73 20.32
- ----------------------------------------------------------------------------
End of 42 Months 19.75 20.24 20.85
- ----------------------------------------------------------------------------
End of 48 Months 20.26 20.77 21.39
- ----------------------------------------------------------------------------
End of 54 Months 20.78 21.30 21.94
- ----------------------------------------------------------------------------
End of 60 Months Journeyman rate Journeyman rate Journeyman rate
============================================================================
</TABLE>
Effective May 1, 1996, all Apprentices hired after this date will be paid at
the above Merit Progression Rates, subject to across the board increases
occurring after May 1, 1996. Existing Apprentices will be "Grandfathered"
under the old progression rates per a separate list. These grandfathered
rates will not be reflected on the contract.
59
<PAGE>
EXHIBIT C-4
CHEMICAL OPERATOR APPRENTICE
MERIT PROGRESSION RATE
<TABLE>
<CAPTION>
============================================================================
MERIT EFFECTIVE 2.5% 3.0% 293
PROGRESSION 5-1-96 5-1-97 5-1-98
============================================================================
<S> <C> <C> <C> <C>
Start $16.50 $16.91 $17.42
- -----------------------------------------------------------------------------
End of 6 Months 17.21 17.64 18.17
- -----------------------------------------------------------------------------
End of 12 Months 17.96 18.41 18.96
- -----------------------------------------------------------------------------
End of 18 Months 18.73 19.20 19.78
- -----------------------------------------------------------------------------
End of 24 Months 19.54 20.03 20.63
- -----------------------------------------------------------------------------
End of 30 Months 20.39 20.90 21.53
- -----------------------------------------------------------------------------
End of 36 Months Journeyman rate Journeyman rate Journeyman rate
=============================================================================
</TABLE>
Effective May 1, 1996, all Apprentices hired after this date will be paid at
the above Merit Progression Rates, subject to across the board increases
occurring after May 1, 1996. Existing Apprentices will be "Grandfathered"
under the old progression rates per a separate list. These grandfathered
rates will not be reflected on the contract.
EXHIBIT C-5
PUMPER GAUGER APPRENTICE
MERIT PROGRESSION RATE
<TABLE>
<CAPTION>
=============================================================================
MERIT EFFECTIVE 2.5% 3.0% 294
PROGRESSION 5-1-96 5-1-97 5-1-98
=============================================================================
<S> <C> <C> <C> <C>
Start $ 16.50 $ 16.91 $ 17.42
- -----------------------------------------------------------------------------
End of 6 Months 17.21 17.64 18.17
- -----------------------------------------------------------------------------
End of 12 Months 17.96 18.41 18.96
- -----------------------------------------------------------------------------
End of 18 Months 18.73 19.20 19.78
- -----------------------------------------------------------------------------
End of 24 Months 19.54 20.03 20.63
- -----------------------------------------------------------------------------
End of 30 Months 20.39 20.90 21.53
- -----------------------------------------------------------------------------
End of 36 Months Journeyman rate Journeyman rate Journeyman rate
=============================================================================
</TABLE>
Effective May 1, 1996, all Apprentices hired after this date will be paid at
the above Merit Progression Rates, subject to across the board increases
occurring after May 1, 1996. Existing Apprentices will be "Grandfathered"
under the old progression rates per a separate list. These grandfathered
rates will not be reflected on the contract.
60
<PAGE>
ARTICLES OF AGREEMENT
INDEX
SUBJECT PAGE PAR. NO.
Abrogation of Contract Articles........ 38 247
Afternoon Court Appearances............ 27 172 thru 174
Bank Days.............................. 11 62
Bargaining Unit Defined................ 2 3
Basic Principles....................... 1 2
Bid Procedure.......................... 16 90 thru 104
Bulletin Boards........................ 33 217
Call-in Guarantee...................... 9 49
Clothing Replacement................... 28 177 thru 180
Company Rules.......................... 33 218
Continuous Service..................... 29 185
Contract Period........................ 42 275, 276
Contract Work.......................... 24 147 thru 151
Court Duty............................. 26 167 thru 175
Coveralls.............................. 28 178
Damage -- Clothing..................... 28 179
Death in Family........................ 33 219 thru 222
Discharge.............................. 37 239 thru 241
Discipline............................. 23 146
Dues Check-Off......................... 2 6
Dues Check-Off, Cancellation........... 3 11
Duration of Contract................... 42 275, 276
Election Day........................... 27 176
Emergency Work......................... 9 49
Expiration of Contract................. 42 275
Eyeglasses............................. 32 211 thru 214
Funeral Leave.......................... 33 219 thru 222
Grievance -- Discharge................. 37 239 thru 241
Grievance Procedure.................... 35 228 thru 242
Grievance -- Sick Pay.................. 36 235
Grievance -- Timeliness................ 36 237
Holiday Pay, Eligibility............... 6 34 thru 37
Holidays............................... 6 34
Hours of Work.......................... 3 13 thru 16
i
<PAGE>
INDEX
SUBJECT PAGE PAR. NO.
Invalidation of Contract............... 38 247
Jurisdiction........................... 22 133 thru 136
Jurisdiction Disputes.................. 26 163 thru 166
Jury Service........................... 26 167 thru 175
Labor Dispute -- Layoff................ 28 183
Layoff................................. 28 181 thru 199
Layoff Compensation.................... 29 184 thru 199
Layoff Notice.......................... 28 181 thru 183
Layoff, Rehiring....................... 19 116 thru 118
Leadmen................................ 23 137 thru 142
Leave of Absence....................... 30 200 thru 204
Leave of Absence --Duration............ 30 200 thru 202
Leave of Absence -- Maternity.......... 31 203
Leave of Absence -- Union Conventions.. 30 201
Leave of Absence -- Union Employment... 30 202
Lockouts............................... 34 224
Maternity Leave........................ 31 203
Military Leave of Absence.............. 12, 15 67, 81
Morning Court Appearance............... 26 168 thru 171
Overtime Distribution.................. 8 40
Overtime Meals......................... 8 41 thru 45
Overtime Premiums...................... 5 27 thru 33
Pay Day................................ 24 152, 153
Pay Rate............................... 55 thru 60 289 thru 294
Physical, Medical...................... 25 155 thru 157
Plant Rules............................ 33 218
Plant/Union -- Management Committee.... 36 234
Postings............................... 33 217
Pregnancy Leave........................ 31 203
Probation Period....................... 14 76
Progressions (Pay)..................... 57 thru 60 290 thru 294
Proof of Court Appearance.............. 27 175
Recognition of Union................... 2 3
Running Repairs........................ 22 133
Safety Glasses......................... 32 211 thru 214
Safety Inspections..................... 32 209
Safety Meetings........................ 32 208
ii
<PAGE>
INDEX
SUBJECT PAGE PAR.NO.
Safety Shoes........................... 32 215
Sanitation............................. 31 205, 206
Schedule-In............................ 9 49
Seniority.............................. 13 73 thru 89
Seniority -- Commences................. 14 76
Seniority -- Group, Craft, Department.. 13 74 thru 75
Seniority Lists........................ 14 77
Separation Allowance................... 29 185, 186
Eligibility........................... 30 190 thru 199
Limitations of Applicability.......... 28 181 thru 189
Method of Payment..................... 29 186 thru 189
Shift Differential..................... 9 46 thru 48
Shift Schedules........................ 3, 4, 45 thru 54 13 thru 16
277 thru 287
Sick Pay............................... 39 248 thru 274
Amount................................ 40 259
Duration of Benefits.................. 39 254
Eligibility and Proof................. 41 264-266
False Claim........................... 42 274
Non-Occupational...................... 39 248
Plant Service Credit.................. 39 248, 249
Waiting Period........................ 40 257
Signatory Unions....................... 1 1
Staffing New Units..................... 22 132
Stewards............................... 23 143 thru 146
Strikes................................ 34 223 thru 227
Supervisors Working.................... 21 123 thru 128
Surplus Employees...................... 18 105 thru 109
Transfers.............................. 13, 18 72, 105-111
Transfers, Temporary................... 18 106
Transportation, Overtime............... 10 50
Union Activities....................... 25 158 ,162
Union Committee........................ 36 238
Upgrading, Benefits.................... 20 122
Upgrading, Temporary................... 20 120 thru 122
Vacation............................... 10 52 thru 72
Vacation Splits........................ 12 63
Visits by Union Representatives........ 25 162
Wage Rates............................. 55 thru 60 289 thru 294
Work Schedules......................... 3, 45 thru 54 13 thru 16,
277 thru 288
iii
<PAGE>
LETTERS OF AGREEMENT
BETWEEN
STERLING CHEMICALS, INC.
ITS SUCCESSORS AND ASSIGNS
AND
THE TEXAS CITY, TEXAS METAL TRADES COUNCIL
AFL-CIO OF TEXAS CITY, TEXAS
<PAGE>
LETTERS OF AGREEMENT
TABLE OF CONTENTS
GENERAL SECTION PAGE
I. Shift Preference......................... 1
II. Transportation........................... 1
III. Arbitration.............................. 1
IV. Premium, Pay Related Practices........... 1
V. Jury Pay................................. 4
VI. Pay Day.................................. 4
VII. Non-Occupational Sick Pay................ 4
VIII. Worker's Compensation.................... 5
IX. Physicals................................ 5
X. Vacation................................. 6
XI. Seniority................................ 7
XII. Jury Duty................................ 7
XIII. Elections................................ 7
XIV. Coveralls................................ 7
XV. Prescription Safety Glasses.............. 8
XVI. Funeral Leave............................ 9
XVII. Inspections.............................. 9
XVIII. Scheduling............................... 9
XIX. Bid Procedure............................ 9
XX. Food Service............................. 10
XXI. Work Gloves.............................. 10
XXII. Clip-on Glasses.......................... 11
XXIII. Pension and Insurance Steward............ 11
XXIV. Productivity Statement................... 11
MAINTENANCE SECTION
I. Work Assignment.......................... 12
II. Shift Assignment......................... 17
III. Upgrade, Laborers........................ 18
IV. Leadman.................................. 19
V. Safety Glasses........................... 19
VI. Premium Pay.............................. 19
VII. Special Qualifications................... 19
VIII. Work Clothes............................. 20
IX. Layoff................................... 20
X. License Reimbursement.................... 20
XI. Training................................. 21
XII. Work Instructions........................ 21
XIII. Stores................................... 21
XIV. Instrument & Electrical Work Jurisdiction 22
XV. I&E Upgrades............................. 24
i
<PAGE>
MATERIALS HANDLING SECTION
I. Work Assignments......................... 24
II. Work Clothes............................. 25
LABORATORY SECTION
I. Training................................. 25
II. Work Assignment.......................... 25
OPERATIONS SECTION
I. Shift Assignments........................ 25
II. Manufacturing Twelve Hour Shifts......... 26
III. Work Assignments......................... 26
IV. Lunch Delivery........................... 26
ii
<PAGE>
LETTERS OF AGREEMENT
BETWEEN
STERLING CHEMICALS, INC.
ITS SUCCESSORS AND ASSIGNS
AND
THE TEXAS CITY, TEXAS METAL TRADES COUNCIL,
AFL-CIO OF TEXAS CITY, TEXAS
GENERAL SECTION
I. SHIFT PREFERENCE
1 Straight-day employment shall be determined on the basis of
seniority. New employees will be required to go on shift within not
more than ninety (90) days after employment.
II. TRANSPORTATION
2 The COMPANY will provide rides home for employees who are without
transportation and are held over on overtime past their regular
scheduled shift.
III. ARBITRATION
3 The COMPANY will not, for the purposes of arbitration, use the
"basic principle" clause in a jurisdictional dispute arbitration.
4 IV. PREMIUM PAY RELATED PRACTICES
A. MAINTENANCE DEPARTMENT
1. 0700-1530 hours, Monday-Friday Normal Work Week
5 (a) After each craftsmen has had an opportunity to work
overtime for the 3:00 p.m.-11:00 p.m. and/or graveyard
shifts, the COMPANY may contract its overtime needs for
that shift.
6 (b) For all overtime jobs that are turned in by 1430 hours
but not filled by 1500 hours, the COMPANY may contract
its overtime needs for that shift. Jobs that are
turned in after 1430 hours will be filled by continuing
to run the overtime list until the list has been run
one complete time. After the list has been run one
complete time, the COMPANY may contract its overtime
needs for that shift.
1
<PAGE>
7 (c) All overtime worked or refused will be
charged by actual payroll hours. The Union and the
Company agree that there has been some abuse of the
overtime systems in the past; therefore, the Union and
the Company agree to work together to identify,
discuss, and correct any problems of abuse that may
occur in the overtime system.
8 (d) On off hours, holidays, and weekends, employees will be
allowed to change their overtime preference on the
overtime list (okay to work or not work) only once per
shift.
9 2. 1530-0659 hours, Monday-Friday Normal Work Week; Weekends
and Holidays 0700-0659 hours.
10 (a) After each craftsman has had two (2) opportunities to
work overtime on a shift, the COMPANY may contract its
overtime needs for that shift. However, on a given job
after each craftsman has had an opportunity to work
that job the COMPANY may contract that job.
11 B. All straight-day employees scheduled to work the day shift
Saturday or Sunday will be allowed to eat their meal on COMPANY
paid time.
12 C. If, because of a shift change, an employee works seven (7)
consecutive days within a work week without any scheduled days of
rest, the sixth and seventh days shall be considered, for pay
purposes, to be the first and second days of rest, respectively.
13 D. When an employee clocks out in accordance with normal procedure
and is contacted for holdover overtime before exiting plant
gate(s), the time worked will be paid at the applicable overtime
rate and not treated as a call-in.
14 E. The COMPANY agrees that in scheduling overtime, no employee shall
be bypassed in the assignment of overtime work solely to avoid
payment of double time.
15 F. The COMPANY agrees that Article 3, Section 8, will be interpreted
so as to include in the computation of the sixteen continuous
hours, the thirty-minute unpaid lunch break during the day shift.
16 G. The COMPANY agrees that when an employee is held over for
purposes of job continuity and completes the scheduled job they
were held for, they will be allowed to go home, assuming no other
emergency work arises that
2
<PAGE>
would require a call-out. (Emergency as outlined in "Call-out"
article and as clarified in subcommittee meeting.)
17 H. If an employee's shift change is canceled prior to working the
first shift on a new schedule, no notice is required. Once the
employee has worked on the new schedule, forty-eight (48) hours
notice is required to change the schedule.
18 I. When the low person is not afforded overtime, in accordance with
the overtime agreements, and the parties agree that there has
been an error:
1. The employee will be allowed to make up the hours lost by
working comparable hours.
2. The make-up time will be worked, within thirty (30) days of
the decision that an error has been made, at a mutually
agreeable time. Should the COMPANY and employee not be able
to mutually agree, the employee shall make the time up on a
shift which is the same as that on which the overtime would
have been worked had there been no error.
3. Such employees working make-up time will not be assigned to
work which would eliminate overtime for someone else; i.e.,
work that would be worked on an overtime basis if the
employee working make-up time was not available.
19 In the administration of this procedure, errors created by the
following will not be remedied by the above:
1. Any deliberate act by an employee with intent to cause an
error in the administration of overtime distribution; or
2. Mechanical, electrical or system problems creating errors on
down-time in the basic overtime recording data by computer.
20 J. Any employee who is forced out on overtime and worked up to or
into their regular shift shall be excused from work on their
regular shift without pay once the employee has performed work
for a duration of eight (8) continuous hours if the employee so
requests.
21 Should an employee be forced on overtime and said overtime lasts
for three (3) or more hours and terminates six (6) or less hours
prior to the start of their next regular shift, said employee
shall be excused from working the next regular shift without pay
if the employee so requests.
3
<PAGE>
22 It is understood that an employee to be excused, as provided
above, who works a job typically requiring continuous coverage
must be relieved by some other employee prior to being released.
V. JURY PAY
23 An employee who is to report for court duty in the afternoon shall be
given a reasonable period of time to go home, change clothes, etc.,
eat and then drive to the courthouse for duty; or that an employee
released from court duty before 10:00 a.m. shall be given reasonable
time to go home, change clothes, eat and drive to the plant.
VI. PAY DAY
24 Employees who are scheduled to begin working third shift on a Thursday
will be extended the same pay check privileges as accorded an employee
on off days with the understanding that should it create a problem
with a normal payroll operation at any future date, we would change
back to the present procedure.
VII. NON-OCCUPATIONAL SICK PAY
25 A. Employees who experience an illness or injury which results in
absence from work for a continuous period in excess of thirty
(30) days will be furnished, upon request of the employee, a
statement reflecting the period of the absence and the amount of
sick pay received for the absence in excess of the thirty (30)
day period.
26 B. Employees off sick and receiving sick benefits under Article 33,
"Non-Occupational Accident and Sickness Plan" of the present
contract at the time a work stoppage occurs will continue to be
covered under Article 33 until certified able to return to work.
Employees whose illness or injury occurs after a work stoppage
begins will not receive benefits, as set forth in Article 33,
until the settlement of the work stoppage.
27 C. The COMPANY agrees under Article 33, "Non-Occupational Accident
and Sickness Plan" to waive the waiting period, as defined in
Article 33, Section 4, when an employee is hospitalized and
undergoes surgery or other medical treatment, for which
hospitalization is a generally accepted requirement. The waiting
period waiver will also apply when an employee receives surgery
or medical treatment on an out-patient basis for a condition that
has historically called for hospital confinement.
Hospitalization for surgery or other medical treatment where the
generally accepted practice in the area is out-patient care, does
not qualify for a waiver of the waiting period under this
paragraph.
4
<PAGE>
28 D. An employee who has completed the probationary period but has
less that six (6) month's service and otherwise qualified for
non-occupational illness benefits on a holiday will be guaranteed
up to eight (8) hours' pay.
29 E. The COMPANY agrees that when an employee becomes ill or is
injured while on vacation and is certified as disabled by a
licensed physician, they will be able to cancel subsequent full
weeks of vacation beyond the week in which they become certified
as disabled upon proper notification to the COMPANY.
30 F. The COMPANY agrees that if an employee is hospitalized while on
vacation, the employees' vacation may be canceled and the
employee placed on sick leave on the day of hospitalization. For
purposes of this paragraph, the day is defined as the payroll day
appropriate to the employees' regular work schedule.
31 G. The COMPANY agrees to make available a reasonable number of
Physician's Certification (pink) forms upon request.
VIII. WORKER'S COMPENSATION
32 The COMPANY will supplement weekly Workman's Compensation benefits up
to 100% of base pay with no waiting period at time of incident or
first illness for the employee's first year of disability but not
after Workmen's Compensation payments to the employee have been
ceased. Supplementary payments for all subsequent absences related to
the specific industrial injury or illness will start after a one-day
waiting period. The COMPANY agrees to guarantee that no lesser
benefits will be instituted during the term of the contract.
IX. PHYSICALS
33 The COMPANY agrees to continue notification and to send a copy of such
individual test results to employees who fall outside the normal
medical limits and to provide a copy to an employee who comes to First
Aid and requests such information.
34 The COMPANY will provide assistance in scheduling appointments for
those employees who request same to obtain non-mandatory x-rays as
part of their periodic physical examinations.
5
<PAGE>
35 When an employee is scheduled for a chest x-ray as part of their
physical, the Company will provide for the x-ray to be read by a "B-
Reader". For employees in the Insulator Craft, a second x-ray, read
by a "B-Reader", will be provided at six (6) month intervals at the
request of an insulator.
X. VACATION
36 A. Whenever a summer hire is used, such summer hire shall work in a
manner similar to any new hire. When possible, an additional
employee shall be allowed off on vacation during the period the
summer hire is used, after training, provided, in the opinion of
the COMPANY, ample coverage by overtime is available.
37 B. Employees, operation or maintenance, in any new department facing
start-up, shall be allowed to take vacation irrespective of
previous plans or instructions so long as the vacations do not
conflict with or impair plant start-up.
38 C. Back-to-back vacations from one vacation year to the next will be
allowed under the following conditions:
1. The period of vacation must be for six or more weeks.
2. The employees who desire to schedule vacation in a
continuous period beginning in one vacation year and ending
in another vacation year must schedule such vacation prior
to April 1 of the first vacation year.
3. If, on the basis of seniority, they will be allowed to
schedule their vacation immediately prior to the end of the
vacation year, then they shall be granted vacation
preference for the continuous portion of the vacation which
ends the next vacation year.
39 D. When a day of vacation falls on a holiday and the employee elects
to take an extra day of vacation, they may elect to take it the
last working day immediately prior to their scheduled vacation.
40 E. The COMPANY agrees that when an employee becomes ill or is
injured while on vacation and is certified as disabled by a
licensed physician, they will be able to cancel subsequent full
weeks of vacation beyond the week in which they become certified
as disabled upon proper notification to the COMPANY.
6
<PAGE>
41 F. The COMPANY agrees that if an employee is hospitalized while on
vacation, the employees' vacation may be canceled and the
employee placed on sick leave on the day of hospitalization. For
purposes of this paragraph, the day is defined as the payroll day
appropriate to the employees' regular work schedule.
XI. SENIORITY
42 A. When employees are hired into a group or craft on the same date,
their order on the seniority lists shall be determined by "lot".
43 B. In a situation where departmental seniority is equal, the group
seniority shall govern, and when group or craft seniority are
equal, seniority on the first day worked in the bargaining unit
shall govern.
XII. JURY DUTY
44 A. In the event an employee is required to appear for jury duty on a
scheduled day of work which is a holiday as set forth in Section
2 of Article 3, the employee will be paid unworked holiday and
jury service pay if the employee meets the requirements for jury
service pay as set forth in Article 20.
45 B. With regard to jury service, the COMPANY agrees to treat the
documental release time the same for standby as for court
appearances.
XIII. ELECTIONS
46 An employee appointed as an election judge or observer or those
elected as delegates to political conventions shall be granted: (a)
vacation bank days if eligible; or (b) an excused absence. The
request must be made in advance and must not conflict with or impair
plant operation.
XIV. COVERALLS
47 A. The COMPANY agrees to provide coveralls upon request when, in the
judgment of the immediate supervisor, the job to be performed
meets either of the following tests:
1. The work will result in irreparable damage to clothing.
2. The work will subject an employee's clothing to abnormal
stains, soot, chemical contamination or irritants.
7
<PAGE>
48 B. The COMPANY reserves the right to make coveralls mandatory on
certain jobs. Should the supervisor and employee disagree on the
need for coveralls in a certain job, the dispute will be resolved
as defined in paragraph C. Any further disputes may be resolved
by the grievance procedure.
49 C. The above agreement on coveralls issue is made with the
understanding that if conditions change or improvements are made
that alter the need or justification for coveralls, the COMPANY
would no longer provide coveralls on that job. It is also
understood that if a special need arises in which the craft feels
coveralls should be provided, the COMPANY will review the job
need to determine the merit of the request and issue coveralls if
agreed. The Maintenance Supervisor, Shops/Crafts, will review
with the craft steward. If not satisfied with the decision, it
can be reviewed by steward, Maintenance Supervisor, Shops/Crafts,
and the Maintenance Supervisor, Support, or designees. If not
satisfactory, the job will proceed immediately and be carried to
arbitration at a later date.
XV. PRESCRIPTION SAFETY GLASSES
50 A. In cases where the employee needs prescription glasses and the
COMPANY requires eye protection, the COMPANY will provide for the
initial eye exam as deemed necessary by the Medical Department.
The Company will pay 75% for subsequent eye exams in two (2) year
intervals from an approved provider. The COMPANY will pay the
cost of required glasses as currently administered. It is the
intent that the initial eye examination, as well as subsequent
examinations necessary to ensure proper visual acuity, be covered
by this policy.
51 Employees who are not on COMPANY time may go to Personnel
Benefits Section and pick up purchase orders for prescription
safety glasses during the hours that Personnel Benefits is
normally open.
52 B. Shaded safety glasses are to be issued where a licensed
physician, usually defined as an ophthalmologist, specifies that
an employee's eye condition requires shaded glass during daylight
hours. Recommendations by opticians or optometrists are not to
be treated as meeting the requirements of Article 25, Section 6
with regard to "licensed physician".
53 C. The COMPANY agrees to provide two (2) pair of prescription
glasses for welders. At the time of ordering, two pair will be
ordered. One pair will be provided the welder and the second
pair will be kept in the Safety Department for issue to the
welder when needed. At the time the first pair
8
<PAGE>
is turned in and the second pair issued, a new pair will be
ordered unless it is time for the employee's eyes to be checked.
XVI. FUNERAL LEAVE
54 A. The COMPANY agrees that when a death in an employee's immediate
family (as interpreted in Article 28) occurs while the employee
is on vacation, the employee, with sufficient notice to the
COMPANY and in accordance with Article 28, may stop their
vacation and start their funeral leave.
55 B. An employee absent from their regular work schedule due to the
imminent death of a relative (as defined under Article 28) may
receive funeral leave provided such lost time occurs within the
three-day period selected by the employee as funeral leave under
the provisions of Article 28.
56 C. The COMPANY agrees to apply Article 28 to a second listed
relative.
XVII. INSPECTIONS
57 The COMPANY agreed to state that it has always been its intent to
report the results of a safety inspection to the complaining employee
and the COMPANY agrees to continue this practice.
XVIII. SCHEDULING
58 In the event an employee is inadvertently scheduled for less than the
normal work week, the employee will be allowed to make up the
difference after reporting the discrepancy to supervision. The
employee will be allowed to make up such difference only to the point
where their earnings equal the straight time earnings for a normal
work week.
XIX. BID PROCEDURE
59 In the case of multiple job posting, those individuals wishing to bid
will be given the opportunity to express the rank order of their
preferences. A copy of this preference will be given to each multiple
bidder. Once recorded, this preference ranking cannot be changed. In
awarding jobs, the senior qualified bidder's preference will govern
the selection process.
The following criterion will be applied in selecting qualified
candidates for Sterling Chemicals Apprenticeship programs.
60 A. Operator Apprentice requirements will include that all candidates
hired on or after May 1, 1993, must have completed three (3)
hours of college level
9
<PAGE>
math and six (6) hours of college level science with a GPA of 2.5
or better (A = 4.0) prior to being considered. In addition to the
above listed requirements, Operator Apprentice candidates must
have completed a Junior College Basic Petrochemical Operators
course prior to being considered.
61 B. Instrument/Electrical (combined) and Machinists Apprentice
requirements will include that all candidates hired on or after
May 1, 1993, must have completed six (6) hours of college level
math and six (6) hours of college level science with a GPA of 2.5
or better (A = 4.0) prior to being considered.
62 C. The following criteria will be applied in selecting qualified
candidates for Sterling Chemicals "Associate Operator"
classification:
The Associate Operator requirements will include that all
Associate Operators hired on or after May 1, 1996, must have
completed a State Educational Board Certified Associate Degree of
Process Technology prior to being considered and the statistical
requirements in Paragraph A. Their entry pay level will be at
the end of eighteen (18) months Merit Pay Progression Schedule
for Chemical Operator Apprentices.
XX. FOOD SERVICE
63 A. Menu selections will be made by the COMPANY after consultation
with the UNION. It is the COMPANY's intent to provide wholesome
and nutritionally balanced meals.
64 B. The COMPANY agrees that an employee who is called to work the day
shift with less than eight (8) hours' notice will be furnished a
meal or meal ticket if the employee reports at the beginning of
the day shift and an additional meal or meal ticket if they work
up to 11:00 a.m.. The parties recognize that this does not apply
to employees held over into the day shift.
XXI. WORK GLOVES
65 The COMPANY will continue its present policy and practice of
furnishing work gloves at COMPANY expense and expand it to include
White Mule leather gloves or its equal for carpenters and the Truck
Department.
10
<PAGE>
XXII. CLIP ON GLASSES
66 Up to two pairs of clip-on glasses per year shall be furnished by the
COMPANY to the Operating Engineers, Local 450 members only. Clip-on
glasses may be purchased at cost by other employees at the Safety
Supply section.
XXIII. PENSION AND INSURANCE STEWARD
67 One person within the bargaining unit designated by the Business
Manager of the UNION may be named to act in the capacity as the
Council's Pension and Insurance Steward for hourly employees
represented by the Texas City, Texas Metal Trades Council or retirees.
Said designee shall be provided with a locked file cabinet in a
suitable location within the plant in which to file records and
information. All medical, SIP, DAP, pension and other benefit forms
and associated correspondence presented or received by the COMPANY are
confidential and private information and the COMPANY is required to
treat it as such. Any confidential records and information sought by
the UNION shall be obtained directly from the concerned employee or,
with written permission by the employee, from the COMPANY'S benefit
office.
68 The Pension and Insurance Steward shall be afforded reasonable use of
the COMPANY'S telephone for transacting business as regards pension
and insurance. The COMPANY and UNION agree that said designee shall,
with ten (10) days' advance notice, be allowed leaves of absence
necessary for attending national negotiations and/or meetings
regarding pension and insurance, but said leaves shall be without pay.
Said Steward shall be allowed, during their regular working hours, to
consult with employees and/or COMPANY representatives and shall
perform work of the job classification when not otherwise occupied.
69 Nothing in this agreement shall be construed as preventing any
employee so represented from dealing directly with the COMPANY'S
benefit personnel.
XXIV. LETTER OF UNDERSTANDING - PRODUCTIVITY STATEMENT
70 The COMPANY and the Texas City Metal Trades Council agree that a
profitable and highly competitive Texas City plant enhances the job
security of all plant employees. Both parties recognize the necessity
of making productivity improvements to ensure the future profitability
and competitiveness of the plant.
71 While acknowledging their respective rights and obligations, the
COMPANY and the Texas City Metal Trades Council further recognize that
in today's rapidly changing business environment a cooperative versus
a confrontational approach to labor relations matters is vital to the
plant's success. Specifically, the parties have
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endorsed the following principles to reinforce their emphasis on this
productive collaboration.
72 A. A working environment that fosters increased effectiveness,
efficiency and productivity of plant operations is a highly
desirable goal all employees should contribute to achieving.
73 B. Timely, effective two-way communications are basic to productive
plant operations.
74 C. As appropriate, problem solving groups, as well as participative
concepts such as quality circles, may be facilitated.
Productivity improvement plans, programs and results will be
periodically reviewed with the Plant Union Committee.
75 The COMPANY and the UNION recognize that it is desirable and mutually
beneficial to set up an annual meeting to review Work Practices vs.
Best of Class in Industry. The purpose of these meetings would be to
identify possible areas of improvement which could enhance the
Company's competitiveness within the industry.
76 During such meetings, possible areas of improvement identified which
would require modifying, amending, or waiving any of the provisions of
this Labor Agreement shall be implemented only by mutual consent of
both the COMPANY and the UNION.
MAINTENANCE SECTION
I. WORK ASSIGNMENT
77 A. One truck helper will be assigned to each stores route truck.
78 B. The COMPANY will use the truck dispatcher on overtime as a truck
driver in order to equalize overtime in this group.
79 C. When spray or sandblasting machines are being used in the field,
two painters will be used on the job.
80 D. Maintenance Planning tries to plan and schedule all maintenance
work including overtime for Sterling employees. Occasionally, due
to change in scope of work, demands from the production
departments and shutdowns, it is necessary that overtime be worked
on jobs which have previously been assigned to contract personnel.
Within these limits, every effort is made to assign Sterling
personnel on jobs requiring overtime.
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81 E. Overtime maintenance work in the plant will normally be assigned
to Sterling personnel with the following exceptions:
1. Where special skills, knowledge, tools and equipment or
services are required.
2. When Sterling personnel are not available for all shifts on
which the work must proceed.
3. Shutdown scheduling when advance planning requires
assumptions on personnel availability.
4. When a job has been started by contractor personnel and a
short time (4 hours or less) is required to completion.
82 F. Employees covered by this agreement will normally make all tie-
ins between new project and existing equipment and may engage in
any and all work involving maintenance, repair or replacement of
equipment and may engage in any and all work involving
maintenance, repair or replacement of equipment, alterations to
improve the efficiency and capacity of equipment and rearrange or
make additions to all existing COMPANY property within the
capacity of the equipment and personnel available.
83 All blinding and preparations of a unit for maintenance, repair,
or renovation work will normally be done by employees covered by
this agreement.
84 The "rain-out" clause in the contractor's contract or straight
time work on Saturday, Sunday, or holidays as may be provided
under the contractor's contract, will not be used to avoid
Sterling employee's overtime.
85 G. The following shift schedules are available in the Maintenance
Department for staffing shutdown work, equipment repairs
requiring continuous staffing, and unit start-ups lasting three
days or more in duration:
(a) Two (2) shifts of eight (8) hours each.
(b) Two (2) shifts of ten (10) hours each.
(c) Two (2) shifts of twelve (12) hours each.
(d) Two (2) shifts of thirteen (13) hours each.
86 The shift will be continuous and start between 5:00 a.m. and 7:00
a.m. The twelve hour shift schedule will be worked as follows:
1. Work will be continued through the normal ten hour meal
period.
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2. Work will stop thirty minutes prior to the end of the twelve
hour shift, and employees may clock out at that time.
3. Pay for the twelve hour shift will be on the basis of twelve
hours worked.
4. The regular ten hour meal allowance will be paid.
87 H. If the shifts cannot be covered by volunteers which includes
canvassing by the appropriate craft stewards, the vacancies will
be filled by conscripting from the craft in inverse order of
seniority. The COMPANY will be sympathetic to exempting
conscripts who have health or significant personal problems as
long as the UNION does not grieve the effect of these exemptions
and efficient and effective operations can be maintained. If the
conscripts can get volunteers to replace themselves after the
shutdown staffing list is completed, they will be released.
Otherwise, they will work for the duration of the shutdown. If
the shutdown is scheduled to last longer than twenty-one (21)
calendar days, the COMPANY will only take volunteers or
conscripts up to 80% of the craft. The remaining 20% may be used
to relieve those individuals after 21 calendar days who request
relief. Relief requests will be honored on a seniority basis.
The UNION understands that if the above is not practical then the
COMPANY must utilize other staffing arrangements in order to have
the work performed.
88 I. The COMPANY agrees that Sterling employees covered by this
agreement, will not be expected to take instructions from a non-
Sterling supervisor or foreman.
89 The COMPANY and the UNION agree that Sterling personnel and
contractor personnel shall not be used in a composite manner
without approval of the steward of the craft or group involved;
it being understood, however, that practices as existed in the
prior agreement may continue.
90 Additionally, the UNION and the COMPANY agree that unusual
situations may occur that fall outside the scope of this
procedure, and in these instances, these variances will be
discussed and agreed to by the COMPANY and the stewards of the
craft or crafts involved.
91 J. Anytime three or more trucks are being used, a dispatcher will be
used. The dispatcher may or may not act as a truck driver at the
discretion of the COMPANY, but on the day shift Monday through
Friday (exclusive of holidays), a dispatcher shall not be
required to drive a truck. When upgrading a truck driver to
dispatcher, if skill and ability are approximately equal, the
senior qualified truck driver shall be used.
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92 K. A six-month rotation plan will be set up within the Boilermaker,
Laborer, Ironworker and Insulator crafts. These craftsmen shall
be rotated at six-month intervals between department and areas of
the plant.
93 L. The following was agreed to in regard to the Truck Department:
1. A helper will be provided to work with the truck drivers on
the Dempster-Dumpsters, one on each dumpster if both trucks
are running.
2. Stores supervision will be instructed to use hotshot
delivery trucks in a manner not to carry materials heavier
than one person can reasonably handle.
94 M. The following assignments were reached in regard to porter
assignments, labor leadman and labor upgrade:
1. The COMPANY agrees to eliminate porter assignments as
preferred work.
2. Laborer assignments by the COMPANY will be made to allow
opportunity for training and upgrading of the senior
laborers. The above to be done in accordance with the
provisions of Article 5, Section 8, Promotions.
95 N. Apprentices shall work under the direction of a leadman or
journeyman and shall not be assigned an operating unit or area to
work individually except during the last six months of the
apprenticeship program unless by mutual agreement of the COMPANY
and the UNION.
O. Incidental/Common Work Skill
96 In order to expedite the job in an efficient manner the COMPANY
and UNION agree that employees in a Maintenance Craft or Group 3
may be required to perform minor and/or incidental work, as
specified below, while in the performance of the employee's
primary job assignment.
1. Haul tools, equipment, materials and manpower needed to do
the job in pickups, vans or similar sized vehicles.
2. Erect, adjust and/or dismantle one section of scaffolding.
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3. Strip reusable and non-reusable non-asbestos insulation
necessary to break flanges and/or junctions or to gain
access to areas needed to execute primary tasks.
4. Pull back tracing to gain access to their primary task.
5. First flange, first union, first connection may be assigned
to craft with primary task. Second flange, second union,
second connection may be assigned if necessary to perform
primary task. Obstructions of a minor nature may be removed
and reinstalled by the craft with the primary task.
6. Utilize plug-in electrical, utility, process and/or product
connections.
7. When testing is necessary, each craft may blind and tie on
to the equipment being tested as long as the total
connection is not rigid pipe.
8. Any employee may remove and reinstall obstructions that
prevent them from executing their primary task such as
guards, grating, floor plate and handrails.
9. Signs to define content and direction (water, steam,
product, etc.) can be done by the employee involved.
10. Specialty vendors, and employees may connect or disconnect
their equipment if hook-ups are available (chemical
cleaning, cleaning, vacuum, etc.).
11. Operating engineers may do minor repairs, adjustments and
lubrication to their rigs.
12. Painters may replace hoses and make minor repairs to their
equipment, using normal hand tools.
13. Insulators may mix all materials they use.
14. All crafts may install clips and/or brackets on racks and/or
vessels needed to support the equipment they install.
15. I&E craft may decouple, couple and set motors that do not
require indicator alignment.
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16. I&E craft may pull and repair solenoid valves, pressure,
temperature, flow and limit switches or DCA if initially
troubleshooting the system.
17. I&E craft may pull and install control valves, transmitters,
analyzers and controllers (pneumatic and electronic. This
includes disconnections and connecting hard wired
terminations).
18. Stores clerks may deliver materials from stores to the field
and may finish crating materials.
19. Stores clerks may operate forklift trucks after proper
training has taken place.
20. I&E craft may replace, repair, and/or modify tubing of a
minor nature damaged or discovered while performing the
primary task.
97 P. Merge Labor "A" and Labor "B" classifications and delete all
reference to separate classifications or subgroups in the labor
agreement. The seniority and vacation list of Labor "A" and
Labor "B" will be merged.
A. Employees currently in "Labor Special" jobs would be
grandfathered in their current assignment.
B. The current Labor "B" employees working "nights" would be
transferred to the "day" shift.
C. All current Labor "B" employees (not "Labor Special") will
be grandfathered in "Porter" jobs on days. If they
volunteer to the other duties of the Labor Group they will
forfeit their grandfather rights.
II. SHIFT ASSIGNMENT
98 A. The volunteer shift assignment procedure for maintenance
employees will be revised to provide (a) an employee will
volunteer for a shift, by seniority, each four months; (b) if a
shift is discontinued the employee who had volunteered for that
shift may elect to either go to another shift or to come off
shift; and (c) if a person whose shift is discontinued elects to
come off shift the COMPANY may fill the position with the next
senior person with a volunteer slip, or by conscript.
99 B. In the use of shifts for a specific craft in the Maintenance
Department, at least as many people will be scheduled on the day
shift as there are scheduled on the graveyard shift.
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100 C. When a machinist is denied a preferred shift because their
ability to do machine tool work is questioned and the UNION has
reason to feel the employee has the necessary ability to perform
the job, the COMPANY will meet with the UNION and discuss the
employee's qualifications. If, after much discussion it is
determined that a trial period is merited, the employee will be
given a trial period not to exceed thirty (30) days to prove
their ability to perform the work.
101 D. The following agreement was reached regarding shift preference
within the maintenance crafts:
102 In those maintenance crafts having leadmen on shift work, the
leadman having the least continuous service as a leadman shall be
assigned the shift position or positions unless a more senior
person volunteers.
103 The above is subject to special training and development needs as
determined by the COMPANY.
104 E. The work load fluctuates for the maintenance shift personnel on
the second and third shifts due to operational conditions,
shipping schedules, weather conditions and other factors.
Regular assigned maintenance shift personnel will be replaced
when absent so long as the work load is expected to be of a
normal nature.
III. UPGRADE, LABORER
105 A. When a laborer is to be temporarily upgraded to truck helper,
truck driver or stores where skill and ability are approximately
equal, the senior qualified laborer, exclusive of laborers
regularly assigned to work as porters, will be upgraded.
106 A laborer will not be used for purposes of defeating overtime in
the truck or stores groups.
107 B. With regard to the laborers and truck driver crafts:
1. The COMPANY agrees to replace the regular labor leadman when
one is absent from work.
108 C. With regard to a proposal by the UNION prohibiting the temporary
transfer of laborers to the truck driver craft or the stores
group, the COMPANY agrees to abide by the decision of a majority
of the laborer craft.
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109 D. For the laborer classification only, Article 6, Paragraph 120
will be interpreted as follows: Consecutive upgrades will be
accumulated to count toward the 15-day period. When 15 days of
consecutive upgrading have occurred, benefits will be paid at the
rate of the job the laborer is holding at the time they qualify
for the benefit.
IV. LEADMAN
110 A. When the number of personnel regularly assigned to a shift
requires a leadman under the provisions of Article 11, a regular
leadman will be assigned to that shift.
111 B. The provisions of Article 11, Leadman Ratio, will apply to the
laborer craft. The provisions of Article 11 shall not apply to
the Stores and Truck Departments.
112 C. In the assignment of leadman to areas where the work is
predominantly "leading" and not working with the tools of the
craft, the Senior leadman with appropriate skill and ability will
be selected. This agreement in no way supersedes Article 11 of
the agreement or implies assignment to work areas by seniority.
V. SAFETY GLASSES
113 The COMPANY agrees to provide one pair of colored prescription safety
glasses for Operating Engineers required to operate hoisting
equipment. The parties recognize that this is a unique requirement
for that craft and that such provision is not intended to be the
beginning of a colored safety glass program for other groups.
VI. PREMIUM PAY
114 A. Separate overtime eligibility assignment lists will be maintained
in the Truck Department for the driver and helper
classifications.
115 B. Applying to all crafts, the COMPANY agrees that there shall be no
bypassing on overtime on the second day of rest because of an
upcoming regular schedule of work.
VII. SPECIAL QUALIFICATIONS
116 Training on specialized equipment (Balancing Machine) will be provided
to those in the Machinist craft.
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VIII. WORK CLOTHES
117 A. The COMPANY and UNION agree to the following with regard to
coveralls and wash-up time:
1. The COMPANY agrees to furnish coveralls and allows bath time
to the insulators when removing and replacing glass wool
blankets on the outer skin of boilers and the removal and
replacing of glass wool blankets between the outer skin and
the inner wall in boilers located within the plant.
2. The COMPANY agrees to furnish coveralls (no bath time) to
all employees working on a unit which has had a fire of
considerable magnitude.
3. The COMPANY agrees to furnish coveralls (no bath time) to
the operating engineers when applying crater compound to the
turntable on heavy rigs.
118 B. When stripping asbestos or applying asbestos blankets, coveralls
will be furnished. Replacement of coveralls will be made as
required by insulator foreman.
119 C. The COMPANY reserves the right to make coveralls mandatory on
certain jobs. Should the supervisor and employee disagree on the
need for coveralls on a certain job, the dispute will be resolved
by the Maintenance Supervisor, Shops/Craft, and the Maintenance
Supervisor, Support. Any further disputes may be resolved by the
grievance procedure.
IX. LAYOFF
120 The COMPANY agrees that contract janitors will not be employed if
Sterling Laborers are on layoff or if such action will result in
Sterling Laborers being temporarily laid off.
X. LICENSE REIMBURSEMENT
121 Operating Engineers (Local 450), Truck Drivers and members of overhead
distribution crews who, in order to perform their normal duties, are
required by state law to possess either a commercial or chauffeur's
license shall be reimbursed the cost of these licenses.
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XI. TRAINING
122 A. The COMPANY agrees to work with the craft steward in determining
special training needs for that craft.
123 B. In order to maintain a viable maintenance apprenticeship program,
the COMPANY and the UNION agree that when personnel are to be
added to a maintenance craft, the addition of apprentices shall
be favored provided the situation at the time permits.
XII. WORK INSTRUCTIONS
124 The COMPANY agrees that Sterling employees covered by this agreement
will not be expected to take instructions from a non-Sterling
supervisor or foreman.
XIII. STORES
125 A. Work Assignments
The COMPANY will rotate the stores clerks in the various work
assignments in the storeroom.
126 B. Shift Assignments
The four-month volunteer shift assignments will be applied in the
Stores Department. Employees in the Warehouseman classification
at the time the 1985 Agreement becomes effective, will not be
required to be a part of the regular Stores Department four-month
volunteer shift assignment program, as described above, in their
new position of Stores Clerk.
127 C. Call-outs
The call-out of stores clerks to dispense material from the
storeroom will continue as is being done under present practices.
128 D. Shift Rotation
The four-month voluntary shift rotation plan presently used in
the Maintenance crafts shall be applied to the Stores Department.
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XIV. INSTRUMENT AND ELECTRICAL WORK JURISDICTION
129 A. Each craft keeps union jurisdiction.
130 B. Jurisdiction becomes common for all maintenance work between
Instrument and Electrical crafts.
1. A detailed training program would contain two sections.
Class A training would provide basic safety training. After
a craftsman completes Class A training, the individual would
be able to assist the other craft. Class B training would
begin after completion of Class A and would be designed to
achieve a working knowledge in the second craft and make the
individual an I&E qualified craftsman. After completion of
Class B training, each employee successfully qualifying as
an I&E craftsman would be awarded a suitable certificate
signed by the plant manager and the business representatives
of IBEW #527 and IAM Instrument Local #903.
2. Training would be conducted by an Electrician and an
Instrumentman that would be jointly selected by the COMPANY
and the UNION based on skill and ability. Instrumentmen
would train Electricians and Electricians would train
Instrumentmen.
131 C. 1. When analyzer overtime is needed the low man with analyzer
skills will be called out. If the man is unsuccessful in
making the repair and special skills are needed, the low man
with those skills will be called out to assist him.
2. When power distribution overtime is needed, the two low men
with power distribution skills will be called out. If
additional manpower is needed, they will be called out as
outlined in the I&E overtime procedure.
3. When conventional overtime is needed the low I&E craftsman
will be called out. If the low man is unsuccessful in
making the repair and special skills are needed, then the
low man with those skills will be called out to assist him.
132 D. All existing chiefs/leadmen will be grandfathered. Employees of
the analyzer, power distribution and I&E groups will work under
the direction of their respective leadmen. Should two or more
leadmen be working together in the same I&E conventional crew,
the one with the most craft seniority shall direct the work.
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133 E. Both Electrical and Instrument groups will maintain separate
vacation lists and have approximately the same maximum ceiling
percentage.
134 F. Should a layoff be necessary involving either the Instrument or
Electrical craft, then the order of layoff shall be in reverse
order of craft seniority for the combined crafts. (The employee
of either craft having the least craft seniority shall be laid
off first, etc.).
135 G. The ratio of employees between the Instrument and Electrical
crafts will be maintained as it is on 5/1/85, for any new hires
or transfers of new employees into the two crafts. New hires
and/or transferees will have to agree to the I&E combination.
There will be no mandatory replacement of employees to meet craft
ratios if imbalance develops through attrition.
136 H. Maintenance overtime practices will apply to the combined group,
with the exception of the specific special overtime practices
listed in this Letter of Agreement.
137 I. When a vacancy occurs in the Analyzer or Power Distribution
Groups, the COMPANY and UNION will alternately select the I&E
craftsmen for either group to fill the vacancy. I&E craftsmen
who are selected will commit to continue their employment for a
period equal to two (2) years of training and two (2) years of
work after training.
138 J. The priority order for training employees on new equipment will
be as follows:
1. employees who will be immediately responsible for the new
equipment maintenance,
2. employees needed for check-out purposes,
3. employees who normally work overtime,
4. shift employees.
Familiarization training will be given to other employees, if
requested.
139 K. A formal and permanent comprehensive training program for
analyzer training will be initiated.
140 L. The existing agreement for Electrical craft safety backup will
apply to the new I&E group.
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XV. I&E UPGRADES
141 The following procedure will be followed in upgrading journeymen in
the Instrument and Electrical department or craft:
142 A. Permanent upgrades will be made in accordance with Article 5,
Section 8, Promotions.
143 B. Temporary upgrades of four (4) days or less will be filled by
upgrading the senior journeyman in the leadman's area. Under no
circumstances will a more senior journeyman from another
Leadman's area be transferred into the absent Leadman's area for
the purpose of filling the position. In the event there is no
journeyman in the Leadman's area, the senior qualified employee
in the group (Analyzer, Power Distribution, or I&E Conventional)
will be upgraded.
144 C. Temporary upgrades of more than four (4) days will be filled as
follows:
1. Temporary upgrades in the Analyzer group will be filled by
the senior qualified person in the Analyzer group;
2. Temporary upgrades in the Power Distribution group will be
filled by the senior qualified person in the Power
Distribution group; and
3. Temporary upgrades in the conventional Instrument and
Electrical group will be filled by the senior qualified
person in the conventional Instrument and Electrical group.
MATERIALS HANDLING SECTION
I. WORK ASSIGNMENTS
145 A chief pumper-gauger may have up to and including ten (10) pumper-
gaugers in their group.
146 Should the Coast Guard suspend or cancel the tankerman's license of
any Sterling pumper-gauger, said employee shall be assigned to other
work within the classification. Should the COMPANY discharge or
otherwise discipline a pumper-gauger for any alleged violation of
Coast Guard regulation, said discharge or discipline shall, in
accordance with Article 30 and 31, be subject to the grievance and
arbitration procedures.
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II. WORK CLOTHES
147 Distribution supervision will follow the coverall policy of the plant
when pumper-gaugers are working acetic acid. The COMPANY agrees to
provide coveralls for Esters job (steamerette and tankcar inspection).
LABORATORY SECTION
I. TRAINING
148 The COMPANY agrees to continue recognition of seniority for obtaining
training on different jobs, unless it is the employee's primary job.
II. WORK ASSIGNMENTS
149 Analysts in PPQ Lab shall be offered straight day and A-7 shifts by
group seniority.
150 When destaffing occurs on the straight day or A-7 shifts, the analyst
with the least group seniority will be moved.
151 These agreements apply only to lab facilities as presently organized
by teams.
152 The Chief Laboratory Analyst will be not be expected to perform
routine analytical work except under emergency or urgent conditions.
The Chief Laboratory Analyst will be expected to perform selected
screening samples. The Chief Laboratory Analyst will be expected to
perform his normal Chief responsibilities on all shifts. The Chief
Laboratory Analyst will be provided with training on the laboratory
network operation and is expected to have a thorough working knowledge
of its use in laboratory operations. One (1) chief will be assigned
to each shift. The hourly rate of pay and other responsibilities (per
paragraphs 157 and 158 of this section) for said Chief Analyst shall
be equal to that of Chief Operator.
OPERATING SECTION
153 I. SHIFT ASSIGNMENTS
Straight-day jobs in Operating Departments will be filled by the
senior qualified employee in the department, unless an agreement is
reached, otherwise within the department.
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154 II. In Manufacturing Departments, during shutdowns and/or start-ups of
operations, a special twelve hour shift schedule may be established
for periods of three days or more in duration in addition to current
schedules provided in the Labor Agreement.
155 The shifts will be continuous and start between 5:00 a.m. and 7:00
a.m.
III. WORK ASSIGNMENTS
156 The position of breaker on the X-1 shift is a straight day schedule.
In filling this position the senior qualified employee will be given
preference.
157 The chief operator will not be assigned routine duties during normal
operations; however, chiefs will continue their existing practice of
assisting operators as needed for effective, safe and efficient
operations.
158 In units staffed with two (2) operators, one will be a working chief.
159 The COMPANY agrees to give Operators, Pumper-Gaugers and Lab employees
all available information concerning duration of temporary jobs.
Relief jobs will be offered to senior employees prior to each vacation
year. An employee who accepts the relief job will serve in that job
for one year.
IV. LUNCH DELIVERY
160 The COMPANY agrees to establish a 12:00 midnight. meal delivery time
for overtime meals for Groups 1, 2, and 4.
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LETTERS OF AGREEMENT
INDEX
SUBJECT PAGE PAR. NO.
Arbitration............................ 1 3
Benefits............................... 11 67
Bid Procedure.......................... 9 59 thru 62
Clip-on Glasses........................ 11 66
Clothing -- Maintenance................ 20 117 thru 119
Coveralls.............................. 7, 20, 25 47 thru 49
117 thru 119
147
Elections.............................. 7 46
Food Service........................... 10 63, 64
Funeral Leave.......................... 9 54 thru 56
Gloves................................. 10 65
Incidental Work........................ 15 96
I&E Work Jurisdiction.................. 22 129 thru 140
I&E Upgrades........................... 24 141 thru 144
Inspections............................ 9 57
Jury Duty.............................. 7 44, 45
Layoff -- Maintenance.................. 20 120
Leadman -- Maintenance................. 19 110 thru 112
License Reimbursement -- Maintenance... 20 121
Lunch Delivery -- Operations........... 26 160
Non-Occupational Sick Pay.............. 4 25 thru 31
Overtime Errors........................ 3 18
Pay Day................................ 4 24
Physicals.............................. 5 33 thru 35
Premium Pay Practices.................. 1 4 thru 22
Premium Pay Practices -- Maintenance... 1 5 thru 10
Prescription Safety Glasses............ 8 50 thru 53
Productivity Statement................. 11 70 thru 76
Safety Glasses -- Maintenance.......... 19 113
i
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LETTERS OF AGREEMENT
INDEX
SUBJECT PAGE PAR. NO.
Scheduling............................. 9 58
Seniority.............................. 7 42, 43
Shift Assignment -- Maintenance........ 17 98 thru 104
Shift Assignment -- Operations......... 25 153 thru 155
Shift Preference....................... 1, 25 1, 153 thru 155
Shutdown Staffing -- Maintenance....... 13 85
Special Qualifications -- Maintenance.. 19 116
Stores................................. 21 125 thru 128
Training -- Laboratory................. 25 148
Training -- Maintenance................ 21 122, 123
Transportation......................... 1 2
Upgrade -- Maintenance................. 18 105 thru 109
Vacation............................... 6 36 thru 41
Work Assignment -- Operations.......... 25 153 thru 155
Work Assignment -- Laboratory.......... 25 148 thru 152
Work Assignment -- Maintenance......... 12 77 thru 97
Work Assignment -- Materials Handling.. 24 145 thru 146
Work Clothes -- Maintenance............ 20 117 thru 119
Worker's Compensation.................. 5 32
Work Gloves............................ 10 65
Work Instructions -- Maintenance....... 21 124
ii
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EXHIBIT 10.33
***OMITTED INFORMATION DENOTED BY ASTERISKS (***) HAS BEEN FILED SEPARATELY WITH
THE COMMISSION AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.***
METHANOL PRODUCTION AGREEMENT
between
BP CHEMICALS INC.
and
STERLING CHEMICALS, INC.
September 26, 1996
<PAGE>
METHANOL PRODUCTION AGREEMENT
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE 1 DEFINITIONS.................................... 2
ARTICLE 2 TERM...........................................11
ARTICLE 3 CONSTRUCTION PHASE.............................13
ARTICLE 4 OPERATIONS PHASE...............................13
ARTICLE 5 REIMBURSEMENT AND PAYMENT......................17
ARTICLE 6 CHANGES IN SPECIFICATIONS......................22
ARTICLE 7 PRODUCT OWNERSHIP; RISK OF LOSS................22
ARTICLE 8 TESTING........................................23
ARTICLE 9 OPERATION OF UNIT AND RELATED MATTERS..........24
ARTICLE 10 SHUTDOWNS OF THE UNIT..........................24
ARTICLE 11 INSURANCE......................................25
ARTICLE 12 OPERATING EXPENSES.............................26
ARTICLE 13 CAPITAL EXPENDITURES...........................27
ARTICLE 14 FUTURE EXPANSION EXPENDITURES..................28
ARTICLE 15 PERSONNEL......................................29
ARTICLE 16 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..30
ARTICLE 17 REPRESENTATIONS AND WARRANTIES OF BP...........31
ARTICLE 18 ACCESS.........................................32
ARTICLE 19 MEETINGS.......................................34
ARTICLE 20 TAXES..........................................35
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ARTICLE 21 FINANCIAL ASSURANCES...........................36
ARTICLE 22 ARBITRATION....................................36
ARTICLE 23 CONFIDENTIALITY AND INTELLECTUAL PROPERTY......37
ARTICLE 24 DEFAULTS; FAILURES; REMEDIES...................38
ARTICLE 25 INDEMNIFICATION................................38
ARTICLE 26 FORCE MAJEURE..................................42
ARTICLE 27 ASSIGNMENT.....................................44
ARTICLE 28 GENERAL........................................45
EXHIBITS
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Exhibit A Methanol Specifications
Exhibit B BP Contractual Commitments
Exhibit C Summary of Insurance Coverage
Exhibit D Company Marketing Costs
Exhibit E BP Marketing Costs
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METHANOL PRODUCTION AGREEMENT
THIS METHANOL PRODUCTION AGREEMENT executed this 26th day of
September, 1996, and effective as of the Effective Date, is by and between BP
CHEMICALS INC., an Ohio corporation, and STERLING CHEMICALS, INC., a Delaware
corporation.
W I T N E S E T H:
WHEREAS, the Company owns an idle methanol production facility at its
plant in Texas City, Texas that it desires to reconstruct through a combination
of new construction and increase in capacity; and
WHEREAS, BP is willing to share the actual costs of reconstructing and
increasing the capacity of the Company's idle methanol production facility and
operating it for a period of time thereafter in exchange for the right to
receive a portion of the methanol produced from such facility, as set forth in
this Agreement; and
WHEREAS, the Company is willing to grant to BP the right to receive a
portion of the methanol produced in exchange for BP sharing the actual costs of
reconstructing, increasing the capacity and operating the Company's methanol
production facility, as set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements herein contained
and the mutual benefits to be derived therefrom, the parties hereto agree as
follows:
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ARTICLE 1
DEFINITIONS
-----------
Unless otherwise stated in this Agreement, the following terms shall
have the meanings ascribed to them below, and the following definitions shall be
equally applicable to both the singular and plural forms of any of the terms
herein defined:
Affiliate: Affiliate of a party shall mean a corporation, at least
50% of the voting securities of which is owned directly or indirectly by such
party; a corporation which owns directly or indirectly at least 50% of the
voting stock of such party; a corporation, at least 50% of the voting securities
of which is owned directly by a corporation which owns directly or indirectly at
least 50% of the voting stock of such party; or any other entity controlled,
controlled by or under common control with such party.
After-Acquired Assets: All improvements, replacements, substitutions,
deletions, additions or other changes to the Unit made after the Effective Date
attributable to any Construction Expenditures, Capital Expenditures, and Future
Expansion Expenditures incurred after the Effective Date.
Annual Stated Capacity: A volume of Methanol equal to *** of the
daily capacity of the Unit demonstrated on the Construction Completion Date in
accordance with the Engineering Agreement, multiplied by 365, as it may be
adjusted from time to time in accordance with Section 14.2 hereof.
Agreement: This Methanol Production Agreement and all Exhibits
hereto, as the same may be amended from time to time pursuant to the provisions
hereof.
Arbitration Notice: As defined in Section 22.1 hereof.
BP: BP Chemicals Inc., an Ohio corporation, and its successors and
permitted assigns hereunder.
BP Allocation: A volume of Methanol during each Contract Year equal
to *** of the Methanol produced in the Unit during such Contract Year, subject
to Section 5.5 hereof.
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BP Capacity Factor: The greater of (i) the product obtained by
multiplying *** by the then Annual Stated Capacity or (ii) the quotient obtained
by dividing the difference between the Annual Stated Capacity and ***
*** by two. For example, if the Annual Stated Capacity were 150 million
gallons, then the BP Capacity Factor would be *** gallons, computed as
follows: the greater of (i) *** x 150 million = *** million or (ii) (150 million
- - *** million) / 2 = *** million.
BP Capacity Percentage: The greater of (i) *** or (ii) the quotient
(expressed as a percentage) obtained by dividing the BP Capacity Factor by the
Annual Stated Capacity, to the second decimal place. For example, if the Annual
Stated Capacity were 150 million gallons and the BP Capacity Factor were ***
million gallons, then the BP Capacity Percentage would be ***, computed as
follows: *** million / 150 million = ***.
BPCL: BP Chemicals Ltd., a company registered in England and Wales
which is an Affiliate of BP, and its successors and permitted assigns.
BP Contribution: The volume of Methanol contributed by BP to the
Methanol Pool, during each Contract Year, which shall be equal to the BP
Allocation.
BP Event of Default: During the Term hereof, (i) the failure by BP to
perform any of its financial obligations hereunder, which failure continues for
a period of thirty (30) days after receipt of written notice thereof by BP from
the Company, (ii) the failure by BP to perform any other covenants or agreements
hereunder to a material extent, which failure continues for a period of thirty
(30) days after receipt of written notice thereof by BP from the Company, and/or
(iii) the inaccuracy in any material respect of any representation or warranty
made by BP in this Agreement; provided, however, that with respect to an event
described in (i) or (ii) above, if BP has performed any such obligation,
covenant or agreement or made any such payment prior to the expiration of such
thirty (30)-day period, such failure or default shall not constitute a BP Event
of Default.
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BP Marketing Costs: As defined in Section 5.1(b) hereof.
Business Day: A day in the City of Houston, Harris County, Texas,
that is neither a Saturday, Sunday or legal holiday nor a day on which banking
institutions in Houston, Texas, are obligated by law to close.
Capacity Percentages: The BP Capacity Percentage and the Company
Capacity Percentage.
Capital Expenditures: The actual expenditures incurred after the
completion of the Construction Phase to acquire any asset for use on, or for the
benefit of, the Unit, or to add to, modify, replace or improve any asset used
on, or for the benefit of, the Unit, including but not limited to repair costs
in excess of insurance proceeds as provided in Section 10.3 hereof.
Capital Project: A project which requires Capital Expenditures.
Claim: As defined in Section 25.3 hereof.
Company: Sterling Chemicals, Inc., a Delaware corporation, and its
successors and permitted assigns hereunder.
Company Allocation: A volume of Methanol during each Contract Year
equal to *** of the Methanol produced in the Unit during such Contract Year,
subject to Section 5.5 hereof.
Company Capacity Factor: The difference between the Annual Stated
Capacity and the BP Capacity Factor. For example, if the Annual Stated Capacity
were 150 million gallons and the BP Capacity Factor were ***, then the Company
Capacity Factor would be ***, computed as follows: ***.
Company Capacity Percentage: The difference between 100% and the BP
Capacity Percentage. For example, if the BP Capacity Percentage were ***, the
Company Capacity Percentage would be ***, computed as follows: ***.
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Company Contribution: The volume of Methanol contributed by the
Company to the Methanol Pool during each Contract Year, which shall be equal to
the Company Allocation minus the Company Portion.
Company Event of Default: During the Term hereof, (i) the failure of
the Company to perform any of its financial obligations hereunder, which failure
continues for a period of thirty (30) days after receipt of written notice
thereof by the Company from BP, (ii) the failure by the Company to perform any
of its obligations, covenants or agreements hereunder to a material extent,
which failure continues for a period of thirty (30) days after receipt of
written notice thereof by the Company from BP, and/or (iii) the inaccuracy in
any material respect of any representation or warranty made by the Company in
this Agreement; provided, however, that with respect to an event described in
(i) or (ii) above, if the Company has performed any such obligation, covenant or
agreement prior to the expiration of such thirty (30)-day period, such failure
to perform shall not constitute a Company Event of Default.
Company Marketing Costs: As defined in Section 5.1(b) hereof.
Company Portion: That portion of the Company Allocation, as determined
by the Company from time to time in its sole discretion upon notice to BP as
provided in Section 19.2 hereof, not to exceed *** during each Contract Year,
prorated for Contract Years of less than twelve months.
Company Taxes: All taxes, if any, (other than capital stock, income
or excess profit taxes, general franchise taxes imposed on corporations on
account of their corporate existence or on their right to do business within the
state as a foreign corporation, and similar taxes) licenses, fees or charges
levied, assessed or made by any governmental authority on the act, right or
privilege of production, transportation, handling, sale, resale or delivery of
Methanol produced, transported, handled, sold, resold or delivered under this
Agreement or raw materials for the production of Methanol which (i) are measured
by the volume in gallons, value or sales price of, or are otherwise based on
factors respecting the production,
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purchase, transportation, handling, sale, resale or delivery of Methanol and
(ii) are imposed upon and paid by or for the account of the Company.
Construction Completion Date. The Day the Unit has demonstrated its
ability to meet the capacity and efficiency targets in the Engineering
Agreement.
Construction Expenditures: During the Construction Phase, all actual
costs, expenses, fees and other charges contemplated by the plant budget
(including incentives payable to John Brown pursuant to the Engineering
Agreement) attached as an exhibit to the Engineering Agreement, as it may be
amended from time to time, and all other costs, expenses, fees and other charges
necessary to commence commercial operation of the Unit.
Construction Phase: During the Term, the period commencing on the
Effective Date and continuing until the Construction Completion Date.
Contract Year: A period of twelve (12) consecutive months beginning
on the first Day of January next following the Effective Date, and beginning on
the first Day of January of each subsequent year during the Term hereof. The
period of time from the Effective Date until the first day of the January next
following the Effective Date, and the period of time from the first day of
January last occurring during the Term to the end of the Term shall each be
considered to be a Contract Year.
Damages: Except to the extent included as Operating Expenses in
Articles 7, 11 and 21 of this Agreement, any and all damages, losses, payments,
expenses, obligations, claims, liabilities, fines, penalties, clean-up or
remedial costs, costs of investigation, attorneys' fees, court costs, but
excluding all consequential, incidental and indirect damages and lost profits.
Day: The 24-hour period commencing at 7:00 a.m. Houston, Texas, time
on one calendar day and ending at 7:00 a.m. Houston, Texas, time on the
following calendar day. The date of a Day shall be that of its beginning.
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Declaration of BP Default: As defined in Section 24.2 hereof.
Declaration of Company Default: As provided in Section 24.1 hereof.
Delivery, Shipment and Storage Instructions: As defined in Section
4.12 hereof.
Effective Date: August 1, 1994.
Engineering Agreement: That certain Agreement for Design,
Engineering, Procurement Support, Construction Management and Start-Up Services
effective as of November 14, 1994 between the Company and John Brown, as it may
be amended from time to time pursuant to the terms thereof.
Estimated Delivery, Shipment and Storage Instructions: As defined in
Section 4.12 hereof.
Force Majeure: As defined in Section 26.2 hereof.
Future Expansion Expenditures: All actual costs, expenses, fees and
other charges, including but not limited to all Capital Expenditures, that are
incurred by the Company after the Construction Completion Date to increase the
capacity of the Unit to produce a volume of Methanol in excess of the Annual
Stated Capacity.
ICI Process: Technologies and know how of Imperial Chemical
Industries PLC pursuant to the Company's existing license directed to the
production of crude methanol from suitably purified and compressed gaseous
mixtures containing hydrogen, carbon monoxide and carbon dioxide and to the
production of refined methanol from crude methanol.
Indemnifying Party: As defined in Section 25.4 hereof.
Indemnified Party: As defined in Section 25.4 hereof.
Insurance Coverages: As defined in Section 11.1 hereof.
John Brown: John Brown, a Division of Trafalgar House, Inc., and its
successor and assigns.
Joint Account Revenue: The gross revenue received by BP arising from
sales of Methanol from the Methanol Pool during any Month including any gains or
losses from swaps or exchanges (including,
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but not limited to, freight or duty saved), less any commissions, freight and
other distribution costs incurred in delivering such Methanol and any costs
incurred by BP in connection with the purchase of Methanol from third parties
for the Methanol Pool from time to time.
Lease and Production Agreement. That certain Amended and Restated
Lease and Production Agreement dated August 8, 1994 between BP and the Company,
as same may be amended from time to time pursuant to the terms thereof.
Market Price: For any month, the price of methanol for such month as
reported in the Transaction Index of the Methanol and Derivatives Pricing Table
contained in the Methanol and Derivatives Monthly Business Report (published
monthly by Petrochemical Consultants International), appropriately adjusted to
reflect the FOB Gulf Coast price for methanol available to large volume users,
or such other index or publication as BP and the Company may agree to utilize.
Methanol: Methanol produced in the Unit and meeting the
Specifications in effect from time to time pursuant to this Agreement and
"methanol" (lower case) shall mean any methanol, regardless of whether it was
produced in the Unit or meets the Specifications. The unit of measurement of
Methanol shall be one United States gallon which may be converted to pounds
using a factor of 6.63 pounds per gallon. All quantities given herein, unless
otherwise expressly stated, are in terms of United States gallons.
Methanol Plant Assets: The existing, idled methanol production
facility at Texas City, Texas as of the Effective Date of which all or a portion
will become part of the Unit in accordance with the terms of this Agreement.
Methanol Pool: The volume of Methanol, consisting of the BP
Contribution and the Company Contribution and other methanol meeting the
Specifications obtained by BP by swaps, exchanges, purchases or otherwise for
use in accordance with this Agreement, to be marketed by BP on behalf of the
Company and BP as a single "pool", in accordance with the terms of this
Agreement.
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Month: The period beginning on the first Day of a calendar month and
ending on the first Day of the next succeeding calendar month.
Operating Expenses: As defined in Article 12 hereof.
Operations Phase: During the Term, the period commencing on the
Construction Completion Date and continuing until July 31, 2016, unless earlier
terminated as provided herein.
Plant: The Company's petrochemical plant located in Texas City, Texas.
Quarter: During any Contract Year which is a calendar year, the
period beginning on the first Day of the Months of January, April, July and
October and ending on the first Day of the next succeeding April, July, October
and January, respectively. During any Contract Year which is not a calendar
year, Quarter shall mean a three (3) month period (or such lesser period prior
to reaching the commencement of a calendar year as shall be applicable)
commencing on the first Day of such period and ending the first Day of the next
succeeding January, April, July or October, as the case may be.
Reimbursable Expenditures: Construction Expenditures, Operating
Expenses, Capital Expenditures and Future Expansion Expenditures, collectively.
Scheduled Shutdown: After the Construction Completion Date, a period
during which the Unit is shut down for the purpose of a Capital Project or such
maintenance as has been agreed by the parties hereto in a Semi-annual Meeting or
otherwise.
Semi-annual Meetings: The meetings of representatives of the Company
and BP to be held no later than four (4) weeks after the end of each March and
September in each Contract Year during the Operations Phase.
Specifications: The Methanol specifications, attached hereto as
Exhibit A, as the same may be changed from time to time by written agreement
between BP and the Company.
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Spills or Releases: Any emission, discharge, release or threatened
emission, discharge or release of products, pollutants, contaminants, hazardous
substances, toxic materials or solid or hazardous wastes into or upon ambient
air, surface water, ground water or land, or subsurface strata or otherwise
relating to the production, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of products, pollutants,
contaminants, hazardous substances, toxic materials or solid or hazardous
wastes, as any of the same relate to or affect or arise at any time in
connection with or as a result of operation of the Unit, or the manufacture,
processing, distribution, production, delivery, storage, shipment, treatment,
sale, resale or use, disposal or transportation of Methanol or feedstocks, raw
materials, intermediate streams, wastes or other materials used in or resulting
from the production of Methanol at the Unit.
Term: As defined in Section 2.1 hereof.
Third-Party Action: As defined in Section 25.3 hereof.
Third Party Offer: As defined in Section 27.4 hereof.
Unit: All real property at the Plant, together with all buildings,
improvements and fixtures located and to be located thereon and equipment,
piping and instrumentation relating thereto, which is used for the production,
storage, shipment and delivery of Methanol, or which is used to support the
production, storage, shipment and delivery of Methanol, in each case to the
extent so used, and all improvements, replacements, substitutions, deletions,
additions or other changes thereto from time to time.
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ARTICLE 2
TERM
----
2.1 The term of this Agreement shall commence upon the Effective Date
and continue through July 31, 2016, unless earlier terminated as provided herein
(herein referred to as the "Term").
2.2 The Term shall be divided into two phases: the Construction Phase
and the Operations Phase.
2.3(a) The parties hereto agree that at all times prior to and after
the Effective Date (i) the Company has been and will be the beneficial owner of
the Methanol Plant Assets, (ii) the Company is entitled to all available
depreciation, amortization, expense, and/or casualty loss deductions with
respect thereto, and (iii) BP is not and will not be entitled to the benefit of
any depreciation, amortization, expense, and/or casualty loss deductions with
respect to the Methanol Plant Assets.
(b) As a result of the payment of BP's share of Construction
Expenditures, Capital Expenditures, and Future Expansion Expenditures for the
After-Acquired Assets, the parties hereto agree that BP will be entitled to any
and all depreciation, amortization, expense, and/or casualty loss deductions
with respect to that portion of any Construction Expenditures, Capital
Expenditures, and Future Expansion Expenditures paid for directly or through
reimbursement by BP for the After-Acquired Assets.
(c) The parties hereto agree that the Company will be entitled to any
and all depreciation, amortization, expense, and/or casualty loss deductions
with respect to that portion of any Construction Expenditures, Capital
Expenditures, and Future Expansion Expenditures for the After-Acquired Assets
paid for by the Company and not reimbursed by BP.
(d) The Company shall be responsible for preparing and maintaining all
appropriate books and records of expenditures associated with the Company's
responsibilities under this Agreement which would
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allow the Company and BP to determine their respective share of depreciation,
amortization, expense, or casualty loss deductions in accordance with this
Agreement.
2.4 Upon the expiration of the Term on July 31, 2016, the Company
agrees to pay to BP an amount equal to *** remaining undepreciated book basis in
any portion of the Unit with respect to any Construction Expenditure, Capital
Expenditure or Future Expansion Expenditure to the extent paid for either
directly or through reimbursement by BP, and BP shall have no right to receive
any further payments at the expiration of the Term.
2.5 Upon the termination of this Agreement by BP due to a Company
Event of Default, the Company agrees to pay to BP an amount equal to *** of
BP's remaining undepreciated book basis in any portion of the Unit with respect
to any Construction Expenditure, Capital Expenditure or Future Expansion
Expenditure to the extent paid for either directly or through reimbursement by
BP, and BP, subject to Section 24.3 hereof, shall have no right to receive any
further payments upon such termination of this Agreement. In the event of any
other termination of this Agreement, the Company shall have all rights and
remedies provided by Section 24.3 and shall have no obligation to pay BP any
amounts in respect of its undepreciated book basis in any portion of the Unit
with respect to any Construction Expenditure, Capital Expenditure or Future
Expansion Expenditure to the extent paid for either directly or through
reimbursement by BP.
2.6 For purposes of Sections 2.4 and 2.5, BP's undepreciated book
basis will be calculated utilizing a ten (10) year life and straight line
depreciation. BP agrees to execute and deliver such instruments as the Company
may reasonably require at the expiration or termination of this Agreement to
reflect the termination of BP's right to depreciation, amortization, expense, or
casualty loss deductions with respect thereto.
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ARTICLE 3
CONSTRUCTION PHASE
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3.1 The Company has entered into the Engineering Agreement pursuant
to which the Unit will be reconstructed and its capacity increased. The
Engineering Agreement has been approved by BP. During the Construction Phase, BP
shall reimburse the Company in accordance with Article 5 below for *** of all
Construction Expenditures, except the cost of the initial catalysts for the Unit
which will be purchased initially by the Company and the expense reimbursed by
BP at the rate of *** per month for 48 months beginning September 1, 1996, based
on an initial catalyst cost of ***.
3.2 The Company and BP will establish a construction management team
comprised of one representative of the Company and one representative of BP who
will meet regularly during the Construction Phase to confer on the progress of
the construction and consider any proposed changes, subject to any limitations
of BP's and the Company's internal approval and control procedures.
3.3 The Company shall notify the BP representative in advance and
allow BP an opportunity to observe the tests for efficiency and capacity to be
performed pursuant to the Engineering Agreement upon introduction of chemicals
into the Unit so that BP can monitor such tests. Upon successful completion of
such tests, the Company will notify BP of the Day on which the Construction
Completion Date occurred and the amount of the initial Annual Stated Capacity
determined as a result of such tests.
ARTICLE 4
OPERATIONS PHASE
----------------
4.1 During the Operations Phase, BP shall reimburse the Company in
accordance with Article 5 below for (a) *** of all Operating Expenses, subject
to Section 5.5 below, (b) the BP Capacity Percentage of all Capital Expenditures
approved by BP, and (c) *** of any Future Expansion Expenditures approved by BP.
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4.2 BP shall be entitled to receive, and agrees to take, the BP
Allocation from the Company ratably on a monthly basis during the Operations
Phase. All of the BP Allocation (referred to herein as the BP Contribution)
shall be contributed by BP to the Methanol Pool to be marketed as provided in
this Agreement.
4.3 The Company shall be entitled to receive, and agrees to take, the
Company Allocation ratably on a monthly basis during the Operations Phase. From
the Company Allocation, the Company shall have the sole and exclusive right to
use, sell or otherwise dispose of the Company Portion subject to Section 19.2
hereof. The Company expects to resell the Company Portion to a third party or
parties, and the parties hereto agree that BP shall have no right to any
proceeds or benefits from resales by the Company of the Company Portion nor any
obligation or liability with respect thereto. After deduction of the Company
Portion, if any, from the Company Allocation, the entire remainder of the
Company Allocation (referred to herein as the Company Contribution) shall be
contributed by the Company to the Methanol Pool to be marketed by BP as provided
in this Agreement.
4.4 Neither the Company nor BP shall have any right to take or
receive Methanol from the Methanol Pool without paying Market Price therefor.
All sales, swaps, exchanges and other transfers of Methanol from the Methanol
Pool to the Company or BP shall be invoiced at Market Price, in accordance with
Article 5 below. All sales, swaps, exchanges and other transfers from the
Methanol Pool by BP to any Affiliate of BP or the Company shall be made on an
arms length basis, on terms no less favorable to the Methanol Pool than the
terms available from unaffiliated third parties and with each such Affiliate
being treated as if it were an unaffiliated third party. Sales, swaps,
exchanges and other transfers of Methanol from the Methanol Pool to persons
other than the Company, BP or Affiliates of BP or the Company shall be invoiced
in accordance with the prices negotiated with such persons.
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4.5 Pursuant to the Lease and Production Agreement, BP has the
obligation to provide methanol for the Plant's acetic acid unit, which
obligation shall remain in full force and effect in accordance with the terms of
the Lease and Production Agreement notwithstanding the execution and delivery of
this Agreement. BP agrees to purchase from the Methanol Pool, if available, all
of its requirements of methanol to be supplied to the acetic acid unit of the
Plant pursuant to the Lease and Production Agreement, subject to contractual
commitments existing on the date of execution of this Agreement and listed on
Exhibit B attached hereto. It is the intention of the parties that the
operation of the Company's acetic acid unit pursuant to the Lease and Production
Agreement and the Unit pursuant to this Agreement shall be conducted on an arms
length basis in accordance with the terms of such agreements so that neither
facility subsidizes the operation of the other.
4.6 The Company agrees to purchase from the Methanol Pool, if
available, all of its requirements of methanol for the Plant (other than
methanol for the acetic acid unit which will be provided by BP, as described
above).
4.7 BP shall market from the Methanol Pool on behalf of BP and the
Company and in accordance with the marketing strategy developed by the
management team pursuant to Section 4.8 hereof, all the Methanol not purchased
for the Plant, pursuant to Sections 4.5 and 4.6 hereof. BP agrees that it will
not purchase Methanol from the Methanol Pool for its own account for resale,
swap or exchange. BP further agrees that in the event that BP arranges any
swaps or exchanges of Methanol from the Methanol Pool, or purchases of methanol
for the Methanol Pool, any benefit, loss or cost resulting therefrom (for
example, transportation savings) shall be included in the calculation of the
Joint Account Revenue. The decision to purchase methanol for the Methanol Pool
shall be jointly made by the Company and BP.
4.8 The Company and BP will establish a management team comprised of
representatives from the Company and BP for the administration of the Methanol
Pool having agreed powers and responsibilities
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for developing marketing strategy, tactical plans and similar matters and
coordinating the production of Methanol and marketing of the Methanol Pool.
4.9 Except as otherwise provided in Section 9.4 hereof, the Company
will be responsible for the operation of the Unit, for obtaining and maintaining
all related permits, for scheduling shipping and delivery, for loading any
vessels in connection with sales from the Methanol Pool pursuant to BP's
instructions, and for notifying BP of the actual amount of Methanol produced and
shipped.
4.10 BP will be responsible for all sales, marketing, shipping and
delivery of Methanol from the Methanol Pool, including receiving orders,
advising the Company of orders, billing, collecting, accounting for the Joint
Account Revenue, and disbursing the Joint Account Revenue in accordance with
Section 5.3 below. In marketing Methanol from the Methanol Pool, BP will employ
terms and conditions of sale reasonably acceptable to the management team
including without limitation the liability limitations in Section 6.2 hereof.
Any deviation from such terms and conditions will require the consent of both
the Company and BP.
4.11 At least fourteen (14) Business Days prior to the end of each
Quarter during the Operations Phase, the Company shall notify BP (orally, in
writing or in other mutually agreeable form) of the estimated volume of
Methanol, if any, comprising the Company Portion for the following Quarter. At
least fourteen (14) Business Days prior to the first Day of each Month during
the Operations Phase, the Company shall notify BP of the firm volume of
Methanol, if any, comprising the Company Portion for the following Month. The
aggregate amount of the Company Portion for a Contract Year will not exceed the
amount of the Company Portion specified in the statement delivered to BP
pursuant to Section 19.2 hereof.
4.12 On or before fourteen (14) Business Days prior to the end of
each Quarter during the Operations Phase, BP shall provide notice to the Company
(orally, in writing or in other mutually agreeable form) setting forth the
estimated delivery, shipment and storage instructions of Methanol for the coming
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Quarter (the "Estimated Delivery, Shipment and Storage Instructions"), which
shall include estimated dates, volumes of deliveries, shipping and storage
requirements of Methanol for such Quarter. At least five (5) Business Days
prior to the first Day of each Month during the Operations Phase, BP shall
provide notice in similar form to the Company setting forth the requested dates,
volumes of deliveries, shipping and its storage requirements of Methanol for the
coming Month (the "Delivery, Shipment and Storage Instructions"). The Company
shall be entitled to rely on the Estimated Delivery, Shipment and Storage
Instructions and the same shall be deemed to be the Delivery, Shipment and
Storage Instructions unless or until actual Delivery, Shipment and Storage
Instructions are received by the Company at least five (5) Business Days prior
to the first Day of the coming month.
ARTICLE 5
REIMBURSEMENT AND PAYMENT
-------------------------
5.1 (a) BP shall reimburse the Company for its applicable percentage
of Reimbursable Expenditures. It is the intention of the parties that the
Company receive from BP full recovery of all Reimbursable Expenses to the extent
of BP's applicable percentage of the Reimbursable Expenses. The Company shall,
on or before the fifth Business Day of each Month, render to BP an invoice with
reasonable supporting detail for the preceding Month showing the amount and type
of Reimbursable Expenditures actually incurred by the Company during the
preceding Month and the total amount due. BP shall pay each such invoice on or
before the tenth Day after receipt thereof (or if such Day is not a Business
Day, on the Business Day next following).
(b) BP acknowledges that the Company will incur costs in coordinating
its production activities with BP's marketing activities and otherwise
supporting BP's marketing efforts that will not constitute Reimbursable Expenses
(other than corporate overheads or the cost of personnel associated with the
Lease and Production Agreement), as that term is used in this Agreement,
including but not limited to those set
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forth in Exhibit D attached hereto ("Company Marketing Costs"). The Company
acknowledges that BP will incur costs in performing its marketing obligations
under this Agreement (other than corporate overheads or the cost of personnel
associated with the Lease and Production Agreement) including but not limited to
those set forth in Exhibit E attached hereto ("BP Marketing Costs"). The
parties agree to (i) develop procedures to account for both the Company
Marketing Costs and the BP Marketing Costs and (ii) cooperate to reduce these
costs over time, subject to the requirements of the agreed marketing strategy
and related production coordination and marketing support activities. If
practicable, estimates of the BP Marketing Costs and the Company Marketing Costs
for the next Contract Year shall be agreed at the fall Semi-annual Meeting. If
the parties have agreed to such estimates, the monthly amount by which the
estimated BP Marketing Costs exceed the estimated Company's Marketing Costs
shall be deducted from the Joint Account Revenue monthly commencing the next
Contract Year and reconciled to actual costs as the parties may determine
necessary at the following fall Semi-annual Meeting by March 15 of the
subsequent Contract Year as part of the reconciliation contemplated by Section
5.4.
5.2 Both the Company and BP shall pay to BP the Market Price for all
Methanol sold or delivered to them from the Methanol Pool. BP shall, on or
before the fifth Business Day of each month render to the Company and BP an
invoice for the preceding Month showing the quantity of Methanol sold or
delivered to each from the Methanol Pool, the Market Price payable for such
Methanol and the total amount due from each. The Company and BP shall each pay
the amount due from it pursuant to such invoice on or before the tenth Day after
receipt therefor (or if such Day is not a Business Day, on the Business Day next
following).
5.3 BP shall disburse all Joint Account Revenue to the Company and BP
on a monthly basis. Disbursement shall be made for the Month two Months
preceding the current Month. The disbursement of Joint Account Revenue shall be
accompanied by a statement setting forth in reasonable detail the
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calculation of such Joint Account Revenue and shall be made on or before the
fifteenth Day of each Month (or if such Day is not a Business Day, then on the
Business Day next occurring) during the Term commencing on the second such date
occurring after the Construction Completion Date. For example, BP shall
disburse any Joint Account Revenue for June by August 15 of a Contract Year. At
its option, BP may combine the payments to the Company due under Sections 5.1
and 5.3 of this Agreement into a single payment.
5.4 For convenience during each Contract Year during the Operations
Phase, Joint Account Revenue will be allocated equally to the Company and BP on
a monthly basis (or in such other proportions as determined by the management
team at the previous fall Semi-annual Meeting), subject to a year-end
reconciliation by March 15 of the next Contract Year (or if such Day is not a
Business Day, then on the Business Day next occurring). When the year-end
reconciliation occurs, the Joint Account Revenue will be allocated in proportion
to the percentage that the actual Company Contribution or the actual BP
Contribution for each Month of such Contract Year, respectively, bears to the
total volume of Methanol contributed to the Methanol Pool during each Month of
such Contract Year, based on a monthly first-in first-out calculation. For
example, when the year-end reconciliation occurs for a particular Month of a
Contract Year, if Joint Account Revenue were $100,000 and the Company and BP
contributed *** and ***, respectively, of the Methanol sold by the Methanol Pool
during that Month, the Company would be entitled to *** of the total Joint
Account Revenue (***) and BP would be entitled to *** of the total Joint Account
Revenue (***) for such Month, notwithstanding the fact that the actual
distribution during such Month was allocated equally. The year-end
reconciliation shall be cumulative of all such adjustments for each Month during
such Contract Year. BP shall include any adjustments required by the year-end
reconciliation of Joint Account Revenue with the disbursement of Joint Account
Revenue for February of the following Contract Year, accompanied by a statement
setting forth in reasonable detail the
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calculation of such reconciliation. If necessary, BP may submit an invoice to
the Company for any amounts owed as a result of the year-end reconciliation, and
the Company shall pay such invoice on or before the tenth Day after receipt
thereof (or if such Day is not a Business Day, on the Business Day next
following).
If at any time during a Contract Year either party believes that the
difference between the estimated and actual allocations of Joint Account Revenue
to either the Company or BP exceeds ***, then either party may request a
mid-year reconciliation to be conducted in the same manner as a year-end
reconciliation. At the end of the Term, a mid-year reconciliation shall be
conducted in the same manner as a year-end reconciliation.
Any unsold volumes of Methanol remaining in the Methanol Pool at the
end of a Contract Year shall be allocated between the Company and BP on the
basis of their respective contributions for that Contract Year and added to the
Company Contribution or the BP Contribution for the following Contract Year.
Any Methanol remaining in the Methanol Pool after the end of the last Contract
Year will be sold and BP shall allocate and distribute the Joint Account Revenue
from such remaining Methanol as if it were a year-end reconciliation.
5.5 The parties have agreed that (a) if at the end of any Contract
Year, annual production of Methanol during that Contract Year was 150 million
gallons or less, then the Company Allocation will be *** and the BP Allocation
will be *** and that Operating Expenses will be allocated *** to the Company and
*** to BP and (b) if at the end of a Contract Year, annual production of
Methanol exceeded 150 million gallons, such excess production and related
Operating Expenses will be allocated equally between the Company and BP.
Accordingly, if at the end of any Contract Year, annual production of Methanol
from the Unit exceeded 150 million gallons, the Company shall, within 30 Days of
the end of such Contract Year reallocate to BP (a) *** of all volumes produced
in excess of 150 million gallons for
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such Contract Year, and (b) *** of all Operating Expenses (calculated on an
annualized basis) related to production in excess of 150 million gallons per
year. The Company shall include any additional Operating Expenses due to such
year-end reallocation with the invoice for expenses for January of the following
year or submit a separate invoice for such Operating Expenses within 30 Days of
the termination or expiration of this Agreement. BP shall pay such invoice on
or before the tenth Day after receipt therefor (or if such Day is not a Business
Day, on the Business Day next following). BP shall make a similar year-end
reallocation of Joint Account Revenue, if necessary and include it with the
statement of Joint Account Revenue for January of the following year, or submit
a separate statement within 30 Days of the termination of expiration of this
Agreement. The Company Portion shall not be affected by the reallocation of
annual production or revenues in excess of 150 million gallons.
5.6 If either BP or the Company has reason in good faith to dispute
the accuracy of any invoice or portion thereof submitted to it hereunder, it
will pay that part of the invoice which is undisputed in accordance with the
provisions of this Article 5 and, after such dispute has been resolved, pay any
balance due to the Company or BP, as the case may be, on or before the tenth day
after the receipt by it of a replacement invoice submitted to it by the Company
or BP (or if such Day is not a Business Day, on the Business Day next
following).
5.7 The Company and BP shall maintain sales, accounting, production,
business and other records relating to this Agreement in accordance with usual
and customary practices and standards in the methanol industry in respect of all
matters referred to in this Article 5. Each shall provide the other access to
such records and data pursuant to the provisions of Article 18 hereof.
5.8 The suspension of the production of Methanol in the Unit by
reason of Force Majeure shall not suspend either party's obligation to make the
payments required hereunder.
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5.9 Delay in submission of invoices by either party shall not
constitute a waiver of any right to receive payment hereunder.
ARTICLE 6
CHANGES IN SPECIFICATIONS
-------------------------
6.1 The Company shall employ the ICI Process in the production of
Methanol. All methanol produced in the Unit and made available to the Methanol
Pool will comply with the Specifications (unless otherwise mutually agreed) and
shall be produced in accordance with established procedures and methods of
manufacture. The Specifications shall not be changed unless agreed to in
advance in writing by BP and the Company.
6.2 No claim of any kind with respect to the conformance of methanol to
the Specifications, whether based on contract, warranty, negligence, indemnity,
strict liability or otherwise, shall be greater than the price of the
nonconforming methanol, and the Company's sole obligation with respect to any
methanol which does not conform to the Specifications shall be the replacement
of such methanol with conforming product.
ARTICLE 7
PRODUCT OWNERSHIP; RISK OF LOSS
-------------------------------
7.1 At the time methanol is initially produced by the Company in the Unit,
it shall be considered to be *** owned by the Company and *** owned by BP,
subject to Section 5.5 hereof and the Company and BP shall share the risk of
loss thereof as an Operating Expense. Methanol produced in the Unit shall be
transferred by the Company by pipeline to the methanol storage tanks located at
the Plant. While stored in such methanol storage tanks pending (a) transfers by
pipeline to other units of the Plant as contemplated by Sections 4.5 and 4.6
hereof, (b) transfers pursuant to BP's authority to market volumes of Methanol
in the Methanol Pool and/or (c) transfer by the Company
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to a third party as contemplated by Section 4.3, the Company shall be
responsible for storage of the Methanol and the Company and BP shall share the
risk of loss thereof as an Operating Expense.
ARTICLE 8
TESTING
-------
8.1 The methanol produced in the Unit shall be tested by the Company under
the testing procedures and schedules established by the Company prior to the
commencement of production, with the concurrence of BP. Such procedures and
schedules may be changed from time to time by the agreement of BP and the
Company. The Company shall maintain accurate records and data of any quality
testing of methanol done by or for the Company and shall retain representative
samples of such methanol for a reasonable period of time. The Company shall
provide BP access to such samples and all records and data maintained by the
Company with respect thereto pursuant to the provisions of Article 18 hereof.
8.2 Confirmatory tests of the quality of shipments from the Methanol Pool
of methanol produced in the Unit shall be performed at the time of delivery to
the carrier and when requested by BP, either conducted by or in the presence of
an independent surveyor, utilizing representative samples taken from the intake
flange of any barge or other inland water or marine vessel, and from the tanks
thereof where necessary, into which such methanol is loaded. The Company shall
retain such samples for sufficient time to allow delivery to and acceptance by
BP's customers of such methanol. The Company shall provide BP access to such
samples and certifications and all records maintained by the Company with
respect thereto pursuant to the provisions of Article 18 hereof.
8.3 Subject to Section 6.2 hereof, methanol made pursuant to this
Agreement shall be conclusively presumed as between the Company and BP to be in
compliance with the Specifications unless, when tested according to the agreed
procedures and schedules pursuant to the provisions of Sections 8.1 or 8.2
hereof, analysis shows the methanol tested not to have met the Specifications.
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ARTICLE 9
OPERATION OF UNIT AND RELATED MATTERS
-------------------------------------
9.1 The Company shall operate the Unit from its acetic acid control
room subject to the terms and conditions of this Agreement in a commercially
reasonable manner provided that the Company shall comply in all material
respects with applicable laws and regulations. The Company shall have the sole
right to operate the Unit and determine operating procedure with respect
thereto.
9.2 The parties acknowledge that their relationship under this
Agreement is contractual and not fiduciary in nature, and no higher standard of
care applies to either party.
9.3 The Company shall comply in all material respects with the
requirements of governmental permits and authorities having jurisdiction now in
force or which may hereafter be in force pertaining to the operation of the Unit
and the production of Methanol.
9.4 The Company agrees to consult with BP regarding the terms of any
arrangements regarding the supply of natural gas to the Unit. The terms of any
such arrangements shall be subject to approval by BP, which approval may not be
unreasonably delayed or withheld.
ARTICLE 10
SHUTDOWNS OF THE UNIT
---------------------
10.1 The parties agree that the Unit will be shut down for such
periods of time as are required to accomplish the Scheduled Shutdowns. During
Scheduled Shutdowns, the Company will not produce Methanol hereunder and it is
the present intention of the parties to utilize the methanol storage tanks
located at the Plant and such other storage as necessary to accumulate Methanol
for delivery during such Scheduled Shutdowns. No Scheduled Shutdown shall
affect the obligations of the Company or BP to make the payments due hereunder,
or to perform the other covenants and agreements of the parties hereunder.
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10.2 The Company shall notify BP as soon as possible in the event of
an unscheduled shutdown of the Unit. No unscheduled shutdown shall affect the
obligations of the Company or BP to make the payments due hereunder, or subject
to the provisions of Article 26 hereof the other covenants and agreements of the
parties hereunder.
10.3 In the event of any damage to or destruction of the Unit, the
Company shall repair the Unit unless the parties agree otherwise. The Company
and BP shall share the cost of any repair costs in excess of insurance proceeds
in accordance with their respective Capacity Percentages, which costs shall be
treated as approved Capital Expenditures. If the Company repairs the Unit, the
parties' obligations under this Agreement shall continue. If the parties elect
not to repair the Unit, this Agreement and the parties' obligations hereunder
shall be terminated.
10.4 Expenses of materials and equipment purchased in anticipation of
a Scheduled Shutdown and expenses of unscheduled shutdowns shall be considered
Operating Expenses and invoiced and reimbursed as such expenses are incurred in
the ordinary course. However, in the event of a Scheduled Shutdown with
expenses estimated to exceed ***, BP shall also be invoiced in the Month
preceding such Scheduled Shutdown for *** of the estimated shutdown cost
(excluding expenses already reimbursed by BP), with adjustments to actual
expenses to be made after completion of the Scheduled Shutdown, unless otherwise
agreed.
ARTICLE 11
INSURANCE
---------
11.1 As of the Effective Date, the Company will obtain and maintain
throughout the Term, subject to Section 11.2 hereof, the insurance coverages
described on Exhibit C attached hereto in respect of the Unit and those parts of
the Plant that serve the Unit. Unless the parties hereto otherwise agree, BP
shall be named an additional insured on the policies providing casualty and
property damage (excluding
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business interruption) and the general and excess liability portions of such
coverages (collectively "Insurance Coverages"). The portions of premiums for
and the cost of deductibles under Insurance Coverages attributable to the Unit
shall be considered Operating Expenses. The Company shall allocate the portion
of the premiums for and the cost of deductibles under Insurance Coverages
attributable to other parts of the Plant that serve the Unit to the Company and
BP on a commercially reasonable basis in accordance with its established
practices for the rest of the Plant, which shall also be considered Operating
Expenses. BP shall have no responsibility hereunder for the premium cost of, or
the deductible expense associated with, business interruption insurance related
to the Unit and those parts of the Plant that serve the Unit, and shall not be
entitled to receive any of the proceeds paid under any such business
interruption policy.
11.2 The Company shall advise BP whenever any insurance policy or
area of coverage listed on the Summary of Insurance Coverage as set out in
Exhibit C to this Agreement is renegotiated or otherwise changed. BP shall be
advised prior to making any major changes in these coverages and shall be
afforded a reasonable opportunity to review such proposed changes.
ARTICLE 12
OPERATING EXPENSES
------------------
12.1 "Operating Expenses" shall mean all actual costs, expenses, fees
and other charges incurred by or on behalf of the Company after the Construction
Phase in connection with the operation of the Unit during the Term to produce,
store, ship and deliver methanol produced in the Unit, including but not limited
to fixed and variable costs, factory indirect expense, plant overhead
allocation, catalysts (other than the initial catalysts provided for in Section
3.1 hereof), Company Taxes, ad valorem and real estate taxes
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relating to the Unit, insurance (pursuant to Section 11.1 hereof), maintenance,
and temporary and/or permanent shutdown costs.
12.2 The cost of all catalysts (other than the initial catalysts
provided for in Section 3.1 hereof) shall be included as an Operating Expense as
incurred and not amortized.
ARTICLE 13
CAPITAL EXPENDITURES
--------------------
13.1 During the Operations Phase, BP shall reimburse the Company in
accordance with Article 5 above for the BP Capacity Percentage of all Capital
Expenditures approved by BP; provided, however, that (a) BP will not
unreasonably withhold its approval for Capital Expenditures needed (i) to meet
the Company's normal operating procedures, (ii) to ensure that the Unit and its
operation and the production, delivery, storage, shipment, sale, resale, use,
disposal or transportation of Methanol, feedstock, supplies and materials comply
with applicable law and regulations, or (iii) to provide for the health, safety
and welfare of the Company's employees on the Unit; and (b) whenever
practicable, the Company shall provide BP a reasonable opportunity to propose
any cost-effective changes or alternative approaches to any such proposed
Capital Expenditures.
13.2 For each Contract Year during the Operations Phase a capital
budget shall be prepared by the Company and submitted for approval by BP no
later than September 30 of the previous Contract Year, except in the case of the
first partial year during the Operations Phase. Such capital budget shall
consist of an outline description of and an estimate of the Capital Expenditures
for each identified Capital Project and a lump sum provision in respect of other
possible developments. Such capital budget will be discussed at the fall Semi-
annual Meeting and approved in whole or in part by BP at or subsequent to that
meeting, but in any event before the next succeeding January 1.
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13.3 Additional Capital Projects may be added to the capital budget
described in Section 13.2 by the Company at any time during a Contract Year,
provided that the approval of BP has first been obtained.
13.4 The Company may commence a Capital Project and incur Capital
Expenditures not contemplated by Section 13.2 or 13.3 hereof without the prior
approval of BP where the Company determines that circumstances reasonably
require; provided, however, that the Company shall at the earliest practicable
opportunity notify BP of such Capital Project and Capital Expenditure. If BP
does not approve such Capital Expenditure, the Company shall at its option (i)
cease such Capital Project and Capital Expenditure, or (ii) continue such
project and Capital Expenditure at its own cost; provided, however, that the
Company may refer the matter to arbitration under Article 22 hereof.
13.5 Capital Projects which individually or in the aggregate are
expected to exceed *** in cost shall be analyzed by BP and the Company to
determine whether and to what extent, if any, any portion of such Capital
Project should be considered a Future Expansion Expenditure, and reimbursed by
BP accordingly. In that case, only the incremental cost of the portion of the
Capital Project that is determined to result in the expansion of the Unit will
be considered a Future Expansion Expenditure, and the remainder of the cost of
the Capital Project will be considered a Capital Expenditure for purposes of BP
reimbursement.
ARTICLE 14
FUTURE EXPANSION EXPENDITURES
-----------------------------
14.1 From time to time during the Operations Phase, the Company may
make Future Expansion Expenditures. BP shall reimburse the Company in
accordance with Article 5 above for *** of any Future Expansion Expenditure
approved by BP. BP shall reimburse the Company for, and the Company may make,
any Future Expansion Expenditure, regardless of amount, in any Contract Year
during the
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Operations Phase if such project and such Future Expansion Expenditure have been
included in the Company's operating plan contemplated by this Agreement for such
Contract Year and such plan was approved by BP prior to the payment of such
Future Expansion Expenditure. In the event BP declines to approve any Future
Expansion Expenditure, the Company may proceed with such expenditure without any
reimbursement from BP therefor, and the Company shall be entitled to all the
benefits resulting therefrom, including without limitation the sole right to any
increased production.
14.2 The Annual Stated Capacity shall remain in effect
notwithstanding Future Expansion Expenditures until such time as a new capacity
test is performed and the Annual Stated Capacity is adjusted accordingly. A new
capacity test may be requested by either the Company or BP at any time, but the
Annual Stated Capacity will not be adjusted more frequently than once every
twelve months, without the agreement of both the Company and BP.
ARTICLE 15
PERSONNEL
---------
15.1 The Company shall at all times have sole authority with respect
to all personnel matters involving the employees, consultants and third-party
contractors at the Plant and the Unit, including, without limitation, salaries,
benefits, compensation, indirect personnel costs, manpower needs, training,
insurance, labor matters, working hours, job responsibilities, health and safety
procedures, bonding and all other employee, personnel-related and contracting
matters.
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ARTICLE 16
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to BP as follows:
16.1 Organization, Good Standing and Corporate Power. The Company is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified as a foreign corporation in the
State of Texas, and has all requisite corporate power and authority to carry on
its business as presently conducted, to enter into this Agreement and perform
its obligations hereunder.
16.2 Authority Relative to Agreement. The execution, delivery and
performance by the Company of this Agreement have been duly and effectively
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by the Company and is a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except
insofar as enforcement may be limited by (i) bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally, and (ii) general principles of equity.
16.3 No Conflict with Other Instruments or Proceeding. Neither the
execution and delivery of this Agreement, nor the performance or compliance with
the terms and conditions hereof conflict with, or will result in a breach by the
Company of, or constitute a default under, or result in the creation of any
lien, charge or encumbrance upon, any asset of the Company pursuant to any of
the terms, conditions or provisions of (i) the Certificate of Incorporation or
Bylaws of the Company, (ii) any mortgage, deed of trust, lease, contract,
agreement or other instrument to which the Company is a party by which the
Company may be bound or affected, or (iii) any writ, order, judgment, decree,
statute, ordinance, regulation or any other restriction of any kind or
character, to which the Company is subject, or by which the Company may be bound
or affected.
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16.4 No Litigation or Proceeding. As of the date hereof, there are
no actions, suits, investigations or proceedings pending or to the Company's
knowledge threatened against the Company at law or in equity or before or by any
federal, state, municipal or other governmental or non-governmental department,
commission, board, bureau, agency or instrumentality seeking to enjoin, restrain
or otherwise prevent the execution and delivery of this Agreement by the
Company.
16.5 No Warranties. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 6.1
HEREOF, THE COMPANY HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED
REPRESENTATION OR WARRANTY RELATING TO ANY METHANOL PRODUCED OR SOLD HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 17
REPRESENTATIONS AND WARRANTIES OF BP
------------------------------------
BP represents and warrants to the Company as follows:
17.1 Organization. BP is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and is duly
qualified to do business as a foreign corporation in the State of Texas and has
all requisite corporate power and authority to carry on its business as
currently conducted, to own and operate the properties owned by it and to enter
into this Agreement and perform its obligations hereunder.
17.2 Authority Relative to Agreement. The execution, delivery and
performance by BP of this Agreement have been duly and effectively authorized by
all necessary corporate action. This Agreement has been duly executed by BP and
is a legal, valid and binding obligation of BP enforceable in accordance with
its terms, except insofar as enforcement may be limited by (i) bankruptcy,
insolvency, reorganization
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or similar laws relating to or affecting the enforcement of creditors' rights
generally, and (ii) general principles of equity.
17.3 No Conflict with Other Instruments or Proceedings. Neither the
execution and delivery of this Agreement, nor the performance or compliance with
the terms and conditions hereof conflict with, or will result in a breach by BP
of, or constitute a default under, or result in the creation of any lien, charge
or encumbrance upon, any of its assets pursuant to any of the terms, conditions
or provisions of (i) the Certificate of Incorporation or Bylaws of BP, (ii) any
mortgage, deed of trust, lease, contract, agreement or other instrument to which
BP is a party or by which BP may be bound or affected, or (iii) any writ, order,
judgment, decree, statute, ordinance, regulation or any other restriction of any
kind or character, to which BP is subject, or by which BP may be bound or
affected,
17.4 No Litigation or Proceedings. As of the date hereof, there are
no actions, suits, investigations or proceedings pending or to BP's knowledge
threatened against or affecting BP at law or in equity or before or by any
federal, state, municipal or other governmental or non-governmental department,
commission, board, bureau, agency or instrumentality seeking to enjoin, restrain
or otherwise prevent the execution and delivery of this Agreement by BP.
ARTICLE 18
ACCESS
------
18.1 Upon written request by BP from time to time, the Company shall
provide to BP, its attorneys, accountants and other representatives, at BP's
expense and subject to the receipt by the Company of confidentiality agreements
no less onerous than apply to the parties hereto under Article 23 hereof, at
reasonable times during normal business hours, access to the Company's books,
records and accounts relating to the operation of the Unit and the performance
of the Company's obligations under this Agreement, except as such access may be
prohibited by licenses or sub-licenses from a third party to which
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the Company is a party or by which the Company is bound. BP shall thereupon
have the right to make copies of and abstracts from such books, records and
accounts, at BP's expense, which copies may be removed from the premises of the
Company and retained by BP, subject to the confidentiality provisions of Article
23 hereof.
18.2 The Company agrees to permit representatives of BP, at BP's sole
cost, expense, and risk to have access to the Unit, and to the Company's
operating personnel, at reasonable times and on reasonable notice for the
purpose of observing and asking questions about the present or proposed
operations of the Unit (e.g.,in order to audit the environmental status and
condition of the Unit) so long as such access (a) is consistent with the
Company's contractual obligations under any licenses or sublicenses to which the
Company is a party, and (b) does not materially disrupt the operation of the
Unit, or the Company's other activities at the Plant. BP agrees to furnish the
Company with copies of all information and audits obtained or prepared in
connection with such access.
18.3 Upon written request by the Company from time to time, BP shall
provide to the Company and its attorneys, accountants and other representatives,
at the Company's expense and subject to the receipt by BP of confidentiality
agreements no less onerous than apply to the parties here to under Article 23
hereof, at reasonable times and during normal business hours, access to BP's
books, records and accounts relating to Joint Account Revenue, marketing of the
Methanol Pool and the performance of BP's obligations under this Agreement. The
Company shall thereupon have the right to make copies of and abstracts from such
books, records and accounts, at the Company's expense, which copies may be
removed from the premises of BP and retained by the Company, subject to the
confidentiality provisions of Article 23 hereof. BP shall make its employees
and other representatives available to the Company at reasonable times on
reasonable notice to discuss the present or proposed strategies relating to the
marketing
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of Methanol from the Methanol Pool so long as such availability does not
materially disrupt the performance of BP's obligations hereunder.
ARTICLE 19
MEETINGS
--------
19.1 At the Semi-annual Meetings, the representatives of BP and the
Company on the management team shall review such matters as may be determined as
appropriate by the parties.
19.2 By no later than September 30 of each Contract Year during the
Operations Phase (with the exception of the first Contract Year during the
Operations Phase, if the Construction Completion Date is after September 30,
1996), (a) the Company shall deliver to BP a statement specifying (i) the amount
of the Company Portion for at least the next Contract Year, and (ii) a proposed
operating plan including proposed Capital Projects and Capital Expenditures and
Future Expansion Expenditures) for the Unit, and the other equipment and
property used in connection therewith, and (b) BP shall deliver to the Company a
proposed marketing plan for the Methanol Pool based on the proposed operating
plan, including volume and revenue forecasts, customers and similar matters, in
each case prepared in good faith and upon realistic assumptions, for the
following Contract Year. At or after the fall Semi-annual Meeting and in any
event prior to the commencement of the next Contract Year, the parties shall
formally agree on and adopt the operating plan and the marketing plan for the
following Contract Year. In the absence of such an agreement on or before the
first day of the Contract Year to which such proposed operating plan would, if
agreed, apply, the Company shall be entitled to operate, maintain, repair,
renovate, remodel, change and make expenditures as may be reasonably necessary
for the operation of the Unit and in a manner consistent with the pattern of
expenditure in the preceding Contract Year but excluding any Capital
Expenditures unless approved by BP pursuant to this Agreement.
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19.3 BP will notify the Company and secure its consent prior to
entering into any marketing agreement that would restrict the Company's ability
to dispose of the entire Company Portion for a time period beyond the expiration
of the most recently approved operating plan.
19.4 Either the Company or BP may call additional meetings of the
management team, as necessary.
ARTICLE 20
TAXES
-----
20.1 The parties recognize that, during the Term, major changes may
occur in the system of federal, state and local taxation at the location of the
Unit, which may materially alter the existing federal, state and local property,
energy, franchise, income and sales tax systems presently in effect. It is the
parties' intent that neither party will receive a tax benefit unintended by the
parties under this Agreement associated with any change in such tax systems. In
that case, the parties agree to modify this Agreement in an equitable manner.
20.2 The parties agree to file all their respective federal, state,
and local income tax returns in accordance with this Agreement and, in the event
that any federal, state, and/or local taxing authority challenges either party's
right to such depreciation, amortization, expense, and/or casualty loss
deductions hereunder, the parties agree to cooperate with each other and to take
all other reasonable and appropriate actions, to cause such taxing authority to
accept such depreciation, amortization, expense, or casualty loss deductions as
claimed. Unless otherwise agreed, each party shall be responsible for its own
expenses in any such challenge. It is the parties' intent that neither party
will receive a tax benefit unintended by the parties under this Agreement
associated with any action by any taxing authority. In that case, the parties
agree to modify this Agreement in an equitable manner.
-35-
<PAGE>
20.3 Any duty drawbacks, superfund drawbacks or similar payments with
respect to the Methanol Pool will be included in the Joint Account Revenue.
ARTICLE 21
FINANCIAL ASSURANCES
--------------------
21.1 In the event any federal, state or other governmental authority
requires the Company to provide financial assurances in connection with the
Unit, its operations or any Spills or Releases, the Company will use its best
efforts to provide the same, and BP will reimburse the Company for *** incurred
in connection with providing such financial assurances as a part of the
Operating Expenses (subject to Section 5.5 hereof), upon receipt of invoice
therefor.
ARTICLE 22
ARBITRATION
-----------
22.1 All disputes, differences or questions arising out of or
relating to this Agreement (including, without limitation, those as to the
validity, interpretation, breach, violation or termination hereof) shall, at the
written request of either party, be finally determined and settled pursuant to
arbitration at Houston, Texas, by three (3) arbitrators, one (1) to be appointed
by the Company, one (1) by BP, and a neutral arbitrator to be appointed by such
two (2) party-appointed arbitrators. The neutral arbitrator shall be an
attorney and shall act as chairman. Any such arbitration may be initiated by a
party by written notice ("Arbitration Notice") to the other party specifying the
subject of the requested arbitration and appointing such party's arbitrator for
such arbitration. In the event that litigation has been initiated, the party's
request for arbitration shall be made prior to the answer date of any litigation
pending regarding such dispute, difference or question and failure to request
arbitration by such date shall constitute a waiver of the right to arbitrate
under this Agreement.
-36-
<PAGE>
22.2 Should (i) a party receiving an Arbitration Notice fail to
appoint an arbitrator as hereinabove contemplated by written notice to the party
giving the Arbitration Notice within ten (10) Business Days after the receipt of
the Arbitration Notice, or (ii) the two (2) arbitrators appointed by or on
behalf of the parties as contemplated in Section 22.1 hereof fail to appoint a
neutral arbitrator as hereinabove contemplated within ten (10) Business Days
after the date of the appointment of the last arbitrator appointed by or on
behalf of the parties, then a Judge of the United States District Court for the
Southern District of Texas, Houston Division, upon application of the Company or
of BP, shall appoint an arbitrator to fill any such position with the same force
and effect as though such arbitrator had been appointed as hereinabove
contemplated.
22.3 The arbitration proceeding shall be conducted in the English
language in Houston, Texas, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. A determination, award or other action
shall be considered the valid action of the arbitrators if supported by the
affirmative vote of a majority of the three (3) arbitrators. The costs of
arbitration (exclusive of the expense of a party in obtaining and presenting
evidence and attending the arbitration, and of the fees and expenses of legal
counsel to such party, all of which shall be borne by such party) shall be
shared equally by the Company and BP. The arbitration award shall be final and
conclusive and shall receive recognition, and judgment upon such award may be
entered and enforced in any court of competent jurisdiction.
ARTICLE 23
CONFIDENTIALITY AND INTELLECTUAL PROPERTY
-----------------------------------------
23.1 The agreement of the Company and BP as to confidentiality and
intellectual property matters related to this Agreement is set forth in a
separate agreement among the Company, BP and
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<PAGE>
BPCL entitled "Methanol Technical Services and Intellectual Property Agreement"
effective on the Effective Date.
ARTICLE 24
DEFAULTS; FAILURES; REMEDIES
----------------------------
24.1 If a Company Event of Default shall occur and be continuing, BP
may, at its option, by written notice to the Company, declare the Company to be
in default hereunder ("Declaration of Company Default"); provided, however, that
a Declaration of Company Default shall not relieve or otherwise discharge the
Company from the performance of its obligations under this Agreement.
24.2 If a BP Event of Default shall occur and be continuing, the
Company may, at its option, by written notice to BP, declare BP to be in default
hereunder ("Declaration of BP Default"); provided, however, that a Declaration
of BP Default shall not relieve or otherwise discharge BP from the performance
of its obligations under this Agreement.
24.3 Upon a Declaration of Company Default or a Declaration of BP
Default, as the case may be, the non-defaulting party shall be entitled to
pursue all rights and remedies provided at law or in equity for such breach or
failure including, but not limited to, terminating this Agreement and seeking
and recovering Damages therefor or the remedy of specific performance of this
Agreement whether or not such remedy is otherwise normally available, subject to
the right of either party to request arbitration pursuant to Article 22 hereof.
ARTICLE 25
INDEMNIFICATION
---------------
25.1 From and after the Effective Date the Company shall indemnify
and hold BP harmless from and against any and all Damages suffered or incurred
by BP on account of or arising from or related to any liability to any third
party whether incurred under statute, in tort or otherwise arising directly or
indirectly
-38-
<PAGE>
from: (a) the production of methanol in the Unit; (b) the handling and storage
of methanol and raw materials used in the production of methanol at the Plant;
(c) the loading of methanol for shipment from the Plant; and (d) Spills or
Releases occurring before methanol passes the transport vessel's pipe flange for
shipment from the Plant, except to the extent that such Spills or Releases are
attributable to the acts, omissions or default of BP.
25.2 From and after the Effective Date BP shall indemnify and hold
the Company harmless from and against any and all Damages suffered or incurred
by the Company on account of or arising from or related to any liability to any
third party whether incurred under statute, in tort or otherwise arising
directly or indirectly from: (a) the marketing and sale of methanol; (b) the
shipment and delivery of methanol; and (c) Spills or Releases Requiring
occurring after methanol passes the transport vessel's pipe flange for shipment
from the Plant, except to the extent that such Spills or Releases are
attributable to the acts, omissions or default of the Company.
25.3 BP and the Company each agree that promptly after any of its
officers becomes aware of the discovery of facts giving rise to a claim by it
for indemnification hereunder ("Claim"), such party will provide notice thereof
in writing to the other party. The failure of either party to so notify the
other party of a Claim, where such failure results in insufficient time being
available to permit the party receiving the notice or its counsel to defend
against such Claim, shall relieve the other party from any liability in respect
of such Claim. For purposes of this Section 25.3, receipt by a party of notice
of any demand, assertion, claim, action or proceeding (judicial, administrative
or otherwise) by or from any person or entity (other than the other party to
this Agreement) or governmental authority ("Third-Party Action") which may give
rise to a Claim on behalf of such party shall constitute the discovery of facts
giving rise to a Claim by it and shall require prompt notice of the receipt of
such matter as provided in the first sentence of this Section 25.3. Any notice
pursuant to this Section 25.3 shall set forth all information respecting the
Claim
-39-
<PAGE>
and the Third-Party Action, if any, as such party shall then have and shall
contain a statement to the effect that the party giving the notice is making a
Claim pursuant to and formal demand for indemnification under this Article 25.
25.4 For purposes of this Article 25, the term "Indemnifying Party,"
as to a particular Claim or Third-Party Action shall mean the party having or
which is held to have an obligation to indemnify the other party with respect to
such Claim or Third-Party Action pursuant to this Article 25 and the term
"Indemnified Party" as to a particular Claim or Third-Party Action shall mean
the party having or which is held to have the right to be indemnified with
respect to such Claim or Third-Party Action by the other party pursuant to this
Article 25.
25.5 Except as otherwise expressly provided herein, the Indemnifying
Party shall be entitled at its cost and expense to contest and defend by all
appropriate legal proceedings any Third-Party Action with respect to which it is
called upon to indemnify the Indemnified Party under the provisions of this
Agreement; provided, however, that with respect to any Claim arising from the
assertion of any Third-Party Action, notice of the intention so to contest shall
be delivered by the Indemnifying Party to the Indemnified Party within twenty
(20) days from the date of mailing by the Indemnified Party of notice to the
Indemnifying Party of the assertion of the Third-Party Action. Any such contest
with respect to a Third-Party Action may be conducted in the name and on behalf
of the Indemnifying Party or the Indemnified Party as may be appropriate.
Except as otherwise expressly provided herein, such contest shall be conducted
by attorneys employed by the Indemnifying Party, but the Indemnified Party shall
have the right to participate in such proceedings and to be represented by
attorneys of its own choosing at its cost and expense. If the Indemnified Party
joins in any such contest, the Indemnified Party shall have full authority to
determine all action to be taken with respect thereto. If after notice as
provided for herein, the Indemnifying Party does not elect to contest any Third-
Party Action as provided in this Section 25.5, the
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<PAGE>
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party and the Indemnified Party may (but shall have no
obligation to) contest any such Third-Party Action or settle or admit liability
with respect thereto, all for the account of the Indemnifying Party. At any time
after the commencement of defense of any such Third-Party Action, the
Indemnifying Party may request the Indemnified Party to agree in writing to the
abandonment of such contest or the payment or compromise by the Indemnifying
Party of the asserted Third-Party Action whereupon such action shall be taken
unless the Indemnified Party so determines that the contest should be continued,
and so notifies the Indemnifying Party in writing within fifteen (15) days of
such request from the Indemnifying Party. In the event that the Indemnified
Party determines that the contest should be continued, the Indemnifying Party
shall be liable with respect to such Third-Party Action only to the extent of
the lesser of (i) the amount which the third party taking the Third-Party Action
had agreed to accept in payment or compromise as of the time the Indemnifying
Party made its request therefor to Indemnified Party, or (ii) such amount for
which the Indemnifying Party may be liable with respect to such Claim by reason
of the provisions hereof.
25.6 If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate with the Indemnifying Party and its counsel in contesting
any Third-Party Action which the Indemnifying Party elects to contest or, if
appropriate, in making any counterclaim against the third party taking the
Third-Party Action, or any cross-complaint against any other person or entity
not a party hereto, but the Indemnifying Party will reimburse the Indemnified
Party for any expenses incurred by it in so cooperating.
25.7 The Indemnified Party agrees to afford the Indemnifying Party
and its counsel the opportunity to be present at, and to participate in,
conferences with all persons or entities, including governmental authorities,
taking Third-Party Action against the Indemnified Party or conference with
representatives of or counsel for such persons or entities.
-41-
<PAGE>
25.8 The Indemnifying Party shall pay to the Indemnified Party, upon
demand, the amount of any Damages to which the Indemnified Party may become
entitled by reason of the provisions of this Article 25; provided, however, that
the amount of any such Damages shall be reduced to the extent of any insurance
proceeds received by the Indemnified Party for such Damages.
25.9 Notwithstanding the foregoing and any other provision of this
Agreement to the contrary, in the event any suit, claim or proceeding is brought
by any third party against either BP or the Company or both based upon the
alleged non-conformance of methanol with the then applicable Specifications, BP
and the Company shall share equally all costs, expenses, including reasonable
attorneys' fees, losses and damages incurred in defending and settling or
otherwise resolving such suit, claim or proceeding.
ARTICLE 26
FORCE MAJEURE
-------------
26.1 In the event of either party being rendered unable, wholly or in
part, by Force Majeure to carry out its obligations under this Agreement (other
than any obligation to make payment of any amount when due and payable
hereunder), it is agreed that on such party giving notice and reasonably full
particulars of such Force Majeure in writing to the other party within a
reasonable time after the occurrence of the cause relied on, then the
obligations of the party giving such notice, so far as they are affected by such
Force Majeure, shall be suspended during the continuance of any inability so
caused, but for no longer period, and such cause shall so far as possible be
remedied with all reasonable dispatch, unless the parties agree otherwise in
accordance with Section 10.3 in connection with any damage to or destruction of
the Unit. In the event of Force Majeure necessitating the allocation of
Methanol, any output of Methanol from the Unit shall be allocated *** to BP and
*** to the Company in accordance with Sections 4.2 and 4.3 above; provided,
however in the event of Force Majeure that the Company Portion shall not exceed
*** of such output.
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<PAGE>
26.2 The term "Force Majeure," as employed herein, shall mean acts of
God, strikes, lockouts or other industrial disturbances, acts of the public
enemy, wars, blockades, embargoes, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, high water, washouts, arrests and
restraints of government and people, civil disturbances, explosions, loss or
interruption of feedstocks or utilities, breakage or accident to machinery,
equipment, lines of pipe or property, freezing of machines, equipment, lines of
pipe, or property, partial or entire failure of any machine, equipment, lines of
pipe or other property, the occurrence of any Spill or Release and any
regulatory, civil or criminal action with respect thereto and any other causes,
whether of the kind herein enumerated or otherwise, not reasonably within the
control of the party claiming suspension; such term shall likewise include in
those instances where any party hereto is required to furnish materials and
supplies or is required to secure permits or permissions from any governmental
agency to enable such party to fulfill its obligations hereunder, the inability
of such party to acquire, or delays on the party of such party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such materials
and supplies, permits and permissions.
26.3 It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the party having the
difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of the opposing party when such
course is inadvisable in the discretion of the party having the difficulty.
26.4 Notwithstanding the provisions of Section 26.1 hereof, the
failure by either party to perform any of its obligations under this Agreement
shall be deemed not to have been caused by circumstances reasonably outside its
control if such failure results from breakage or accident to machinery,
equipment, lines of pipe or other property or the partial or entire failure
thereof or the necessity to make repairs or alterations thereto which result
from normal wear and tear which could be reasonably anticipated
-43-
<PAGE>
by a reasonably prudent operator or in circumstances where a reasonably prudent
operator would have standby equipment or spare parts.
ARTICLE 27
ASSIGNMENT
----------
27.1 This Agreement shall inure to the benefit of and bind the
respective successors and permitted assigns to the parties hereto. Except as
expressly permitted hereby, neither party may assign this Agreement or its
rights under this Agreement, including its rights to receive payments hereunder,
to any other party without the consent of the other.
27.2 Either party may assign this Agreement and all of its rights and
obligations hereunder to any Affiliate of such party. The Company may assign
this Agreement and all of its rights and obligations hereunder as collateral to
any third party providing financing to the Company.
27.3 It is agreed that (i) the sale, transfer or conveyance by BP or
the Company of all or substantially all of its assets, or (ii) the merger,
consolidation, reorganization or recapitalization of BP or the Company with any
third party, or (iii) the change of control of BP or the Company, whether
effected by stock purchase, statutory share exchange, or otherwise, shall not
constitute an assignment of this Agreement by BP or the Company, but BP or the
Company (as the case may be) shall, as a condition precedent to the closing of
any sale, transfer or conveyance referred to in clause (i) above, require the
purchaser or transferee to assume all rights and obligations of BP or the
Company (as the case may be) under this Agreement. In the event that the
Company sells or otherwise transfers or conveys all or substantially all of the
assets constituting the Plant, such sale, transfer or conveyance shall not
constitute an assignment of this Agreement by the Company, but the Company
shall, as a condition precedent to the closing of such sale, transfer or
conveyance, require the purchaser or transferee to assume all rights and
obligations of the Company under this Agreement.
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<PAGE>
27.4 In the event that the Company proposes to sell, transfer or
convey all or substantially all of its interest in the Unit to a third party
which is not acquiring control of the Company by merger or the purchase of all
of the Company's stock or assets ("Third Party Offer"), the Company shall
provide BP written notification setting forth the identity of such third party
and the proposed terms of such Third Party Offer prior to entering into any
agreement with such third party and afford BP an opportunity, within thirty (30)
Days' receipt of such notification, to purchase the assets subject to the offer
on the identical terms of such Third Party Offer if BP, in its sole discretion,
elects to do so. In the event BP does not agree to purchase the assets on the
identical terms of the Third Party Offer within such time period, or if BP fails
to close in accordance with the terms of such offer, then the Company shall be
free to sell, transfer or convey such interests in accordance with such Third
Party Offer.
27.5 No assignment, transfer or conveyance of this Agreement by
either party shall relieve the assigning party of any of its obligations,
liabilities or duties hereunder, unless the other party hereto shall agree
otherwise. Any assignment of this Agreement by either party, except assignments
as collateral, shall be accompanied by the contemporaneous assumption by the
assignee of all rights and obligations of assignor hereunder.
ARTICLE 28
GENERAL
-------
28.1 Notices. Except as otherwise specifically provided, any notice
provided for by this Agreement and any other notice, demand or communication
which any party may wish to send to another shall be in writing and either
delivered in person or sent by registered or certified United States mail,
postage prepaid, return receipt requested, in a properly sealed envelope, and
addressed to the party for which such notice, demand or communication is
intended at such party's address as set forth below:
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<PAGE>
(a) Company: Sterling Chemicals, Inc.
1200 Smith Street
Houston, Texas 77002
Attention: Vice President-Commercial
Copy To: Sterling Chemicals, Inc.
1200 Smith Street
Houston, Texas 77002
Attention: General Counsel
(b) BP: BP Chemicals Inc.
4440 Warrensville Center Road
Warrensville Heights, Ohio 44128-2837
Attention: Vice President Acetyls
Copy To: BP Chemicals Inc.
1 Second Avenue South
Texas City, Texas 77590
Attention: Product Manager Acetyls
Any address or name specified above may be changed by a notice given
by the addressee to the other parties in accordance with this Section 28.1. Any
notice, demand or other communication shall be deemed given and effective as of
the date of delivery in person or upon receipt as set forth on the return
receipt. The inability to deliver because of changed address of which no notice
was given, or the rejection or other refusal to accept any notice, demand or
communication, shall be deemed to be the receipt of the notice, demand or
communication as of the date of such inability to delivery or the rejection or
refusal to accept.
28.2 Controlling Law. All questions concerning the validity,
operation and interpretation of this Agreement and the performance of the
obligations imposed upon the parties hereunder shall be governed by the laws of
the State of Texas, without reference to principles of conflicts of law, and BP
agrees that any legal or equitable action with respect thereto shall be brought
exclusively in the federal or state courts in Harris County, Texas. BP hereby
irrevocably submits to the jurisdiction of the United States District Court for
the Southern District of Texas, Houston Division and any District Court of the
State of Texas
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<PAGE>
in Harris County in any action, suit or proceeding brought against it and
related to or in connection with this Agreement or the transactions contemplated
hereby, and to the extent permitted by applicable law, BP hereby waives and
agrees not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper, or that this Agreement or any document or any instrument referred to
herein or the subject matter hereof may not be litigated in or by such court.
28.3 Heading. The headings and titles to the Articles and Sections
of this Agreement are inserted for convenience only and shall not be deemed a
part hereof or affect the construction or interpretation of any provision
hereof.
28.4 Modifications and Waivers. Except as expressly provided herein
to the contrary, no termination, cancellation, modification, amendment,
deletion, addition or other change in this Agreement or any provision hereof, or
waiver of any right or remedy herein provided, shall be effective for any
purpose unless specifically set forth in writing signed by the party or parties
to be bound thereby. The waiver of any right or remedy in respect of any
occurrence or event on the occasion shall not be deemed a waiver of such right
or remedy in respect of such occurrence or event on any other occasion.
28.5 Entire Agreement. This Agreement, including the other
agreements and instruments herein provided for or referred to, supersedes all
other agreements, oral or written, heretofore made with respect to the subject
matter hereof and the transactions contemplated hereby, and contains the entire
agreement of the parties.
28.6 Severability. Any provisions hereof prohibited by or unlawful
or unenforceable under any applicable law of any jurisdiction shall be
ineffective as to such jurisdiction, without affecting any other provision of
this Agreement, or shall be deemed to be severed or modified to conform with
such law, and
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<PAGE>
the remaining provisions of this Agreement shall remain in force, provided that
the purpose of this Agreement can be effected. To the full extent, however,
that the provisions of such applicable law may be waived, they are hereby
waived, to the end that this Agreement is deemed to be a valid and binding
agreement enforceable in accordance with its terms.
28.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all of such
counterparts together shall constitute but one and the same instrument.
28.8 Binding on Successors. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
28.9 Public Statements. The parties hereto agree to consult with one
another prior to issuing any public announcement or statement with respect to
the transactions contemplated herein.
28.10 No Partnership or Agency. This Agreement shall not be
construed to create a partnership, joint venture, association or other entity or
business organization or to create a principal-agent or other fiduciary
relationship or relationship of special trust and confidence between the Company
and BP.
28.11 No Transfer of Title. The Company expressly does not by the
terms of this Agreement sell, transfer or assign to BP any title or interest in
the Methanol Plant Assets, or any of the Company's other assets or properties,
and BP does not by the terms of this Agreement acquire any title or interest
therein, except that the parties acknowledge BP's economic interest in the
After-Acquired Assets as set forth in Section 2.3(b) of this Agreement.
28.12 Payments. All sums and amounts payable or to be payable
pursuant to this Agreement shall be payable in immediately available funds and
in coin or currency of the United States of America that, at the time of
payment, is legal tender for the payment of public and private debts in the
United States of America and shall be made by wire transfer of immediately
available funds to such bank and/or account
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<PAGE>
in the continental United States for the account of the payee as from time to
time the payee shall have directed to the payor in writing, or, if no such
direction shall have been given, by check to the payee in the manner and at the
address set forth above. Whenever in this Agreement BP is required to pay or
reimburse the Company upon receipt of invoice or otherwise when no due date for
payment is specifically provided, payment shall be due on the tenth Day after
receipt of invoice or other statement (or if such Day is not a Business Day, on
the Business Day next following), and shall be made in the manner set forth
above.
28.13 Survival. The obligations of the parties hereunder shall
survive the expiration of the Term or earlier termination of this Agreement,
except as expressly set forth herein.
28.14 Memorandum of Agreement. The parties hereto agree to execute,
at the request of either party, a short form memorandum of this Agreement in a
form mutually agreeable and sufficient for purposes of recording the material
terms and conditions of this Agreement as a matter of record in the appropriate
recording office or offices in Texas. Upon the expiration of the Term or
earlier termination of this Agreement, the parties hereto agree to execute, at
the request of either party, a release of said memorandum acknowledging said
expiration or termination in the appropriate form for recordation.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written, but effective as of the Effective Date.
BP CHEMICALS INC.,
an Ohio corporation
By: R.R. Mesel
---------------------------------
Name: Robert R. Mesel
---------------------------------
Title: President
---------------------------------
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<PAGE>
STERLING CHEMICALS, INC.,
a Delaware corporation
By: Robert W. Roten
------------------------------
Name: Robert W. Roten
------------------------------
Title: President
------------------------------
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<PAGE>
EXHIBIT A
METHANOL SPECIFICATION
<TABLE>
<CAPTION>
<S> <C>
Acetone, wt % max .003
Acidity, (as acetic acid) wt. % max .003
Alkalinity (as NH3), Wt % max .003
Appearance Clear and free of suspended matter
Carbonizable substances, max. (Pt-Co) 30
Color, max, (Pt-Co) 5
Distillation Range, at 760 mm hg Not more than 1 (degree) C to include 64.6 (degree) C
Ethanol, ppm max 50
Hydrocarbons No cloudiness
Methanol content, Wt. % min 99.85
Non-Volatile Matter, Wt./V% max .001
Odor Characteristic, non-residual
Permanganate time, min at 15 (degree) C 50
Specific Gravity, @ 20/20(degree) C max .7928
Water, Wt. % max .1
</TABLE>
<PAGE>
EXHIBIT B
BP CONTRACTUAL COMMITMENTS
1. ***
2. ***
<PAGE>
SUMMARY OF COVERAGES
FOR STERLING CHEMICALS, INC.
EXHIBIT C
<TABLE>
<CAPTION>
BP as Insurance
No. Type of Insurance Amounts or Limits Additional Insured Company Expiration
- --- ----------------- ----------------- ------------------ ---------- ----------
<C> <S> <C> <C> <C> <C>
1. Workers Compensation Statutory $1,000,000- No Reliance 7/1/97
Employers Liability
2. Automobile Liability $2,000,000 each occurrence No Reliance 7/1/97
3. Excess Liability $25,000,000 each occurrence Yes Primex, Ltd. 7/1/97
Excess to $1 Million SIR and aggregate
4. Excess Liability $100,000,000 each loss Yes XL. Insurance Group 7/1/97
Excess to Primex $100,000,000 aggregate
5. Terminal Operators $125,000,000 each occurrence Yes Lexington et. al. 7/1/97
including Stevedores &
Wharfingers Legal Liability
6. Property Damage $500 million any occurrence, Yes CIGNA, Hartford 10/1/96
and Boiler & Machinery combined all risks. Starr Tech, Zurich,
Includes: Flood; Earthquake et. al.
Extra Expense; Service
Interruption; Hazardous
Cleanup;
Debris Removal; Land Transit;
Others.
</TABLE>
<PAGE>
EXHIBIT D
COMPANY MARKETING COSTS
***
<PAGE>
EXHIBIT E
***
<PAGE>
EXHIBIT 10.34
THE STERLING GROUP
THE STERLING GROUP, INC.
EIGHT GREENWAY PLAZA, SUITE 702
HOUSTON, TEXAS 77046
713-877-8257
FAX 713-877-1824
April 23, 1996
STX Acquisition Corp.
c/o The Sterling Group, Inc.
8 Greenway Plaza, Suite 702
Houston, Texas 77046
Ladies and Gentlemen:
This letter agreement will confirm the agreement between The Sterling
Group, Inc. ("TSG") and STX Acquisition Corp. and STX Chemical Corp. and their
respective present and future direct and indirect wholly-owned subsidiaries
(collectively, the "Companies" and individually, a "Company"), in connection
with STX Acquisition Corp.'s merger with Sterling Chemicals, Inc. (the
"Merger"), as follows:
1. Services. TSG has provided or will provide consulting services to the
Companies in connection with the organization of the Companies, structuring the
Merger, the financing and refinancing thereof, arrangements for outside
consulting services, advice with respect to employee benefit and compensation
arrangements and other reasonable assistance when and as requested by the
Companies.
2. Fee and Expenses. For its services in connection with the Merger, TSG will
be entitled to receive from STX Acquisition Corp. and STX Chemical Corp. at the
consummation of the Merger a fee in the amount of Eight Million Seventy Three
Thousand Dollars ($8,073,000) and reimbursement of all expenses paid or incurred
(including expenses of The Unicorn Group and any other consultant) by TSG in
connection therewith.
3. Indemnification. The Companies, jointly and severally, agree to indemnify
and hold harmless TSG, its consultants, each of their respective controlling
persons and each director, officer, employee, principal, consultant, affiliate
and agent thereof (each an "Indemnified Person") from and against any and all
losses, claims, damages and liabilities, joint or several, to which any
Indemnified Person may become subject relating to or arising out of, or in
connection with, any advice or services provided under this Agreement or the
transactions contemplated by this Agreement, the Merger (including, without
limitation, the use of proceeds from the sale of securities and the financing of
the Merger) or any related transaction (including without limitation, that
certain letter agreement among TSG, Chase Securities Inc., Texas Commerce Bank
National Association, and Credit Suisse dated April 23, 1996 and that certain
letter agreement among TSG, CS First Boston, and The Unicorn Group dated October
9, 1995, and the transactions
<PAGE>
The Sterling Group, Inc.
April 23, 1996
Page 2
contemplated thereby), and to reimburse each Indemnified Person, promptly upon
demand, for expenses (including reasonable counsel fees and expenses) as they
are incurred in connection with the investigation of, giving testimony or
furnishing documents for, preparation for or defense of any pending or
threatened loss, claim, damage or liability, or any litigation, proceeding or
other action in respect thereof (collectively, "Actions"), including any amount
paid in settlement of any litigation, proceeding or other action (commenced or
threatened), to which the Companies shall have consented in writing (such
consent not to be unreasonably withheld), whether or not any Indemnified Person
is a party and whether or not liability resulted therefrom; provided, however,
that the indemnity contained in this Agreement will not apply to any Indemnified
Person with respect to losses, claims, damages, liabilities or related expenses
that are found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) to have resulted from the willful misconduct or gross
negligence of such Indemnified Person. In addition, the Companies will not,
without prior written consent of TSG, settle, compromise or consent to the entry
of any judgment in or otherwise seek to terminate any pending or threatened
Action in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party thereto) unless such
settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Person from all liabilities arising out of such Action.
Promptly after receipt by an Indemnified Person of written notice with respect
to the commencement of any investigation, claim or other Action with respect to
which such Indemnified Person may seek indemnification hereunder, such
Indemnified Person shall notify the Companies in writing at the address set
forth on the first page hereof of such Action; but the omission so to notify the
Companies shall not relieve the Companies from any liability that the Companies
may have hereunder to such Indemnified Person to the extent that such omission
does not materially prejudice or materially adversely affect the Companies. The
Indemnified Persons shall be entitled to retain separate counsel of their own
choice; provided that the Companies shall not be responsible for the fees and
expenses of more than one firm of attorneys (and local counsel, if appropriate)
for all of the Indemnified Persons in any single Action, unless the Indemnified
Persons shall have been advised that there may be one or more legal defenses
available to any of them that may be different from or additional to those
available to the others, in which event each such Indemnified Person shall be
entitled to separate counsel at the expense of the Companies.
If indemnification is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) for reason of public policy not to
be available, the Companies and TSG agree to contribute to the losses, claims,
damages, liabilities or expenses (or actions in respect thereof) for which such
indemnification is held unavailable in such proportion as is appropriate to
reflect the relative benefits to and fault of the Companies, on the one hand,
and TSG, on the other hand, in connection with the matter giving rise to such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof). Notwithstanding the foregoing, TSG shall not be obligated to
contribute any amount hereunder that exceeds the fees and expenses received by
TSG hereunder. No person found liable for a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act of 1933, as amended)
shall be entitled to contribution from any person who is not found liable for
such fraudulent misrepresentation.
<PAGE>
The Sterling Group, Inc.
April 23, 1996
Page 3
The Companies also agree, jointly and severally, that no Indemnified Person
shall have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Companies for or in connection with advice or services
rendered or to be rendered by any Indemnified Person pursuant to this Agreement,
the Merger, the financing thereof, the transactions contemplated thereby or any
Indemnified Person's actions or inactions in connection with any such advice,
services or transactions except for liabilities that are determined by a
judgment of a court of competent jurisdiction (not subject to further appeal) to
have resulted from such Indemnified Person's gross negligence or willful
misconduct in connection with any such advice, actions, inactions or services.
If any term, provision, covenant or restriction contained in this Section is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against public policy, the remainder of the terms,
provisions, covenants and restrictions contained in the Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
The provisions contained in this Section 3 shall remain in full force and effect
(i) whether or not any of the transactions contemplated hereby are consummated,
(ii) regardless of the termination or completion of any Indemnified Person's
services hereunder, (iii) notwithstanding the termination of this agreement and
(iv) notwithstanding any investigation made by or on behalf of TSG or any
Indemnified Person.
4. Future Services. The Companies also agree, jointly and severally, that if
either of the Companies or any of their respective direct or indirect
subsidiaries determines, within 24 months after the date hereof, to dispose of
or acquire any assets or businesses, the Companies will, or will cause such
entity to, retain TSG as a consultant with respect thereto, provided that TSG's
fees with respect thereto are competitive and the Companies and TSG mutually
agree on the terms of such retention. If, within 24 months after the date
hereof, either of the Companies or any of their respective subsidiaries
determines to offer securities for sale to the public or in a private placement
or to raise any debt or equity financing, the Companies will, or will cause such
entity to, retain TSG as a consultant with respect thereto, provided that TSG's
fees with respect thereto are competitive and the Companies and TSG mutually
agree on the terms of such retention.
5. Governing Law. This Agreement shall be governed by, and constructed in
accordance with, the laws of the State of Texas, without giving effect to choice
of law doctrines requiring the application of laws of any other jurisdiction.
If the foregoing meets with your approval and correctly expresses our agreement,
please sign and return the enclosed duplicate copy of this letter.
Very truly yours,
THE STERLING GROUP, INC.
By: /s/ Hunter Nelson
-----------------------------
Name: Hunter Nelson
Title: Principal
<PAGE>
The Sterling Group, Inc.
April 23, 1996
Page 4
ACKNOWLEDGED AND AGREED:
STX ACQUISITION CORP.
By: /s/ Hunter Nelson
--------------------------
Name: Hunter Nelson
Title: Vice President
STX CHEMICAL CORP.
By: /s/ Hunter Nelson
--------------------------
Name: Hunter Nelson
Title: Vice President
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF STERLING CHEMICALS HOLDINGS, INC.
Owns 100% of:
Sterling Chemicals, Inc., a Delaware corporation
Owns 100% of:
Sterling Chemicals International, Inc., a Delaware corporation
Sterling Chemicals Energy, Inc., a Delaware corporation
Sterling Chemicals Marketing, Inc., a Virgin Islands corporation
Sterling Canada, Inc., a Delaware corporation
Owns 100% of:
Sterling Pulp Chemicals U.S., Inc., a Delaware corporation
Sterling NRO, Ltd., an Ontario corporation
Sterling Pulp Chemicals, Ltd., an Ontario corporation
Owns 99% of:
Sterling Pulp Industrial, L.L.C., a Delaware limited
liability company (1)
_______________
(1) The remaining 1% is owned by Sterling Canada, Inc.
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 5,609
<SECURITIES> 0
<RECEIVABLES> 133,399
<ALLOWANCES> 0
<INVENTORY> 53,720
<CURRENT-ASSETS> 209,018
<PP&E> 593,305
<DEPRECIATION> (227,540)
<TOTAL-ASSETS> 689,684
<CURRENT-LIABILITIES> 132,085
<BONDS> 714,632
0
0
<COMMON> 106
<OTHER-SE> (272,545)
<TOTAL-LIABILITY-AND-EQUITY> 689,684
<SALES> 790,465
<TOTAL-REVENUES> 790,465
<CGS> 679,039
<TOTAL-COSTS> 679,039
<OTHER-EXPENSES> 47,644
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<INCOME-TAX> 16,898
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