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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
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COMMISSION FILE NUMBER 0-14727
ACME METALS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 36-3802419
(State of incorporation) (I.R.S. Employer
Identification No.)
13500 SOUTH PERRY AVENUE, RIVERDALE, ILLINOIS 60627-1182
(Address of principal (Zip Code)
executive offices)
(708) 849-2500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
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Common stock, par value $1.00 per share
Preferred Share Purchase Rights
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
The aggregate market value as of March 4, 1996 of common stock, $1 par
value, held by non-affiliates of the Registrant was: $194,579,943.
Number of shares of Common Stock outstanding as of March 4, 1996,
11,584,877.
The following document is partially incorporated into this report by
reference:
(1) Proxy Statement filed in connection with the Annual Meeting of Shareholders
scheduled for April 25, 1996 is partially incorporated by reference into
Part III, Items 10, 11, 12 and 13.
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ACME METALS INCORPORATED
1995 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART I
Item 1. Business....................................................................................... 3
Item 2. Properties..................................................................................... 8
Item 3. Legal Proceedings.............................................................................. 8
Item 4. Submission of Matters to a Vote of Security Holders............................................ 14
PART II
Item 5. Market for the Company's Common Stock and Related Shareholder Matters.......................... 14
Item 6. Selected Financial Data........................................................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 18
Item 8. Financial Statements and Supplementary Data.................................................... 27
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure........... 27
PART III
Item 10. Directors and Executive Officers of the Company................................................ 28
Item 11. Executive Compensation......................................................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 29
Item 13. Certain Relationships and Related Transactions................................................. 29
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 29
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PART I
ITEM 1. BUSINESS
(A) GENERAL DESCRIPTION OF BUSINESS
Acme Metals Incorporated, based in Riverdale, Illinois, is the successor to
the original Acme Steel Company which merged with the Interlake Iron Company in
1964 to form Interlake Steel Corporation. The Company's name was changed to
Interlake, Inc. and was subsequently reincorporated in Delaware on December 19,
1969.
As a result of a reorganization in 1986, The Interlake Corporation ("new
Interlake") became the parent company of Interlake, Inc. ("old Interlake"). Old
Interlake transferred all but its iron, steel and domestic steel strapping
assets and businesses to new Interlake. Old Interlake was again renamed Acme
Steel Company, and pursuant to the reorganization, was spun off from new
Interlake as a public company in May, 1986.
Acme Steel Company undertook a further reorganization in May, 1992 when Acme
Metals Incorporated ("Company") was formed and became the parent of Acme Steel
Company ("Acme"), and Acme's former subsidiaries, Acme Packaging Corporation
("Packaging"), Alpha Tube Corporation ("Alpha"), and Universal Tool & Stamping
Co., Inc. ("Universal"). The Company has been publicly traded on NASDAQ since
1986 and the Toronto Stock Exchange since 1994.
The principal business activities of the Company consist of two separate
industry segments, namely:
STEEL MAKING SEGMENT
Acme Steel Company -- an integrated iron and steel producer
STEEL FABRICATING SEGMENT
Acme Packaging Corporation -- steel strapping and strapping products
Alpha Tube Corporation -- welded steel tube products
Universal Tool & Stamping Co., Inc. -- auto and light truck jack
products
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company reports its operations by two industry segments, Steel Making
and Steel Fabricating. Financial information about the Company's industry
segments is contained in the BUSINESS SEGMENTS section of the Notes to the
Consolidated Financial Statements on pages 53 - 54.
(C) NARRATIVE DESCRIPTION OF BUSINESS
STEEL MAKING SEGMENT
Acme is a fully integrated producer of steel products. Acme's line of
products is concentrated on the manufacture of flat-rolled steels, including
sheet and strip steel. In the flat-rolled steel market, Acme specializes in
producing carbon steels, especially mid- and high-carbon, alloy, and
high-strength low-alloy steels. The principal markets served by Acme include
automotive, agricultural, industrial, fastener, pipe and tube, processor, and
tool manufacturing industries. The Company's Steel Fabricating Segment consumes
approximately 30 - 50 percent of Acme's steel production. Acme's focus on
external customers is centered around customers whose demand levels and
metallurgical requirements are for the small production quantities available
from Acme's facilities. Acme's sales represented about 45, 44, and 41 percent of
total Company sales in 1995, 1994, and 1993, respectively.
Acme's facilities are located in Riverdale and Chicago, Illinois, and
include the following plant facilities: coke ovens, blast furnaces, pigging
machines, basic oxygen furnaces, rolling mill, a slab grinder, hot strip mill,
pickle lines, cold mills, annealing furnaces, slitter lines, and cut-to-length
lines. In addition, Acme is constructing a continuous thin slab caster and hot
strip mill adjacent to its Riverdale steel making operation which will be
completed in late 1996.
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Acme is the smallest integrated steel producer in the U.S. with a current
annual hot band shipping capability of approximately 720,000 tons. This compares
with total U.S. shipments of all steel products of approximately 98 million
tons.
STEEL FABRICATING SEGMENT
Packaging, which was incorporated as a separate entity in December 1991, is
one of the two major domestic producers of steel strapping and strapping tools
in North America and, by management estimates, shares approximately 80 percent
of the domestic market equally with its primary competitor. Strapping is
currently produced at four plants located throughout the U.S. and represented
approximately 32 percent of the Company's sales in 1995 and 1994, and 33 percent
in 1993. Principal markets served by Packaging include the agricultural,
automotive, brick, construction, fabricated and primary metals, forest products,
paper and wholesale industries. Packaging receives all of its flat-rolled steel
supply from Acme.
Packaging currently manufactures its products in four steel strapping
plants, located in Riverdale, Illinois; New Britain, Connecticut; Leeds, Alabama
and Bay Point (formerly Pittsburg-West), California.
Alpha, which was acquired in May 1989, is a leading producer of high quality
welded carbon steel tubing used for furniture, recreational, contractors' and
automotive applications. Alpha receives a significant portion of its flat-rolled
steel supply from Acme. Alpha markets its products to the appliance, automotive,
construction, heating and cooling equipment, household and leisure furniture,
material handling, recreational products, service center, truck exhaust and
water heater industries. Alpha's sales represented approximately 15 percent of
total sales for the Company in 1995 and 16 percent in each of the two years
preceding.
Alpha operates two tubing facilities in Toledo, Ohio, equipped with rolling
mills for the production of steel tube and pipe, and through Alta Slitting
Corporation, a plant for slitting steel.
Universal, acquired in May 1987, produces automotive and light truck jacks,
tire wrenches and accessories for the original equipment manufacturer ("OEM")
market in North America. Management estimates that it currently holds a 30
percent share of the OEM market for auto and light truck jacks in North America.
Universal receives virtually all its flat-rolled steel supply from Acme.
Universal markets its products to domestic and foreign transplant automotive
manufacturers and the automotive aftermarket. Universal's sales were
approximately 8 percent of total Company sales in 1995 and 1994, and 10 percent
in 1993.
Universal's production facilities, located in Butler, Indiana, include a
computer assisted design and manufacturing system, and automated stamping and
assembly lines.
EMPLOYEE RELATIONS
The Company has a work force of 2,740 employees, of which 675 are salaried
and 2,065 are paid hourly. The unionized work force totals 1,990, or 73 percent
of total employment. None of the salaried work force is unionized and the hourly
work force at one site (Alpha) is non-union as well. The Company's relationships
with the unions are good. There have been no strikes or work stoppages at any
location since the Company's purchase of the plants in Connecticut, Alabama,
California and Indiana. The last strike at the Riverdale and Chicago locations
was in 1959 during a major steel industry work stoppage. In addition, the
Company instituted Labor Management Participation Teams in 1982 as a vehicle for
problem solving in a team environment and a Total Quality Improvement Program in
1991 to establish standards to achieve the highest quality product from the
existing facilities. Union members participate extensively in these two
programs.
The Company has a contract in place with the United Steelworkers covering
approximately 1,550 employees at the Acme and Packaging operations in Chicago
and Riverdale, Illinois. The contract expires in 1999, contains a no-strike
provision, and a wage reopener in 1996 subject to binding arbitration.
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RAW MATERIALS
Acme's principal raw materials are iron ore and coal. Iron ore requirements
are expected to continue to be satisfied through an equity interest in Wabush
Mines in Newfoundland (Labrador) and Quebec, Canada and through term contracts
and purchases on the open market. Acme is required to pay its proportionate
share of all fixed operating costs, regardless of the quantity of ore received,
plus the variable operating costs of minimum ore production for the Company's
account. Normally, the Company reimburses the joint venture for these costs
through its purchase of ore. During 1995, Acme acquired approximately 47 percent
of its iron ore needs from Wabush under this agreement with the balance of ore
requirements at a competitive delivered cost. Coal requirements are expected to
be satisfied through term contracts and purchases on the open market. The
Company believes Acme's sources of iron ore, coal and other raw materials are
adequate to provide for its foreseeable needs.
ENVIRONMENTAL COMPLIANCE
The operations of the Company and its subsidiary companies are subject to
numerous Federal, state and local laws and regulations providing a comprehensive
program of controlling the discharge of materials into the environment and
remediation of certain waste disposal sites by responsible parties for the
protection of public health and the environment. In addition, various Federal
and state occupational safety and health laws and regulations apply to the work
place environment. See ITEM 3, LEGAL PROCEEDINGS, (B) ENVIRONMENTAL for a
complete discussion of environmental proceedings.
BACKLOG; TRADEMARKS; PATENTS
None of the Company's subsidiaries had a significant amount of backlog at
December 31, 1995 and neither the Company nor its subsidiaries hold any patents,
trademarks, licenses or franchises which are deemed material to its overall
business.
(D) COMPETITIVE CONDITIONS FOR THE STEEL MAKING SEGMENT
GENERAL STEEL MARKET
The U.S. integrated steel industry has suffered economically in the past
decade due to increased competition from mini-mills, foreign competition (often
government subsidized), increasing costs associated with government-mandated
environmental regulations and high labor and benefit costs.
U.S. domestic shipments for all steel products have averaged approximately
98 million tons per year for the last three years. While total U.S. shipments of
steel have grown by an average of 2.4 percent per year since 1982, steel exports
by U.S. producers have accounted for most of that growth. Domestic steel
consumption has been essentially flat over the past ten years.
The industry has raw steel production capacity estimated to be 110 to 117
million tons. In addition, over 90 percent of current U.S. steel production is
continuously cast. These two factors together with the industry's ongoing
successful efforts to improve productivity and reduce costs have contributed to
significant downward pressure on the price of steel in the marketplace. Real
steel selling prices have fallen at an annual rate of 3.5 percent over the past
decade although during 1993, 1994, and 1995 steel prices have increased on
average. The Company believes the trend toward lower real steel prices will
continue, although at a slower rate.
Over the long-term, steel prices will be set by the lowest cost producers,
and the lowest costs will be attained through the implementation of new
technologies. The flat-rolled steel market provides strong evidence of this
downward trend in real steel prices due to decreasing costs. Technological
innovation is likely to continue in the steel industry and producers will be
required to achieve significant, sustainable cost reductions to succeed.
SPECIAL GRADE MARKET
This component of the flat-rolled market represents the medium-carbon,
high-carbon, high-strength low-alloy ("HSLA") and alloy markets. The total
annual market is approximately 3 million tons, of which Acme's share is
estimated to be 6 to 7 percent. However, in the portion of the market
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where Acme is not facility-limited (where customers can use narrow widths and
have no continuous cast requirement), it holds an approximately 30 percent
share. Acme's principal customer markets are agricultural, industrial, tools,
conversion, automotive components and construction.
LOW CARBON FLAT-ROLLED MARKET
Flat-rolled products comprise approximately 50 percent of the U.S. steel
market, or about 40-45 million tons per year, of which the majority is in
low-carbon sheet and strip. Acme's share is estimated to be less than 1 percent.
The key end users are automotive OEMs, automotive stampers, can and container
manufacturers, the construction industry, appliance makers, tubing manufacturers
and steel service centers.
ACME'S COMPETITIVE POSITION
For commercial sales to unaffiliated customers, Acme currently competes in
the low-, mid- and high-carbon and alloy steel markets. Acme has numerous
competitors composed principally of steel service centers, a substantial portion
of which use imported steel and, to a lesser extent, smaller integrated mills.
Acme faces the same challenges as the rest of the steel industry. Because of
Acme's high overall cost structure resulting from its outmoded steel finishing
process and the competitive forces affecting the entire steel industry, steel
making has proven to be only marginally profitable even at the upper end of the
business cycles. Management believes that Acme, and the U.S. steel industry as a
whole, benefitted during 1993, 1994 and 1995 from an upturn in the business
cycle and increases in steel prices on average over the past three years. There
can be no assurance that this upturn in the business cycle will continue or that
the industry will be successful in maintaining current price levels.
(E) COMPETITIVE CONDITIONS FOR THE STEEL FABRICATING SEGMENT
ACME PACKAGING. In the steel strapping market, Acme Packaging's primary
competitor is ITW Signode, a division of Illinois Tool Works, Inc., which
management believes has a U.S. market share approximating that of Acme
Packaging. The Company believes that Acme Packaging's strong market position is
attributable to (i) a broad product line, (ii) high quality, low cost strapping
produced in modern facilities, (iii) the location of its production facilities
in close proximity to a broad customer base and (iv) the benefits of a close
relationship with Acme Steel, which supplies all of Acme Packaging's steel.
However, the steel strapping market is a mature market that is not expected to
grow significantly in future years. Furthermore, competition from plastic
strapping, especially the higher strength polyester products, is expected by the
Company to intensify in the traditional steel strapping markets of lumber,
paper, textiles, wood and synthetic fibers, primarily due to improvements in
product strength characteristics.
ALPHA TUBE. Alpha Tube operates in a highly competitive market
characterized by numerous participants with widely varying capabilities. Alpha
Tube's customers are increasingly demanding products with increased formability,
greater gauge control and lighter weight in combination with higher strength and
different steel chemistries. Customers, especially in the automotive market,
also are increasingly demanding just-in-time inventory delivery, which has the
effect of increasing inventory carrying costs at the tubing manufacturer level.
Unlike Alpha Tube, many of its competitors compete only on price and generally
offer little or no technical service.
UNIVERSAL. Universal's primary competitor in the automobile and light truck
jack market is the Canadian based Seeburn Division of Ventra Group, which has a
North American market share similar to that of Universal. Universal competes in
a limited market characterized by large purchasers with significant buying
power.
(F) THE MODERNIZATION AND EXPANSION PROJECT
Acme's existing rolling mill facilities cannot produce a coil which is large
and wide (more than 30 inches) enough to satisfy the needs of many users of
flat-rolled steel. In addition, the existing physical
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limitations of the mill facilities do not allow Acme to fully utilize its
existing raw steel manufacturing capability. Further, large users increasingly
demand continuously cast materials, and many other users prefer such materials.
Since 1982, a number of U.S. steel mills have constructed conventional thick
slab continuous casting production facilities. Currently, about 90 percent of
U.S. Steel Mills producing sheet, strip, and plate utilize conventional thick
slab casting.
The conventional thick slab facilities are a technological step behind the
new continuous thin slab casting facilities, which eliminate the extra heating
and rolling necessary to flatten thick slabs to an appropriate dimension. At
present there are 5 operating thin slab casting facilities in North America,
which have a combined estimated capacity of 7.5 million tons per year. In
addition, thin slab casting facilities are under construction with an estimated
combined capacity of 8.8 million tons. Of the companies currently using or
planning to construct continuous thin slab casters, only one company other than
Acme is planning to use basic oxygen furnace steel. Most of these new
installations will use scrap steel as their raw material.
The Modernization and Expansion Project commenced in August of 1994
coincident with the completion of the financing. The final cost, including
equipment, ancillary facilities and construction, is expected to be
approximately $392 million excluding capitalized interest costs and certain
internal costs directly related to the Modernization and Expansion Project. The
Modernization and Expansion Project will include facilities for both the
continuous casting of thin steel slabs (approximately 2" in thickness and 60" in
width) ("Caster") and the hot rolling of those slabs into sheet steel ("Mill")
and is being constructed in a new building on a site adjacent to Acme's current
steel making facilities. Steel production at Acme's existing facilities will
continue during construction without disruption or reduction of product
available for supply to customers. When fully operational, the Modernization and
Expansion Project should be capable of producing Acme's anticipated product mix.
The Modernization and Expansion Project will involve substantial costs in
addition to those for the construction of the facility itself. When the new
facility begins operation, training costs as well as production inefficiencies
related to start-up of the new facility during the transition period will be
charged to operations primarily in 1996. The total costs for training and
production inefficiencies during the transition period is expected to be
approximately $15 million. In addition, Acme will be required to capitalize the
interest expenses associated with the Modernization and Expansion Project during
the construction period. These capitalized expenses are estimated to be
approximately $40 - 45 million, which will be added to the cost of the
Modernization and Expansion Project during the construction period and amortized
over the lives of the related assets.
During construction of the Modernization and Expansion Project, the Company
believes Acme's existing steel manufacturing operations will continue to operate
with minimal disruption. The Modernization and Expansion Project and the
activities of the general contractor are monitored by a project management team
composed primarily of existing officers and employees. In the event there are
significant problems with the construction of the Modernization and Expansion
Project, senior management may have to devote substantial time to those problems
and, as a result, may devote substantially less time than is normal to existing
operations. See LIQUIDITY AND CAPITAL RESOURCES in MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for a discussion of
the financing for the Modernization and Expansion Project.
(G) JOINT VENTURE
On February 27, 1996, Acme broke ground with its joint venture partner to
begin construction of a $30 million state-of-the-art steel processing plant. The
new facility will be located in Chicago adjacent to Acme's Riverdale steel
making operations. The new facility will pickle, oil, slit and package wide
steel coils produced by Acme's new continuous thin slab caster/hot strip mill
modernization project. The joint venture will further enhance Acme's ability to
provide precise customer specifications of superior quality steels with highly
competitive lead times. Acme will be a minority equity participant with a 40
percent interest for a total contribution of $3.5 million. Start-up of a portion
of the new facility is expected in late 1996, with the remainder in early 1997.
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ITEM 2. PROPERTIES
The Company, through its subsidiaries, has facilities throughout the United
States.
Acme's principal properties consist of an iron-producing plant in Chicago,
Illinois and a steel producing plant in Riverdale, Illinois. These facilities
include blast furnaces, coke ovens, pigging machines for the production of
molten iron and pig iron, basic oxygen furnaces and rolling mills for the
production of flat-rolled steel. Acme also owns equity interests in raw material
mining ventures in Newfoundland, and Quebec, Canada (iron ore). In addition,
Acme owns land adjacent to its steel producing plant in Riverdale, Illinois on
which it is constructing the Modernization and Expansion Project. During 1996,
Acme and its joint venture partner will begin construction of a processing
facility for the pickling, oiling and slitting of steel products located in
Chicago also adjacent to the Riverdale operation.
Packaging's principal properties consist of steel strapping plants, which
include slitting and painting equipment, in Riverdale, Illinois; New Britain,
Connecticut; and Leeds, Alabama; and a steel strapping plant in Bay Point
(formerly Pittsburg-West), California.
Alpha's two facilities are located in the Toledo, Ohio metropolitan area.
Alpha's facilities include two manufacturing and office buildings and rolling
mills for the production of welded steel tubing. In addition, Alta Slitting, a
related subsidiary, also operates a plant in the Toledo area which slits steel
for Alpha.
Universal's facilities are located in Butler, Indiana and include a
manufacturing and office building, a computer assisted design and manufacturing
system, and automated forming and assembly lines.
All of these plants are owned in fee except for the Alpha facilities which
are leased for varying periods through 1999, and are renewable at the option of
the Company.
In the opinion of management, the manufacturing facilities of the Company's
subsidiaries are properly maintained and their productive capacity is adequate
to meet its requirements.
ITEM 3. LEGAL PROCEEDINGS
(A) GENERAL
Pursuant to an Agreement and Plan of Reorganization as of March 5, 1986, the
Company (prior to the Company's 1992 reorganization, the Company was Acme Steel
Company, now a subsidiary and formerly called Interlake, Inc. hereinafter
referred to as the "Company") and Interlake, its former parent company, entered
into a Tax Indemnification Agreement ("TIA"). The TIA generally provides for
Interlake to indemnify the Company for certain tax matters. Per the TIA,
Interlake is solely responsible for any additional income taxes it is assessed
related to adjustments relating to all tax years prior to 1982. With respect to
any additional income taxes that are finally determined to be due with respect
to the tax years beginning in 1982 through the date of the "Spin-Off" (as said
term is identified in the Reorganization documents), the Company is responsible
for taxes relating to "Timing Differences" related to the Company's "Continuing
Operations." A "Timing Difference" is defined generally as an adjustment to
income, deductions or credits which is required to be reported in a tax year
beginning subsequent to 1981 through the Spin-Off, but which will reverse in a
subsequent year. "Continuing Operations" is defined generally as any business
and operations conducted by the Company as of the Spin-Off date. Interlake is
principally responsible for any additional income taxes the Company is assessed
relating to all other adjustments prior to the Spin-Off.
While certain issues have been negotiated and settled between the Company,
Interlake and the Internal Revenue Service for the tax years beginning 1982
through the date of the Spin-Off, certain significant issues for the tax years
beginning 1985 through the Spin-Off remain unresolved; and on March 17, 1994,
the Company received a Statutory Notice of Deficiency ("Notice") in the amount
of $16.9 million in tax as a result of the Internal Revenue Service's
examination of the 1982 through 1984 tax years. Interlake has been principally
responsible, pursuant to the TIA, for representing the
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Company before the Internal Revenue Service for the 1982 through 1984 tax years.
Should the government sustain its position as proposed for those unresolved
issues and those contained in the Notice, substantial interest would also be due
(potentially in an amount greater than the tax claimed). The taxes claimed
relate principally to adjustments for which the Company is indemnified by
Interlake pursuant to the TIA. The Company has adequate reserves to cover that
portion of the tax for which it believes it may be responsible per the TIA. The
Company is contesting the unresolved issues and the Notice.
To date, Interlake has met its obligations under the TIA with respect to all
covered matters. In the event Interlake for any reason is unable to fulfill its
obligations under the TIA, the Company could have increased future obligations.
The Company's subsidiaries also have various litigation matters pending
which arise out of the ordinary course of their businesses. In the opinion of
management, the ultimate resolution of these matters will not have a material
adverse effect on the financial position or results of operations of the
Company.
(B) ENVIRONMENTAL
In addition to the general matters noted above, the operations of the
Company and its subsidiary companies are subject to numerous Federal, state and
local laws and regulations providing a comprehensive program of controlling the
discharge of materials into the environment and remediation of certain waste
disposal sites by responsible parties for the protection of public health and
the environment. In addition, various Federal and state occupational safety and
health laws and regulations apply to the work place environment.
The current environmental control requirements are comprehensive and reflect
a long-term trend towards increasing stringency as these laws and regulations
are subject to periodic renewal and revision. The Company expects these
requirements will continue to become even more stringent in future years.
In prior years, the Company has made substantial capital investments in
environmental control facilities to achieve compliance with these laws,
incurring expenditures of $8.7 million for environmental projects (exclusive of
any such expenditures related to the continuous thin slab caster and hot strip
mill project) in the period from 1993 through 1995. The Modernization and
Expansion Project is being constructed under a lump sum fixed price contract of
which it is estimated that $12.1 million was capitalized in 1995 for
environmental compliance excluding capitalized interest. The Company anticipates
making further capital expenditures of approximately $5.3 million for
environmental projects during 1996 relating to existing facilities to maintain
compliance with these laws; and during 1996 it estimates $8.5 million have, or
will be, expended for environmental expenditures related to the continuous thin
slab caster and hot strip mill project excluding capitalized interest. In
addition, maintenance, depreciation and operating expenses attributable to
installed environmental control facilities are having, and will continue to
have, an adverse effect upon the Company's earnings. Although all of the
Company's subsidiary operating companies are affected by these laws and
regulations, similar to other steel manufacturing operations, they have had, and
are expected to continue to have, a greater impact upon the Company's steel
manufacturing subsidiary than on the Company's other operating subsidiaries.
The Company, principally through its operating subsidiaries, is and, from
time to time in the future, will be involved in administrative proceedings
involving the issuance, or renewal, of environmental permits relating to the
conduct of its business. The final issuance of these permits is generally
resolved on terms satisfactory to the Company. In the future, the Company
expects such permits will be similarly resolved on satisfactory terms; however,
from time to time, the Company is required to pursue administrative and/or
judicial appeals prior to achieving a resolution of the terms of such permits.
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The Company, from time to time, may be involved in administrative or
judicial proceedings with various regulatory agencies or private parties in
connection with claims that the Company's operations have violated certain
environmental laws, conditions of existing permits or with respect to the
disposal of materials at waste disposal sites. The resolution of such matters
may involve the payment of civil penalties, damages, remediation expenses and/or
the expenditure of funds to add or modify pollution control equipment.
WASTE REMEDIATION MATTERS
Pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C., Section 9601 ET SEQ. ("Superfund") and
similar state statutes, liability for remediation of property, including waste
disposal sites, contaminated by hazardous materials may be imposed on present
and former owners or operators of such property and generators or transporters
of such materials to a waste disposal site (i.e., Potentially Responsible
Parties, "PRPs"). The Company and its operating subsidiaries have been named as
PRPs with respect to several such sites. In each instance, the Company's
investigation has evidenced either: i) the Company had not disposed of waste
materials at the site and was not properly named as a PRP; or, ii) the Company's
proportion of materials disposed of at such sites is of sufficiently small
volume to qualify the Company as a DE MINIMIS contributor of waste material at
such sites. This DE MINIMIS status has been confirmed at essentially all of the
applicable sites.
Although no assurances can be given that new information will not be
uncovered which would cause the Company and its subsidiaries to lose their DE
MINIMIS status at these sites, or, that the Company, or its subsidiary
companies, would not be named as PRPs at additional sites, the Company presently
believes its total costs for existing sites will not be material.
In addition to the foregoing Superfund sites, the following waste
remediation matters relating to the Company's subsidiary companies are currently
pending:
LEEDS, ALABAMA -- ELEVATED LEVELS OF LEAD. In September 1992, Packaging
hired a consulting engineering firm for the purpose of providing soil sampling
and analysis in connection with an application for a storm water permit for its
Leeds, Alabama, plant. Pursuant to an investigation conducted by the consultant,
elevated levels of lead were discovered on the property, including one area of
the property wherein buried drums were discovered containing lead.
In January 1993, Packaging advised the seller of this plant site that the
sampling program was initiated in conjunction with filing a Notice of Intent for
the plant for coverage under the Alabama Department of Environmental
Management's General Storm Water Discharge Permit. The seller was advised that
the results of the sampling program showed runoff from the west parking lot area
contained elevated concentrations of lead in the samples. Pursuant to
Packaging's investigation, Packaging advised the seller that all evidence
indicated these conditions were present on the property at the time the seller
owned the property and were present at the time the Leeds, Alabama, facility was
sold to the Company on March 29, 1989; and, pursuant to the terms of the
purchase and sale agreements relating to this property, the seller is
responsible for remediating any lead or other contaminants located on this
property. Without admitting or denying its liability, the seller has retained a
consultant to conduct a full investigation, sampling and analysis of the
property.
Packaging is cooperating with the seller regarding the investigation of the
contamination of this property by lead, and/or other substances and the
appropriate remediation strategy; however, Packaging intends to vigorously
pursue its remedies under the purchase and sale agreements with the seller.
ADMINISTRATIVE AND LITIGATION MATTERS
The Company, or its operating subsidiaries are currently involved in the
following matters relating to administrative regulations which affect, or may
affect, the operations, the permits or the issuance of permits; or litigation
relating to the Company:
ACME STEEL COMPANY -- NPDES PERMIT. In 1991, the Illinois Environmental
Protection Agency ("IEPA"), issued Acme a permit, pursuant to the National
Pollution Discharge Elimination System
10
<PAGE>
("NPDES") regulating non-contact water discharges to the Calumet River from
Acme's coke and blast furnace plant facilities. The NPDES permit contains strict
temperature and storm water discharge limitations. Acme filed an appeal of
certain conditions of the permit with the Illinois Pollution Control Board
("IPCB"); and on July 7, 1995 the IPCB granted Acme's Petition for an Adjusted
Standard and relief from the temperature limitations. Further, through
modification of certain provisions in the permit and the implementation of best
management practices, Acme anticipates achieving control of Acme's storm water
discharge to an extent that it will achieve compliance with other permit
conditions. Acme is awaiting IEPA's issuance of a revised NPDES permit
incorporating the revised temperature limitations.
REMOVAL CREDITS AND PRETREATMENT. The Metropolitan Water Reclamation
District of Greater Chicago ("MWRD") is a publicly owned treatment works
("POTW"). The MWRD applied to the U.S. Environmental Protection Agency ("U.S.
EPA") for authority to revise categorical pretreatment standards to reflect the
actual treatment provided by the MWRD for waste water discharged to the MWRD's
POTW by industrial users ("Removal Credits"). These revised categorical
standards, reflecting Removal Credits are essential for Acme to avoid
expenditures for control of 4AAP phenol found in discharges from its coke
by-products plant and for control of certain other pollutants. In 1987, the
MWRD's application was denied by the U.S. EPA and the denial was upheld by the
United States Court of Appeals for the Seventh Circuit. The U.S. EPA maintained
that under the Clean Water Act and decisions of U.S. District Courts, that it
could not approve Removal Credits until it promulgated "sludge criteria."
In 1993, the U.S. EPA promulgated sludge criteria which included the
possibility of granting Removal Credits for phenols only in certain
circumstances. Acme petitioned the MWRD for Removal Credits. Following this
petition, the MWRD again applied to the U.S. EPA for authority to grant Removal
Credits. While this application was denied, the U.S. EPA stated that if the
Agency amends its regulations with respect to phenol 4AAP either as a result of
the petition filed by the MWRD or independently, that the MWRD may then resubmit
its application.
Acme, together with a similarly situated steel company, filed Comments and a
Request for Reconsideration and Clarification concerning the 4AAP phenol
component of U.S. EPA's Standards for Disposal of Sludges with the U.S. EPA and
filed a Petition for Review of the U.S. EPA's decision with the Court of Appeals
for the DC Circuit. Both the Comments and Request for Reconsideration and the
Petition for Review are pending. The steel companies filed a motion with the DC
Circuit Court to stay the appeal pending U.S. EPA's consideration of the
Comments and Administrative Request for Reconsideration and Clarifications. The
Court granted this Motion on September 14, 1994. While Acme continues to
challenge the U.S. EPA's denial of the Removal Credits application and is
pursuing administrative and legal remedies, Acme could be subject to allegations
it is in violation of currently applicable pretreatment standards and could be
required to negotiate appropriate resolutions with the U.S. EPA and the MWRD
which could result in the payment of penalties. In the event Acme is
unsuccessful in its challenge of U.S. EPA's actions, capital expenditures
required to bring its discharges to the MWRD into compliance with the current
applicable pretreatment standards are estimated at approximately $6 million.
Although Acme is vigorously pursuing its administrative and judicial
remedies and would vigorously contest any action to assess civil penalties
against Acme, the Company does not have sufficient information to estimate its
potential liability, if any, if Acme's efforts to obtain such relief, or contest
such penalty assessments, are not successful.
ILLINOIS STATE IMPLEMENTATION PLAN FOR PARTICULATES. Acme, together with
other Illinois steel companies, are engaged in extensive discussions with the
IEPA leading to the development of regulations governing the emissions of
particulate matter from various steel manufacturing facilities operated by Acme
and others. These regulations were submitted to the U.S. EPA for approval as
part of IEPA's State Implementation Plan ("SIP").
11
<PAGE>
On November 18, 1994, the U.S. EPA conditionally approved these regulations.
The conditions imposed by the U.S. EPA for this SIP approval required a
commitment by the IEPA to adopt more stringent rules for various sources at Acme
and other steel companies. Acme, together with other steel companies, filed a
Petition for Review of U.S. EPA's action in the U.S. Court of Appeals for the
Seventh Circuit on January 4, 1995 (Docket No. 95-1025).
The steel companies, including Acme, are engaged in discussions with the
U.S. EPA and the IEPA regarding the need for these more stringent rules and what
additional particulate emission controls, if any, may be appropriate or required
under Federal law. These discussions and the Petition for Review are pending and
no estimate can be made whether additional emission controls will be required or
the cost of such controls at this time.
OTHER MATTERS
ACME STEEL COMPANY--MELT SHOP DESULFURIZATION FUGITIVE AND COKE PLANT
PUSHING EMISSIONS. Following internal reviews of current desulfurization
requirements, Acme determined that existing environmental controls for
desulfurizing molten iron at its Riverdale, Illinois, melt shop were not
satisfactory for the control of fugitive emissions from this process in view of
the higher percentage of molten iron needing desulfurization as a result of
increased market place demands for lower sulfur content in finished steel goods
sold by Acme and future melt shop operations when the Modernization and
Expansion Project is operational.
Acme, after completion of its internal review and preliminary engineering
evaluation, requested a meeting and began discussions with the U.S. EPA and IEPA
in August 1994 regarding an improved fugitive emission control program. During
these discussions, concerns were raised regarding fugitive emissions from the
iron transfer station and Acme included this operation in its new emission
control system. The cost of this emission control system, which was completed in
the first quarter of 1996, was approximately $2.8 million.
Although discussions were ongoing with the U.S. EPA and installation of the
new melt shop iron desulfurization, iron transfer and skimming emission control
system was nearing completion, on February 7 and March 1, 1996 U.S. EPA issued
two Notices of Violation ("NOV") seeking penalties for past violations and for
any economic benefit which may have accrued to Acme by reason of a delay in
achieving compliance with fugitive emission regulations for the iron
desulfurization and transfer operations at the melt shop and pushing emissions
at the Coke Plant under U.S. EPA's civil penalties policies. The Company does
not believe Acme incurred any economic benefits from delayed compliance with
respect to these emissions and intends to vigorously oppose any efforts to
assess such penalties against Acme.
METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO (MWRD)--CEASE AND
DESIST ORDERS (C&D ORDER). CEASE AND DESIST ORDER NO. 32453. On March 24, 1994,
the MWRD issued C&D Order No. 32453 relating to Acme's self-reported discharges
of total cyanide to the MWRD's sanitary sewer system in quantities in excess of
the limits authorized by the MWRD's Sewage and Waste Control Ordinance at its
Chicago, Illinois Coke Plant. Following extensive investigation of the cause and
evaluation and testing of appropriate treatment methodologies, Acme selected a
treatment system and submitted a proposed construction schedule to the MWRD for
review. A treatment system for the removal of cyanide was installed and
compliance demonstrated by Acme by the October 31, 1995 final compliance date
established by the MWRD at a cost of approximately $1.2 million.
CEASE AND DESIST ORDER NO. 38357. On July 13, 1994, the MWRD issued C&D
Order No. 38357 relating to Acme's self-reported discharges of lead, mercury,
iron and pH in quantities in excess of, or out of the range of, the limits
authorized by the MWRD's Sewage and Waste Control Ordinance. Following
investigation and corrective action, these violations were corrected for all
parameters except lead. Subsequent investigation has identified the potential
source of the excess lead discharges; and a treatment system to achieve
compliance is scheduled for completion by June 30, 1996 at an estimated cost of
$0.5 million.
12
<PAGE>
1986 REORGANIZATION MATTERS. Pursuant to an Agreement and Plan of
Reorganization dated as of March 5, 1986, (the "Reorganization") between the
Company and Interlake, both parties entered into a Cross-Indemnification
Agreement, dated May 29, 1986, (the "Agreement") more specifically described in
Exhibit 10.2 to the Company's Annual Report/Form 10-K filed with the U.S.
Securities Exchange Commission for the fiscal year 1992.
Pursuant to the terms of this Agreement, for a period of ten (10) years
following the date of the Spin-Off (as said term is identified in the
Reorganization documents), the Company undertook to defend, indemnify and hold
Interlake and its affiliates harmless from and against any and all Claims, as
that term is defined in the Agreement, occurring either before or after the date
of the Reorganization and which arose out of or are related to the Acme
Business. The Acme Business is more specifically defined in the Agreement as the
iron and steel and domestic U.S. steel strapping business as conducted by the
Company on or about May 29, 1986. The indemnification by the Company of
Interlake with respect to any claims includes, but is not limited to, all claims
asserted in connection with the Company's interests or obligations with respect
to: Wabush Iron Company, Ltd.; Wabush Mines; Erie Mining Company; Olga Coal
Company; assets and liabilities related to qualified welfare and benefit plans
with respect to retired, current and future employees of the Company; certain
environmental matters relating to the Acme Business, whether brought by a
governmental agency or a private entity; workers' compensation matters and
occupational safety, health and administration matters; and product liability
and general liability matters related to the Acme Businesses. The Agreement
designated certain mineral property interests retained by the Company, including
land held for the account of the Company by Syracuse Mining Company, a
subsidiary of Pickands Mather and Company; stock of Tilden Iron Mining Company;
and, lands in Bruce County, Ontario, Canada, being within the scope of the
indemnification.
Similarly, and for the same period of time, Interlake undertook to defend,
indemnify and hold the Company and its affiliates harmless from and against all
Claims, as that term is defined in the Agreement, occurring either before or
after the date of the Reorganization related to the operation of all businesses
and properties currently owned, directly or indirectly, by Interlake or any
subsidiary of Interlake (other than the Company and its affiliates) and relating
to the Transferred Property, as that term is defined in the Reorganization
Agreement (but excluding the Acme Business), and, any business and properties
discontinued or sold by Interlake Inc. prior to May 29, 1986, including any
discontinued or sold businesses or property which, if continued, would be part
of the Acme Business. The indemnification by Interlake with respect to any
Claims incurred in connection with or arising out of or related to the Interlake
Business, as that term is defined more specifically in the Agreement, includes
but is not limited to: those claims asserted in connection with certain stock
options, rights, awards and programs; certain deferred compensation matters;
certain matters arising under qualified welfare and benefit plans and
post-retirement income plans; and, environmental matters relating to the
Interlake Businesses whether brought by governmental agencies or private
entities. These environmental matters include, without limitation, the lawsuit
captioned PEOPLE OF THE STATE OF ILLINOIS V. WASTE MANAGEMENT OF ILLINOIS,
INTERLAKE, INC. AND FIRST NATIONAL BANK OF WESTERN SPRINGS, Circuit Court of
Cook County, Illinois (No. 85 L 30162); the disposal of materials at the
landfill operated by Conservation Chemical located at Gary, Indiana, to the
extent such materials originated at the plant of Gary Steel Company; and,
operation of facilities by predecessors of Interlake, Inc. at Duluth, Minnesota;
workers' compensation, occupational safety and health matters relating to the
Interlake Business; general products liability and general litigation matters
related to the Interlake Business; and, the matters arising from Lake Mining
Company, Mauthe Mining Company, Odanah Iron Company, Vermillion Mining Company
and Western Mining Company.
Pursuant to this Agreement, Interlake has provided the defense and paid all
costs in the matter of CITY OF TOLEDO V. BEAZER MATERIALS AND SERVICES, INC.,
SUCCESSOR-IN-INTEREST TO KOPPERS COMPANY, INC., TOLEDO COKE CORPORATION, THE
INTERLAKE CORPORATION, SUCCESSOR-IN-INTEREST TO INTERLAKE, INC., THE INTERLAKE
COMPANIES, INC., SUCCESSOR-IN-INTEREST TO INTERLAKE, INC., ACME STEEL COMPANY,
SUCCESSOR-IN-INTEREST TO INTERLAKE, INC., United States District Court, Northern
District of Ohio, Western Division,
13
<PAGE>
Case No. 3:90 CV 7344, which is an action for declaratory and injunctive relief
by the City of Toledo (the "City") to recover its past and future costs and
damages associated with the presence of and release of hazardous substances,
hazardous wastes, solid waste, industrial waste and other waste at or about
property located on Front Street in Toledo, Ohio (the "Site"). The City seeks
relief pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Resource Conservation Recovery Act ("RCRA") and on
the basis of nuisance. City claims that the defendants owned and/or operated
facilities located on Front Street in Toledo, Ohio which generated, transported
and/or treated, stored or disposed of hazardous substances, hazardous wastes,
solid wastes and industrial wastes or other wastes which were released at and
from the facility by defendants or successors-in-interest to the entities which
owned, operated, generated, transported and/or treated, stored or disposed of
said substances. In June 1995, the Court denied the City's motion for an
injunction under RCRA to compel the defendants to clean up the Site. The City is
appealing this decision. In November 1995, the Court granted the Interlake
defendants' (Acme Steel Company, The Interlake Corporation and The Interlake
Companies, Inc.) motion for summary judgement seeking indemnification by Beazer
for any environmental liabilities assisted by the City. Beazer indicates it
intends to appeal this decision. In January 1996, the Court ruled the defendants
were liable for the City's costs incurred to investigate the Site ($400,000) and
for future costs of investigation and remediation, to the extent they are
consistent with the National Contingency Plan under CERCLA.
Interlake also has and continues to provide indemnification to the Company
for the Duluth, Minnesota, facility which has been designated as a Superfund
Site pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Section 9601, ET SEQ. Interlake's
estimate, obtained from publicly filed documents, of the potential remediation
costs of contaminated soils, under alternatives Interlake deems appropriate and
which it indicates are consistent with U.S. EPA's policy guidance and the
Minnesota environmental agency ("MPCA"), range from $3 to $4 million. Other
remediation plans for the contaminated soils which contemplate the continued
industrial use of the property could cost as much as $20 million. However,
Interlake believes that the risks and other assumptions associated with these
plans may be overstated. Interlake reports it expects the soil remediation will
be substantially complete by the end of 1996. The MPCA also requested Interlake
to investigate and evaluate remediation alternatives for the underwater
sediments at the Duluth site. Interlake reports that it and the MPCA have
substantially agreed upon the scope of the sediments investigation and this
investigation commenced in February 1996. Interlake indicates it is unable to
provide meaningful estimates of the potential cost estimates of such
remediation, if any is deemed appropriate, until the investigation is complete
and remediation alternatives are reviewed with the MPCA.
To date, Interlake has met its obligations under the Cross-Indemnification
Agreement with respect to all matters covered therein affecting the Company,
including those matters related to litigation and environmental matters. The
Company does not have sufficient information to determine the potential
liability of the Company, if any, for the matters covered by the Agreement in
the event Interlake fails to meet its obligations thereunder in the future. In
the event Interlake, for any reason, was unable to fulfill its obligations under
the Cross-Indemnification Agreement, the Company could have increased future
obligations which could be significant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the last quarter of the last fiscal year.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The information relating to the market for the Company's common stock and
related shareholder matters appears in the note to consolidated financial
statements titled Long-term Debt and Revolving Credit Agreement, pages 49 - 51,
and found in the inside back cover under the captions Stock Market Information
and Dividends which is incorporated by reference in this Form 10-K Annual
Report.
14
<PAGE>
(This page has been left blank intentionally.)
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
TEN YEARS IN REVIEW (dollars in thousands except for per share data)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Income Data
Net sales $ 521,619 $ 522,880
- --------------------------------------------------------------------------------------------
Gross profit $ 84,448 $ 76,288
- --------------------------------------------------------------------------------------------
Income (loss) before income taxes, extraordinary items and
cumulative effect of changes in accounting principle $ 44,135 $ 28,693
- --------------------------------------------------------------------------------------------
Income tax provision (credit) $ 15,889 $ 9,935
- --------------------------------------------------------------------------------------------
Net income (loss) before extraordinary items and cumulative
effect of changes in accounting principle $ 28,246 $ 18,758
- --------------------------------------------------------------------------------------------
Extraordinary credit resulting from utilization of net
operating loss
- --------------------------------------------------------------------------------------------
Extraordinary expense item related to penalty on prepayment of
debt $ (1,787)
- --------------------------------------------------------------------------------------------
Cumulative effect on prior years of changes in accounting
principle
- --------------------------------------------------------------------------------------------
Net income (loss) $ 28,246 $ 16,971
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Per Share Data
Income (loss) before extraordinary credit (expense) and
cumulative effect of changes in accounting principle $ 2.44 $ 2.38
- --------------------------------------------------------------------------------------------
Extraordinary credit (expense) item $ (0.22)
- --------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principle
- --------------------------------------------------------------------------------------------
Net income (loss) $ 2.44 $ 2.16
- --------------------------------------------------------------------------------------------
Shareholders' equity $ 21.42 $ 19.31
- --------------------------------------------------------------------------------------------
Weighted average shares outstanding (in thousands) 11,596 7,873
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Balance Sheet
Current assets $ 258,787 $ 273,842
- --------------------------------------------------------------------------------------------
Property, plant and equipment, net $ 379,178 $ 148,829
- --------------------------------------------------------------------------------------------
Total assets $ 754,743 $ 682,330
- --------------------------------------------------------------------------------------------
Current liabilities $ 108,330 $ 81,391
- --------------------------------------------------------------------------------------------
Long-term debt $ 276,831 $ 265,055
- --------------------------------------------------------------------------------------------
Shareholders' equity $ 248,111 $ 223,278
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Cash flows
Net cash provided by (used for) operating activities $ 57,787 $ 47,422
- --------------------------------------------------------------------------------------------
Net cash used for investing activities $ (81,793) $(334,124)
- --------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities $ 410 $ 312,897
- --------------------------------------------------------------------------------------------
Net increase (decrease) in cash $ (23,596) $ 26,195
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Ratio Analysis (percent)
Gross profit margin 16.2% 14.6%
- --------------------------------------------------------------------------------------------
Pre-tax margin 8.5% 5.5%
- --------------------------------------------------------------------------------------------
Net margin 5.4% 3.3%
- --------------------------------------------------------------------------------------------
Return on shareholders' equity 12.0%(e) 11.1%(d)
- --------------------------------------------------------------------------------------------
Debt as a percentage of capitalization 53% 54%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Additional Information
Depreciation $ 13,613 $ 15,514
- --------------------------------------------------------------------------------------------
Capital expenditures $ 244,374 $ 56,339
- --------------------------------------------------------------------------------------------
Working capital $ 150,457 $ 192,451
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Computed before cumulative effect of changes in accounting principle.
(b) Includes result of cumulative effect of changes in accounting principle and
an $8.2 million reduction in shareholder's equity related to a minimum
pension liability adjustment.
(c) Includes a $13.1 million reduction in shareholder's equity related to a
minimum pension liability adjustment.
(d) Includes a $0.7 million increase in shareholder's equity related to a
minimum pension liability adjustment.
(e) Includes a $3.8 million reduction in retained earnings related to minimum
pension liability adjustment.
16
<PAGE>
Certain amounts have been reclassified to conform with the 1995 presentation. A
ten-year presentation is provided. Acme Metals Incorporated, formerly Acme Steel
Company, became a public company in 1986 when, following the reorganization of
Interlake, Inc., the shares of the company were distributed to shareholders of
The Interlake Corporation, pursuant to a reorganization of Interlake, Inc.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income Data
Net sales $ 457,406 $ 391,562 $ 376,951 $ 446,042 $ 439,412 $ 412,453 $ 335,488 $240,314
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit $ 45,223 $ 29,546 $ 27,748 $ 36,712 $ 51,886 $ 54,493 $ 31,314 $ 14,174
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before
income taxes,
extraordinary items and
cumulative effect of
changes in accounting
principle $ 10,432 $ (4,522) $ (3,050) $ 9,388 $ 26,126 $ 30,982 $ 13,302 $(21,103)
- ---------------------------------------------------------------------------------------------------------------------------------
Income tax provision
(credit) $ 4,173 $ (1,673) $ (732) $ 3,755 $ 9,926 $ 12,393 $ 6,360
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) before
extraordinary items and
cumulative effect of
changes in accounting
principle $ 6,259 $ (2,849) $ (2,318) $ 5,633 $ 16,200 $ 18,589 $ 6,942 $(21,103)
- ---------------------------------------------------------------------------------------------------------------------------------
Extraordinary credit
resulting from
utilization of net
operating loss $ 1,010 $ 6,041
- ---------------------------------------------------------------------------------------------------------------------------------
Extraordinary expense
item related to penalty
on prepayment of debt
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effect on
prior years of changes in
accounting principle $ (50,323)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 6,259 $ (53,172) $ (2,318) $ 5,633 $ 16,200 $ 19,599 $ 12,983 $(21,103)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Income (loss) before
extraordinary credit
(expense) and cumulative
effect of changes in
accounting principle $ 1.15 $ (0.53) $ (0.43) $ 1.05 $ 3.00 $ 3.22 $ 1.19 $ (3.66)
- ---------------------------------------------------------------------------------------------------------------------------------
Extraordinary credit
(expense) item $ 0.17 $ 1.03
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of
changes in accounting
principle $ (9.32)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.15 $ (9.85) $ (0.43) $ 1.05 $ 3.00 $ 3.39 $ 2.22 $ (3.66)
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity $ 15.39 $ 16.55 $ 28.13 $ 28.65 $ 27.63 $ 24.62 $ 21.43 $ 19.01
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average shares
outstanding (in
thousands) 5,439 5,396 5,373 5,356 5,393 5,776 5,856 5,769
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Balance Sheet
Current assets $ 170,394 $ 148,860 $ 134,192 $ 126,497 $ 149,199 $ 102,572 $ 86,117 $ 70,772
- ---------------------------------------------------------------------------------------------------------------------------------
Property, plant and
equipment, net $ 115,539 $ 120,689 $ 129,730 $ 133,419 $ 116,552 $ 104,024 $ 99,285 $ 91,583
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 333,869 $ 300,702 $ 290,736 $ 286,603 $ 285,275 $ 224,070 $ 201,155 $177,085
- ---------------------------------------------------------------------------------------------------------------------------------
Current liabilities $ 77,197 $ 59,425 $ 50,027 $ 50,026 $ 57,683 $ 66,331 $ 51,511 $ 47,297
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term debt $ 49,333 $ 56,000 $ 59,500 $ 59,500 $ 59,500 $ 9,500 $ 9,500 $ 10,000
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity $ 83,203 $ 89,295 $ 150,664 $ 152,370 $ 147,106 $ 130,390 $ 124,775 $110,486
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows
Net cash provided by
(used for) operating
activities $ 16,041 $ 24,018 $ 21,721 $ 24,045 $ 20,805 $ 23,252 $ 22,750 $ (5,731)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used for
investing activities $ (11,749) $ (6,562) $ (10,611) $ (37,693) $ (38,804) $ (16,014) $ (18,909) $(12,363)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by
(used for) financing
activities $ (3,072) $ 34 $ (443) $ (328) $ 50,155 $ (15,410) $ 1,213 $ 22,947
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in cash $ 1,220 $ 17,490 $ 10,667 $ (13,976) $ 32,156 $ (8,172) $ 5,054 $ 4,853
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio Analysis (percent)
Gross profit margin 9.9% 7.5% 7.4% 8.2% 11.8% 13.2% 9.3% 5.9%
- ---------------------------------------------------------------------------------------------------------------------------------
Pre-tax margin 2.3% (1.2)%(a) (0.8)% 2.1% 5.9% 7.5% 4% (8.8)%
- ---------------------------------------------------------------------------------------------------------------------------------
Net margin 1.4% (0.7)%(a) (0.6)% 1.3% 3.7% 4.8% 3.9% (8.8)%
- ---------------------------------------------------------------------------------------------------------------------------------
Return on shareholders'
equity 7.3%(c) (59.5)%(b) (1.5)% 3.8% 11.6% 15% 11% (17.9)%
- ---------------------------------------------------------------------------------------------------------------------------------
Debt as a percentage of
capitalization 40% 40%(b) 28% 28% 29% 7% 7% 8%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Additional Information
Depreciation $ 15,234 $ 14,705 $ 14,224 $ 13,031 $ 12,031 $ 10,742 $ 9,873 $ 9,629
- ---------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 11,749 $ 7,557 $ 10,611 $ 28,604 $ 14,960 $ 9,314 $ 7,151 $ 12,363
- ---------------------------------------------------------------------------------------------------------------------------------
Working capital $ 93,197 $ 89,435 $ 84,165 $ 76,471 $ 91,516 $ 36,241 $ 34,606 $ 23,475
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
relationship that items in the Statements of Operations bear to net sales.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-------------------------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
----- ----- -----
Costs and expenses:
Cost of products sold..................................... 81.3 82.5 86.9
Depreciation expense...................................... 2.5 2.9 3.2
----- ----- -----
Gross profit................................................ 16.2 14.6 9.9
Selling and administrative expense........................ 6.8 6.4 6.7
Restructuring/nonrecurring charges........................ 1.8 0.4
----- ----- -----
Operating income............................................ 9.4 6.4 2.8
Interest expense, net..................................... (1.3) (1.2) (0.9)
Other non-operating income, net........................... 0.3 0.3 0.1
Unusual income items...................................... 0.0 0.0 0.3
Income tax provision........................................ 3.0 1.9 0.9
----- ----- -----
Net income before extraordinary item........................ 5.4 3.6 1.4
Extraordinary item, net of taxes............................ (0.3)
----- ----- -----
Net income.................................................. 5.4% 3.3% 1.4%
----- ----- -----
----- ----- -----
</TABLE>
FISCAL 1995 AS COMPARED TO FISCAL 1994
NET SALES. Consolidated net sales of $521.6 million for the year ended
December 31, 1995 were essentially even with the prior year. Higher selling
prices of $19.4 million and an increase in sales of iron products of $27.8
million were completely offset by reduced shipments.
STEEL MAKING SEGMENT. In 1995, the Company continued to enjoy improved
selling prices that benefited the steel industry as a whole. Net sales of the
Steel Making Segment advanced slightly to $356.8 million in 1995, a 2 percent
improvement over last year. Sales to unaffiliated customers rose 2 percent to
$234.9 million, while intersegment sales of $121.9 million were 3 percent higher
than in 1994. The Steel Making Segment's net sales benefited from a 3 percent
increase in average selling prices, resulting principally from a partial
realization of price increases that were announced during 1994.
STEEL FABRICATING SEGMENT. Steel Fabricating Segment net sales of $288.4
million in 1995 were 2 percent lower than the comparable period in the prior
year. Lower shipment volume accounted for $19.3 million of the sales decline
partially offset by increased average selling prices that contributed $14.3
million versus last year.
Sales of strapping and strapping tools of $166.8 million in 1995 matched
sales in the previous year. Higher average selling prices increased net sales by
$8.3 million, which was completely negated by lower shipment volume.
Steel tube sales for 1995 totaled $80.8 million, down 2 percent from the
prior year. The $2.0 million reduction in sales was due entirely to lower
shipments as average selling prices increased over last year. Average selling
prices rose 10 percent, contributing an increase of $6.2 million in sales versus
1994. Higher selling prices were completely offset by a 12 percent decline in
shipments, which was largely due to on going rationalization of the customer
base towards higher margin accounts.
Sales of jacks and lifting tools for cars and light trucks totaled $40.8
million, a 7 percent decline from the prior year. The decrease versus last year
was due almost entirely to lower sales volume, as selling prices remained
consistent with the prior year.
18
<PAGE>
COMPARATIVE SALES BY SEGMENT. The table below summarizes the relative sales
contribution of the products comprising the Company's business segments for the
past three years.
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Sheet and strip steel............................................................. 33% 38% 37%
Semi-finished steel............................................................... 4% 4% 2%
Iron products and other........................................................... 8% 2% 2%
-- -- --
TOTAL STEEL MAKING SEGMENT.................................................... 45% 44% 41%
-- -- --
-- -- --
Sheet strapping and strapping tools............................................... 32% 32% 33%
Welded steel tube................................................................. 15% 16% 16%
Auto and light truck jacks........................................................ 8% 8% 10%
-- -- --
TOTAL STEEL FABRICATING SEGMENT............................................... 55% 56% 59%
-- -- --
-- -- --
</TABLE>
GROSS PROFIT. The gross profit for the year ended December 31, 1995 of
$84.4 million was $8.2 million higher than last year, primarily reflecting
higher selling prices for the majority of the Company's products. Gross profit,
as a percentage of net sales, was 16.2 percent in 1995 versus 14.6 percent in
last year's comparable period.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense
totaled $35.6 million (6.8 percent of net sales) and $33.2 million (6.4 percent
of net sales) for the years ended 1995 and 1994, respectively. The increase in
expense was principally the result of higher salaries and increases in other
administrative costs.
OPERATING INCOME. Operating income for the year ended December 31, 1995 was
$48.8 million compared to $33.6 million for the year ended December 25, 1994.
STEEL MAKING SEGMENT. Operating income for the Steel Making Segment totaled
$28.5 million, a $14.0 million improvement over 1994. Operating income last year
was reduced by a pre-tax $9.5 million non-cash, nonrecurring charge recorded to
recognize the impairment of existing steel making facilities and contractual
employee reduction costs related to the decision to proceed with the
Modernization and Expansion Project. Exclusive of this charge, 1995's operating
income increased $4.5 million due almost entirely to higher average selling
prices of 3 percent and increased sales of iron products of 6 percent.
Offsetting a substantial portion of this benefit was a decline in shipments,
increased retiree and active medical costs, increased pension expense, and
higher administrative expenses. Flat-rolled shipments to external customers
decreased 50,000 tons compared to the prior year, while shipments to the Steel
Fabricating Segment were 6,000 tons lower. In 1995, approximately 61 percent of
flat-rolled sales and 65 percent of gross margin were attributable to external
customers. The remaining sales and gross margin were generated by shipments to
the Steel Fabricating Segment. In 1994, approximately 65 percent of sales and
gross margin of the Steel Making Segment resulted from flat-rolled sales to
external customers, while shipments to the Fabricating Segment accounted for the
remaining 35 percent of sales and gross margin. The increased percentage of
shipments to affiliated customers in 1995 is consistent with the Company's
strategy to obtain the highest possible margin on flat-rolled steel and obtain
the highest earnings for the Company as a whole.
STEEL FABRICATING SEGMENT. Operating income for the Steel Fabricating
Segment of $20.4 million in 1995 was $1.3 million higher than last year. The
segment was aided by the continued strength of the economy and increased average
selling prices in 1995, somewhat offset by lower shipment volumes. The strapping
business benefited from a 6 percent increase in average selling prices
established in December 1994 which was mostly offset by lower shipment volume.
Alpha's results advanced due to improved mix resulting from a shift away from
commodity markets to specialty value-added tubing
19
<PAGE>
products. In addition, Alpha's business benefited from lower raw material costs
for certain of its higher margin products. Lower demand in 1995 left Universal's
operating income lower than that of the prior year.
INTEREST EXPENSE. Interest expense increased $6.8 million over the prior
year. The increase in interest expense resulted from the issuance of $255.0
million of long-term debt in the third quarter of 1994. Interest costs totaled
$35.4 million, compared to $16.0 million in the previous year. Interest costs of
$14.6 million were capitalized as part of the Modernization and Expansion
Project in 1995, compared to $2.0 million in the prior year. See LIQUIDITY AND
CAPITAL RESOURCES included herein and LONG-TERM DEBT AND REVOLVING CREDIT
AGREEMENT in the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
INTEREST INCOME. Interest income was $6.6 million higher than in 1994 due
entirely to additional interest income earned on the net proceeds received from
the issuance of debt and equity in the third quarter of 1994, less payments to
the general contractor relating to the Modernization and Expansion Project.
OTHER NON-OPERATING INCOME. Other non-operating income in 1995 was $1.8
million due primarily to a $1.6 million gain on the sale of the Company's
interest in a West Virginia coal producing property. The comparable period in
1994 included income of $1.4 million consisting principally of a refund of prior
years' utility costs.
INCOME TAX EXPENSE. Income tax expense in 1995 totaled $15.9 million based
on a 36 percent effective tax rate as compared to the $9.9 million expense in
1994, based on a 34.6 percent effective rate.
NET INCOME. The Company recorded the highest earnings level in its history
posting $28.2 million, or $2.44 per share in 1995 versus the $17.0 million, or
$2.16 per share, recorded in 1994. In 1994, net income per share was reduced by
an extraordinary expense item of $1.8 million, net of tax, or 22 cents per share
related to the early extinguishment of debt in the third quarter.
FISCAL 1994 AS COMPARED TO FISCAL 1993
NET SALES. In 1994, the Company continued to enjoy an improvement both in
order volume and prices that benefited the steel industry and the national
economy as a whole. Order rates for all of the Company's products increased as
sales volume improved 13 percent during the year. Consolidated net sales of
$522.9 million for the year ended December 25, 1994 were $65.4 million, or 13
percent, higher than net sales in 1993. Higher shipment volume represented a
$37.7 million increase in sales supplemented by a 6 percent increase in average
selling prices over 1993's comparable period. The increased selling prices had a
$27.7 million favorable impact on sales in comparison to 1993.
STEEL MAKING SEGMENT. Net sales for the Steel Making Segment advanced to
$349.4 million in 1994, a $45.6 million, or 15 percent, improvement over last
year's comparable period. Sales to unaffiliated customers increased 23 percent
to $231.2 million while intersegment sales of $118.2 million were 2 percent
higher than in 1993. The increase in the Steel Making Segment's net sales was
the result of the phase-in of two separate 2 percent price increases in average
selling prices as well as the full year impact of 1993's price increases and a
15,694 ton increase in shipments of flat-rolled products.
STEEL FABRICATING SEGMENT. Steel Fabricating Segment net sales of $293.5
million in 1994 were $21.9 million, or 8 percent, higher than the comparable
period in the prior year. An increase in average selling prices accounted for
$15.9 million of the sales improvement while increased shipments generated the
remainder of the increase over last year.
Sales of steel strapping and strapping tools totaled $166.8 million in 1994,
a $12.7 million, or 8 percent, increase over a year earlier. Increased volume
accounted for $8.6 million, or 68 percent, of the improvement over last year's
results. Average selling prices were 3 percent higher than last year's levels
with all of the increase coming in the latter part of the year.
20
<PAGE>
Steel tube sales for 1994 reached $82.8 million, up 11 percent from the
prior year. The $8.6 million improvement in sales was due entirely to increased
average selling prices. Selling prices rose 18 percent during the year while
shipments fell 7 percent due to on-going rationalization of customer base
towards higher margin accounts.
Sales of jacks and lifting tools for cars and light trucks totaled $43.9
million, 2 percent higher than the prior year. The improvement in sales was due
entirely to increased selling prices, which, on average, were slightly above the
previous year's levels.
GROSS PROFIT. The gross profit for the year ended December 25, 1994 of
$76.3 million was $31.1 million higher than the gross profit recorded during
last year's comparable period. The increase in gross profit was due to higher
average selling prices for the Company's products and increased shipment volume.
Operating costs, however, were higher in 1994. Higher material costs and higher
retiree insurance and pension costs were the primary reasons for the increased
operating costs. The gross profit, as a percentage of net sales, was 14.6
percent in 1994 versus 9.9 percent in the 1993 comparable period.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense
totaled $33.2 million (6.4 percent of net sales) and $30.6 million (6.7 percent
of net sales) for the years ended 1994 and 1993, respectively. While expenses
increased principally due to the increased sales activity, as a percentage of
sales they decreased.
OPERATING INCOME. Operating income for the Company for the year ended
December 25, 1994 was $33.6 million as compared to operating income of $12.7
million for the year ended December 26, 1993.
STEEL MAKING SEGMENT. Operating income for the Steel Making Segment totaled
$14.5 million, a significant improvement over operating income of $0.7 million
recorded in 1993. Operating income in 1994 was reduced by a $9.5 million
non-cash, nonrecurring charge recorded to recognize the impairment of existing
steel making facilities and contractual employee reduction costs related to the
decision to proceed with the Modernization and Expansion Project. The earnings
improvement was driven by increased shipments and higher average selling prices.
Shipments to external customers in 1994 increased 62,000 tons over the prior
year while shipments to the Steel Fabricating Segment were 13,200 tons lower
than in 1993. Approximately 65 percent of 1994's shipments and gross margin was
attributable to external customers while the remaining 35 percent of gross
margin was generated by shipments to the Steel Fabricating Segment. In 1993, the
Steel Making Segment shipped 60 percent of its products to external customers
which generated approximately 60 percent of its margin while shipments to the
Fabricating Segment produced the remaining 40 percent gross margin. The
increased percentage of shipments to external customers in 1994 is consistent
with the Company's two-pronged strategy to obtain the highest possible margin on
flat-rolled steel and obtain the highest earnings for the Company as a whole. In
total, the increased shipments generated $8.1 million in increased revenue while
a 4 percent increase in average selling prices contributed $11.4 million to the
improvement over last year's results. Partially offsetting the Steel Making
Segment's sales related gains were increased material costs, retiree and active
medical costs, increased pension expense, higher major maintenance spending, and
increased selling expenses.
STEEL FABRICATING SEGMENT. Operating income for the Steel Fabricating
Segment of $19.0 million in 1994 was $7.1 million higher than the results
recorded in 1993. The segment benefited from the strong economy and increased
average selling prices in 1994. Packaging, which sells steel strapping used to
secure various finished products to pallets or within shipping containers during
transportation, was helped by higher demand for its products in connection with
increases in the domestic construction and forest products markets. Alpha's
results advanced due to increased average selling prices resulting from a shift
from commodity markets to specialty value added tubing products. Alpha's
business also benefited from higher margins due to increased demand for its more
technologically advanced products and gains in product quality and manufacturing
productivity. Decreased
21
<PAGE>
shipments in 1994 left Universal's operating income just slightly lower than
that of the prior year. Partially offsetting the Steel Fabricating Segment's
sales and productivity related gains were increased raw material costs in the
form of higher flat-rolled steel prices.
INTEREST EXPENSE. Interest expense increased significantly in 1994 over the
1993 level. The increase in interest expense of $8.6 million resulted from the
issuance of $255.0 million and the retirement of $50.0 million of long-term debt
in the third quarter of 1994. See LIQUIDITY AND CAPITAL RESOURCES included
herein and LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT in the NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS.
INTEREST INCOME. Interest income was $6.1 million higher than in 1993 due
mainly to additional interest income earned on the net proceeds received from
the issuance of debt and equity during the year.
OTHER NON-OPERATING INCOME. Non-operating income in 1994 was $1.1 million
higher than last year's comparable period due primarily to a refund of prior
years' utility costs recorded in 1994.
INCOME TAX EXPENSE. The income tax expense in 1994 totaled $9.9 million
based on a 34.6 percent effective tax rate as compared to the $4.2 million
expense in 1993, based on a 40 percent effective rate. The reduction in the
effective tax rate was due primarily to the significant level of interest income
related to tax-free investments during the year.
NET INCOME. The Company recorded earnings of $17.0 million, or $2.16 per
share in 1994 versus the $6.3 million, or $1.15 per share, recorded in 1993. In
1994, net income per share was reduced by an extraordinary expense item of $1.8
million, net of tax, or 22 cents per share related to the early extinguishment
of debt in the third quarter.
FISCAL 1993 AS COMPARED TO FISCAL 1992
NET SALES. In 1993, the Company benefited from the strengthening economy in
terms of increased shipments and higher average selling prices. For the year,
consolidated net sales totaled $457.4 million, up $65.8 million, or 17 percent,
over 1992 sales. Shipments of products were strong, representing a $57.5 million
increase from last year's shipment volume levels. Average selling prices were 2
percent higher than in 1992 with all of the increase coming in the second half
of the year. The improvement in selling prices added $8.3 million to 1993 net
sales.
STEEL MAKING SEGMENT. Total net sales for the Steel Making Segment advanced
to $303.8 million in 1993, a $43.7 million, or 17 percent, improvement over the
prior year. Sales to unaffiliated customers increased 29 percent to $187.8
million while intersegment sales of $116.1 million were 1 percent higher than in
1992. The increase in total net sales was principally the result of a 13 percent
jump in shipments. Steel selling prices, on average, were 3 percent higher than
the prior year. Nearly all of the price increases materialized in the second
half of the year as the Steel Making Segment began to benefit from two $20 per
ton (5 percent) increases initiated in the second and third quarters of 1993.
Sales of sheet and strip steel, which accounted for 94 percent of the Steel
Making Segment's sales in 1993, advanced $41.8 million, or 17 percent, over the
prior year. Semi-finished steel sales increased $3.3 million, or 45 percent,
over the prior year, while sales of iron products fell $1.5 million, or 18
percent, as compared to a year earlier.
STEEL FABRICATING SEGMENT. Steel Fabricating Segment net sales of $271.5
million were $24.6 million, or 10 percent, higher than the prior year. Higher
shipments accounted for $20.0 million of the improvement while a 2 percent
increase in average selling prices generated the remainder of the increase over
a year earlier.
Sales of steel strapping and strapping tools totaled $154.1 million in 1993,
an $11.7 million, or 8 percent, increase over a year earlier. Increased shipping
volume accounted for $9.4 million, or 80 percent, of the improvement over the
prior year's results. Average selling prices were 2 percent higher than the
prior year's levels with all of the increase coming in the latter part of the
year.
22
<PAGE>
Steel tube sales for 1993 reached $74.3 million, up 17 percent from the
prior year. The $10.8 million improvement in sales was due mainly to increased
shipping volume. Selling prices rose 4 percent during the year with most of the
increase in the last half of 1993.
Sales of jacks and lifting tools for cars and light trucks totaled $43.1
million, 5 percent higher than the prior year. The improvement in sales was due
entirely to increased shipping volume as selling prices, on average, were
slightly below the prior year's levels.
GROSS PROFIT. Gross profit as a percent of consolidated net sales in 1993
was 9.9 percent, the highest percentage since 1989. The gross profit percentage
in 1992 was 7.5 percent. Increased sales volume and higher average selling
prices were the primary determinants for the significant increase in gross
profit over last year. Operating costs, however, were higher in 1993. Labor
costs increased due to a combination of higher overtime premiums and incentive
bonuses, a negotiated bonus payment to Acme's and Packaging's union workers at
the Riverdale facilities for ratifying the one year labor contract that ended
August, 1993 of $0.8 million and a union signing bonus and lump sum payments
negotiated as part of the current labor contract resulting in charges of $0.3
million during the year. Unplanned expenditures to repair Acme's basic oxygen
furnace and primary rolling mill also reduced gross profit in 1993. Pension
expense was $1.5 million higher than in 1992 as the Company recorded a $0.3
million expense in 1993 versus a $1.2 million pension benefit in the prior year.
Depreciation increased $0.5 million over the last year due partially to a major
relining of Acme's blast furnace in 1990.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expenses in
1993 were $1.7 million higher than the prior year. However, on a percentage of
sales basis, selling and administrative expenses improved over the prior year as
expenses totaled 6.7 percent of sales in 1993 versus 7.4 percent in 1992. The
Company began to benefit from lower labor costs resulting from a program,
initiated in the 1992 third quarter and substantially completed by year end, to
reduce the Company's salaried employee work-force by 10 percent. The 1993
savings from this program were sufficient to offset higher medical costs for
selling and administrative employees.
RESTRUCTURING CHARGE. During 1992, the Company recorded a $2.7 million
restructuring charge in connection with its 10 percent salaried work force
reduction which was completed during 1993. This charge covered additional
pension liability and extra vacation pay as part of an early retirement offer
and severance payments for involuntary separations.
NONRECURRING CHARGE. The Company recorded a $1.9 million nonrecurring
charge in 1993 in connection with the $1.3 million write-off of Acme's No. 3 Hot
Strip Mill and Billet Mill and a $0.6 million expense to close Packaging's
Pittsburg-East facility in California and write off a strapping line at its New
Britain, Connecticut, facility.
OPERATING INCOME. Operating income for the Company was $12.7 million in
1993 as compared to an operating loss of $2.1 million in 1992.
STEEL MAKING SEGMENT. Operating income for the Steel Making Segment totaled
$0.7 million, a significant improvement over the $9.3 million loss from
operations recorded in 1992. The earnings improvement was driven by increased
shipments and higher average selling prices. Shipments to external customers in
1993 increased 87,000 tons over the prior year while shipments to the Steel
Fabricating Segment were 5,600 tons lower than in 1992. Approximately 60 percent
of 1993's shipments and gross profit was attributable to external customers
while the remaining 40 percent of gross profit was generated by shipments to the
Steel Fabricating Segment. In 1992, the Steel Making Segment shipped 55 percent
of its products to external customers which generated 52 percent of its gross
profit while shipments to the Steel Fabricating Segment produced the remaining
48 percent of gross profit. The increased percentage of shipments to external
customers in 1993 is consistent with the Company's two-pronged strategy to
obtain the highest possible margin on flat-rolled steel and obtain the highest
earnings for the Company as a whole. In total, the increased shipments generated
$8.6 million in increased revenue while a 3 percent increase in average selling
prices contributed $5.9
23
<PAGE>
million to the improvement over the prior year's results. Partially offsetting
the Steel Making Segment's sales related gains were increased labor costs in
connection with overtime and union negotiated payments, unexpected repairs to
its basic oxygen furnace and primary rolling mill and a $1.3 million write-off
of the No. 3 Hot Strip Mill recorded in the fourth quarter.
STEEL FABRICATING SEGMENT. Operating income for the Steel Fabricating
Segment of $11.9 million in 1993 was $4.6 million higher than the results
recorded in 1992. The Steel Fabricating Segment benefited from the improving
economy and increased average selling prices in 1993.
Partially offsetting the Steel Fabricating Segment's sales and productivity
related gains were increased raw material costs in the form of higher
flat-rolled steel prices and a $0.6 million expense to close Packaging's
Pittsburg-East facility in California and the write-off of a strapping line at
its New Britain, Connecticut facility. Packaging, which sells steel strapping
used to secure various finished products to pallets or within shipping
containers during transportation, was helped by higher demand for its products
in connection with increased U.S. industrial output.
Alpha's results advanced due to the improvement in the housing and
recreational product markets. Alpha Tube's business also benefited from higher
margins due to increased demand for its more technologically advanced products
and gains in product quality and manufacturing productivity.
Despite downward pressure on its selling prices in 1993, Universal's
business achieved record results due to improved manufacturing productivity.
INTEREST EXPENSE AND INCOME. Interest expense was slightly lower than the
prior year. The decrease resulted from a reduced balance on the Company's
long-term debt as the result of a $3.5 million principal payment in May 1993.
Interest income was $0.1 million lower than in 1992 due mainly to reduced
returns on cash balances.
NON-OPERATING INCOME. In 1993, the Company recorded a $1.2 million pre-tax
gain as the result of a settlement of prior claims against LTV Steel Company
("LTV") by Wabush Iron, in an iron ore mine equity interest held by Acme,
pursuant to the finalization of LTV's plan of reorganization. The sale of all of
the Company's interests in a coal producing property located in West Virginia
added approximately $1.0 million to pre-tax income in 1992.
INCOME TAX EXPENSE. The income tax expense for 1993 equaled $4.2 million
based on a 40 percent effective tax rate. Because of a loss in 1992, the Company
recognized income tax benefits of $1.7 million in 1992, based on a 37 percent
effective tax rate.
NET INCOME. For 1993, the Company registered net income of $6.3 million, or
$1.15 per share. In 1992, the Company incurred a net loss of $2.8 million, or 53
cents per share, before the cumulative effect of changes in accounting
principles. The improvement in net income was due primarily to increased
shipments, and to a lesser extent, higher average selling prices for steel,
steel strapping and welded steel tube.
In 1992, the Company adopted both FAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions and FAS No. 109, Accounting for
Income Taxes. The cumulative effect of adopting FAS No. 106 resulted in a $42.2
million after-tax charge to 1992 earnings. The cumulative effect of the adoption
of FAS No. 109 increased the 1992 net loss by $8.1 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements include capital investments principally
relating to the Modernization and Expansion Project, working capital
requirements, and interest expense. Cash and cash equivalents balance at
December 31, 1995 was $53.0 million. The Company historically has financed its
operating and investing activities principally with cash from operations and
expects to continue to do so during the next few years except for expenditures
related to the Modernization and Expansion Project, which are funded primarily
from the proceeds received from issuances of debt and equity during 1994. Net
cash provided by operations was $57.8 million, $47.4 million and $16.0 million
24
<PAGE>
for 1995, 1994 and 1993, respectively. At December 31, 1995, the Company had
total cash and cash equivalents, short-term investments and restricted cash and
investments of $187.1 million. These funds are invested in compliance with the
Company's bond indentures which restricts the type, quality and maturity of
investments.
During 1995, the Company's long-term indebtedness increased $11.8 million to
$276.8 million reflecting accretion of the Secured Discount Notes. The Company
also currently has an unused $80.0 million Working Capital Facility, of which
approximately $76 million is available for borrowing at December 31, 1995 as
calculated under the borrowing base agreement. The Working Capital Facility
currently expires in August, 1998. The Company is currently obligated to issue a
letter of credit for deferred payments relating to the Modernization and
Expansion Project. Issuance of such a letter of credit, totaling approximately
$12 million, would reduce the borrowing base in 1996 and 1997 in amounts
equivalent to the outstanding balances of such deferred payments. At December
31, 1995, the Company's ratio of debt to total capitalization was .53 to 1. The
Senior Secured and Senior Discount Notes, the Term Loan, and the Working Capital
Facility were issued under respective agreements that contain certain
limitations on transactions with affiliates including: loans, advances,
guarantees, capital contributions, the sale, lease or purchase of any property
or assets. Also, the indenture agreements contain restrictive covenants that
limit the Company's ability to incur additional indebtedness, create liens, pay
dividends, repurchase capital stock, sell assets, engage in sale and leaseback
transactions and engage in mergers or consolidations.
Capital expenditures totaled $244.4 million, $56.3 million and $11.7 million
in 1995, 1994 and 1993, respectively. The majority of capital project
expenditures during 1995 and 1994 were for payments to the general contractor,
capitalized interest, and other internal capital expenditures related to the
construction of the Modernization and Expansion Project totaling $216.8 million
in 1995 and $44.7 million in 1994. The expenditures for the Modernization and
Expansion Project include an accrual at year end of $18.9 million consisting of
amounts owing the general contractor. Based on the turnkey contract price
without taking into account financing costs, internally generated costs related
directly to the project or additional changes that may be requested by Acme
during construction, management estimates that the cost of the Modernization and
Expansion Project, including equipment, ancillary facilities, construction,
general contractor fees, and certain other project costs that will be paid by
the Company, will approximate $392 million. The remainder of capital project
expenditures during 1995 was principally for an upgrade of the Company's
management information systems and for replacement and rehabilitation of various
production facilities.
Capital expenditures attributable to compliance with environmental
regulations totaled $8.7 million from 1993 through 1995, exclusive of the
Modernization and Expansion Project. The Modernization and Expansion Project is
a turnkey lump sum contract of which approximately $12.1 million, excluding
capitalized interest, was capitalized during 1995 to comply with environmental
regulations.
During 1995, Acme invested capital of $1.8 million in a joint venture. Acme
engaged in this venture as an equity partner and has agreed to invest capital of
$3.5 million for a total minority interest of 40 percent. The venture will
operate a state-of-the-art steel processing plant which will provide the
capability of processing wide coils produced by the new continuous thin slab
caster and hot strip mill. In addition, the steel processing plant will improve
the Company's ability to deliver exact customer specifications of superior
quality steel with highly competitive lead times. Acme has also entered into a
steel processing agreement with the joint venture which stipulates minimum steel
processing utilization requirements, along with related processing and
management fees. The facility is expected to be partially operational in late
1996 with the remainder by early 1997.
The Company currently has sufficient cash and investments resulting from the
issuance of the notes, term loan and equity which, when combined with funds that
will be generated from future operations, will enable the Company to complete
construction of the Modernization and Expansion
25
<PAGE>
Project and meet the working capital needs of the Company. The Company has an
available $80.0 million Working Capital Facility. In addition, the Company has
been authorized to issue $11.3 million of tax-exempt bonds by the State of
Illinois.
The Company also expects to spend approximately $28.0 million in 1998
related to the relining of Acme's A blast furnace at its Chicago facilities, and
the Company is continually evaluating opportunities for incremental capital
expenditures which meet certain financial return criteria.
OUTLOOK
1996 and 1997 will be years of transition for the Company as it completes
construction and begins operation of the Modernization and Expansion Project and
the joint venture facility with National Material L.P. in the second half of
1996. The Modernization and Expansion Project is expected to reduce
manufacturing costs, increase shipping capability and broaden the range of
products of the Steel Making Segment and to improve the range and quality of
steel products furnished to the Steel Fabricating Segment companies.
The Company expects 1996 earnings will be significantly below those recorded
in 1995. Steel Fabricating Segment earnings are expected to remain steady;
however, a number of factors in the Steel Making Segment will affect the
Company's overall financial results in 1996.
MODERNIZATION AND EXPANSION PROJECT
The Modernization and Expansion Project is expected to start-up in the
second half of 1996 and be fully operational by the middle of 1997. During this
transition period the Company will incur training costs as well as production
inefficiencies related to the start-up of the new facility in 1996 and the
decommissioning of the redundant operations in the existing facilities in 1997.
The total amount of these transitional costs is expected to be approximately $15
million and will be charged to the Steel Making Segment operations.
Additionally, depreciation expense related to the new facility and interest
costs previously capitalized as a cost of construction, will be charged to the
operations of the new facility coincident with its start-up. All of these
charges will significantly reduce the results of operations of the Steel Making
Segment in 1996.
While the Company expects second-half 1997 results to benefit from the full
operations of the Modernization and Expansion Project, the transition expenses
in the first half of the year will prevent the Company from realizing the total
annual benefits of the new facility until 1998.
OPERATING COSTS AND SELLING PRICES
During 1996 the Company expects operating costs will be higher due to
increases in the costs of labor, energy, raw material, supplies, pensions and
retiree medical care. During the later part of 1995 and carrying over into 1996,
the Company has experienced substantial competitive pricing pressures resulting
in lower average selling prices in all of its Segments. These increased costs
and lower average selling prices, along with the impact of the Modernization and
Expansion Project discussed above, are expected to significantly reduced the
Company's 1996 earnings.
Actual events might materially differ from those projected in the above
forward-looking statements. The timely arrival, successful installation and
testing of major equipment and computer systems are important assumptions in the
Company's projection of a second-half start-up of the new facility. If the new
facility is not completed in a timely manner or materially exceeds the Company's
cost expectations; if there are substantial unexpected production interruptions
or other start-up difficulties; the new facility fails to achieve the production
levels; quality levels or performance objectives represented and guaranteed by
the equipment suppliers and turn-key general contractor (although mitigated by
liquidated damages of up to 30% of the contract), the competitive and financial
position of the Company could be materially adversely affected. In addition to
uncertainties with respect to the Modernization and Expansion Project,
forwarding looking statements regarding all of the Company's businesses, but
particularly the Steel Making Segment, are based on various economic
assumptions. These assumptions include projections regarding: selling prices for
the Company products; costs for labor, energy, raw material, supplies, pensions
and retiree medical care; volume or units
26
<PAGE>
of product sales; competitive developments in the marketplace by domestic and
foreign competitors and the competitive impact of new facilities which are
expected to compete with the Company's products; general economic developments
in the United States affecting the business of the Company's customers, and
similar events which may affect the costs, price or volume of products sold by
the Company.
There can be no assurances the results of these factors will conform with
the Company's assumptions and projections. If one or more of these factors fails
to meet the Company's projections, the adverse impact on the Company's business
and financial results could be significant. Similarly, in the event the
Company's assumptions and projections are too conservative, the Company's
performance may exceed these forecasts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to Item 8 is submitted in a separate section of this Annual
Report on Form 10-K. See the audited Consolidated Financial Statements and
Financial Statement Schedule of Acme Metals Incorporated attached hereto and
listed in the index on page 33 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information with respect to directors of the Company is incorporated herein
by reference to the proxy statement for the Annual Meeting of Shareholders of
the Company to be held on April 25, 1996 under the caption ELECTION OF
DIRECTORS.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth, as of March 4, 1996, with respect to each
executive officer of the Company, his name and all positions held during the
last five years. Executive officers are elected annually by the Board of
Directors of the Company to serve for a term of office of one year and until
their successors are elected.
As a result of a Reorganization effected May 25, 1992, Acme Steel Company
became and continues to be a subsidiary of the Company. Prior to the
Reorganization some of the executive officers listed below were executive
officers of Acme Steel Company and, at the time of the reorganization, were
elected to similar positions within the Company.
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS DURING LAST 5 YEARS
- ------------------------------ ----------------------------------------------------------------------------------
<S> <C>
Brian W. H. Marsden (64) Chairman and Chief Executive Officer of the Company since January 1, 1993;
Chairman, President and Chief Executive Officer May 1992 to December 1992;
President and Chief Executive Officer of Acme Steel Company (integrated steel
producer) June 1986 to May 1992.
Stephen D. Bennett (47) Director, President and Chief Operating Officer of the Company since January 1,
1993; Group Vice President of the Company May 1992 to December 1992; Group Vice
President of Acme Steel Company January 1992 to May 1992; Vice President --
Operations of Acme Steel Company June 1990 to December 1991; General Manager of
Fairfield Works, USS Division of USX Corporation (integrated steel producer)
December 1987 to May 1990.
James W. Hoekwater (49) Treasurer of the Company since July 1, 1994; Corporate Controller of ITT Rayonier
(producer of pulp and wood products) December 1989 to October 1993.
Gregory J. Pritz (38) Controller of the Company since August 1, 1994; Director of Accounting and
Compliance of the Company January 1993 to July 1994; Manager of Internal Audit of
Acme Steel Company December 1989 to December 1992.
Gerald J. Shope (52) Vice President -- Human Resources of the Company since April 1, 1995; Vice
President -- Human Resources of Acme Steel Company January 1, 1992 to March 31,
1995; Director -- Human Resources of Acme Steel Company June 1986 to January
1992.
Edward P. Weber, Jr. (58) Vice President, General Counsel and Secretary of the Company since May 25, 1992;
Vice President, General Counsel and Secretary of Acme Steel Company June 1986 to
May 1992.
Jerry F. Williams (56) Vice President -- Finance and Administration and Chief Financial Officer of the
Company since May 25, 1992; Vice President -- Finance and Administration and
Chief Financial Officer of Acme Steel Company May 1986 to May 1992.
</TABLE>
28
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is incorporated herein by
reference to the proxy statement for the Annual Meeting of Shareholders of the
Company to be held on April 25, 1996 under the caption EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners and
management is incorporated herein by reference to the proxy statement for the
Annual Meeting of Shareholders of the Company to be held on April 25, 1996 under
the caption SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions is
incorporated herein by reference to the proxy statement for the Annual Meeting
of Shareholders of the Company to be held on April 25, 1996 under the caption
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
The response to this portion of Item 14 is submitted in a separate
section of this report. See the audited Consolidated Financial
Statements and Financial Statement Schedule of Acme Metals
Incorporated attached hereto and listed on the index on page 33 of
this report.
(2) Financial Statement Schedule:
The response to this portion of Item 14 is submitted in a separate
section of this report. See the audited Consolidated Financial
Statements and Financial Statement Schedule of Acme Metals
Incorporated attached hereto and listed on the index on page 33 of
this report.
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------------- ----------------------------------------------------------------
<S> <C> <C>
3. Articles of Incorporation and By-Laws
*3(i) Restated Certificate of Incorporation of the Registrant, as
amended by the Certificate of Designation of Junior
Participating Preferred Stock, Series A.
3(ii) Amended and Restated By-Laws of the Registrant as adopted May
25, 1992. Filed as Exhibit 3.2 to the 1992 Form 10-K and
incorporated by reference herein.
4. Instruments Defining the Rights of Security Holders, Including Indentures
4.1 Rights Agreement dated as of July 15, 1994 between the
Registrant and First Chicago Trust Company of New York, Rights
Agent. Filed as Exhibit 1 to the Form 8-A August 8, 1994 and
Form 8-A/A August 12, 1994 and incorporated by reference
herein.
4.2 Form of Indenture dated as of August 11, 1994 among the
Registrants and Shawmut Bank Connecticut, National Association
as trustee, relating to the 12.5 percent Senior Secured Notes
due 2002. Filed on August 4, 1994 as Exhibit 4.1 to Amendment
No. 3 to Form S-1 Registration Statement, No. 33-54101
("Amendment No. 3 to Form S-1") and incorporated by reference
herein.
</TABLE>
* Filed herewith
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------------- ----------------------------------------------------------------
<S> <C> <C>
4.3 Form of 12.5 percent Senior Secured Note due 2002 (included in
Exhibit 4.2). Filed as Exhibit 4.2 to Amendment No. 3 to Form
S-1 and incorporated by reference herein.
4.4 Form of Indenture dated as of August 11, 1994 among the
Registrant and each of the Guarantors and Shawmut Bank,
Connecticut, National Association as trustee, relating to the
13.5 percent Senior Secured Discount Notes due 2004. Filed as
Exhibit 4.3 to Amendment No. 3 to Form S-1 and incorporated by
reference herein.
4.5 Form of 13.5 percent Senior Secured Discount Note due 2004
(included in Exhibit 4.4). Filed as Exhibit 4.4 to Amendment
No. 3 to Form S-1 and incorporated by reference herein.
4.6 Form of Collateral Agency Agreement dated as of August 11, 1994
among the Company, Acme Steel, Acme Packaging, the Trustees,
the Term Loan Agent and the Collateral Agent. Filed as Exhibit
4.5 to Amendment No. 3 to Form S-1 and incorporated by
reference herein.
4.7 Form of Securities Pledge Agreement dated as of August 11, 1994
between the Company and the Collateral Agent. Filed as Exhibit
4.6 to Amendment No. 3 to Form S-1 and incorporated by
reference herein.
4.8 Form of Securities Pledge Agreement dated as of August 11, 1994
among Acme Steel, Acme Packaging and the Collateral Agent.
Filed as Exhibit 4.7 to Amendment No. 3 to Form S-1 and
incorporated by reference herein.
4.9 Form of Security Agreement dated as of August 11, 1994 between
Acme Steel and the Collateral Agent. Filed as Exhibit 4.8 to
Amendment No. 3 to Form S-1 and incorporated by reference
herein.
4.10 Form of Mortgage dated as of August 11, 1994 from Acme Steel to
the Collateral Agent. Filed as Exhibit 4.9 to Amendment No. 3
to Form S-1 and incorporated by reference herein.
4.11 Form of Intercreditor Agreement dated as of August 11, 1994
among Acme Steel, Harris Trust and Savings Bank and the
Collateral Agent. Filed as Exhibit 4.10 to Amendment No. 3 to
Form S-1 and incorporated by reference herein.
4.12 Form of Disbursement Agreement dated as of August 11, 1994
between the Company and the Collateral Agent. Filed as Exhibit
4.11 to Amendment No. 3 to Form S-1 and incorporated by
reference herein.
4.13 Form of Registration Rights Agreement dated March 28, 1994 among
the Registrant and The Substituted Purchasers. Filed as Exhibit
4.13 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 25, 1994 (the "1994 10-K") and
incorporated by reference herein.
10. Material contracts
10.1 Tax Indemnification Agreement between Acme Steel Company (a
subsidiary of the Company) ("Acme") and The Interlake
Corporation dated May 30, 1986. Filed as Exhibit 10.1 to the
1992 Form 10-K and incorporated by reference herein.
10.2 Cross-Indemnification Agreement between Acme and The Interlake
Corporation dated May 29, 1986. Filed as Exhibit 10.2 to the
1992 Form 10-K and incorporated by reference herein.
10.3 $80,000,000 Credit Agreement by and among Acme Group and Harris
Trust and Savings Bank individually and as Agent and the
Lenders which are or become parties hereto dated as of August
11, 1994 (the "Credit Agreement"). Filed as Exhibit 10.3 to the
1994 10-K and incorporated by reference herein.
*10.4 First Amendment to the Credit Agreement dated as of May 21,
1995.
*10.5 Second Amendment to the Credit Agreement dated August, 1995.
</TABLE>
* Filed herewith
30
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------------- ----------------------------------------------------------------
<S> <C> <C>
10.6 Assignment and Acceptance dated August 24, 1994 relating to the
Credit Agreement (National City Bank, Assignee). Filed as
Exhibit 10.4 to the 1994 10-K and incorporated by reference
herein.
10.7 Assignment and Acceptance dated August 24, 1994 relating to the
Credit Agreement (NBD Bank, N.A., Assignee). Filed as Exhibit
10.5 to the 1994 10-K and incorporated by reference herein.
10.8 Assignment and Acceptance dated August 24, 1994 relating to the
Credit Agreement (Mercantile Bank of St. Louis National
Association, Assignee). Filed as Exhibit 10.6 to the 1994 10-K
and incorporated by reference herein.
10.9 Assignment and Acceptance dated September 1, 1994 relating to
the Credit Agreement (General Electric Capital Corporation,
Assignee). Filed as Exhibit 10.7 to the 1994 10-K and
incorporated by reference herein.
10.10 Term Loan Agreement dated August 4, 1994 among the Registrant,
the Lenders and Lehman Commercial Paper Inc. (the "Term Loan").
Filed as Exhibit 10.42 to Amendment No. 3 to Form S-1 and
incorporated by reference herein.
10.11 Amendment to the Term Loan dated as of December 15, 1994. Filed
as Exhibit 10.9 to the 1994 10-K and incorporated by reference
herein.
10.12 Form of Engineering, Procurement and Construction Contract dated
July 28, 1994 between Acme Steel Company and Raytheon Engineers
& Constructors, Inc. Filed as Exhibit 10.41 to Amendment No. 3
to Form S-1 and incorporated by reference herein.
10.13 Amendment 1 to Engineering, Procurement and Construction
Contract between Acme Steel Company and Raytheon Engineers &
Constructors, Inc. dated as of July 28, 1994. Filed as Exhibit
10.11 to the 1994 10-K and incorporated by reference herein.
10.14 Amendment 2 to Engineering, Procurement and Construction
Contract between Acme Steel Company and Raytheon Engineers &
Constructors, Inc. dated as of March 21, 1995. Filed as Exhibit
10.12 to the 1994 10-K and incorporated by reference herein.
10.15 Joint Development Program Agreement dated July 28, 1994 between
Acme Steel Company and SMS Schloemann-Siemag, AG. Filed as
Exhibit 10.13 to the 1994 10-K and incorporated by reference
herein.
10.16 Agreement between the Registrant and Reynold C. MacDonald dated
June 1, 1992.(1) Filed as Exhibit 10.3 to the 1992 10-K and
incorporated by reference herein.
*10.17 Amendment to the Agreement between Registrant and Reynold C.
MacDonald dated June 1, 1995.
10.18 Non-Employee Directors Retirement Plan dated February 22, 1990
as adopted May 25, 1992.(1) Filed as Exhibit 10.4 to the 1992
10-K and incorporated by reference herein.
10.19 Non-Employee Directors' Stock Compensation Plan adopted January
27, 1995.(1) Filed as Exhibit 10.16 to the 1994 10-K and
incorporated by reference herein.
*10.20 Form of Indemnification Agreement for directors and certain
officers of the Registrant.
10.21 1994 Executive Incentive Compensation Plan of Acme Metals
Incorporated as adopted April 28, 1994.(1) Filed as Exhibit
10.21 to the 1994 10-K and incorporated by reference herein.
</TABLE>
* Filed herewith
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------------- ----------------------------------------------------------------
<S> <C> <C>
10.22 Deferred Compensation Agreement dated May 24, 1986 between the
Registrant and Brian W. H. Marsden as adopted May 25, 1992.(1)
Filed as Exhibit 10.15 to the 1992 10-K and incorporated by
reference herein.
10.23 Acme Metals Incorporated Deferred Compensation Plan as Amended
and Restated effective January 1, 1994 as adopted November 21,
1994.(1) Filed as Exhibit 10.23 to the 1994 10-K and
incorporated by reference herein.
*10.24 Key Executive Severance Pay Plan dated January 22, 1987, as
adopted May 25, 1992, with Exhibit 1 amended through May 25,
1995.
10.25 Acme Metals Incorporated 1994 Stock Incentive Program as adopted
April 28, 1994.(1) Filed as Exhibit 10.25 to the 1994 10-K and
incorporated by reference herein.
10.26 Acme Metals Incorporated Employee Stock Ownership Plan Restated
effective November 1, 1994.(1) Filed as Exhibit 10.42 to the
1994 10-K and incorporated by reference herein.
10.27 Acme Metals Incorporated Salaried Employees' Retirement Savings
Plan ("SERSP") Restated effective November 1, 1994.(1) Filed as
Exhibit 10.43 to the 1994 10-K and incorporated by reference
herein.
*10.28 First Amendment to the SERSP dated September 19, 1995.
10.29 Consolidated Pension Plan for Acme Salaried and Hourly Employees
as Amended and Restated effective November 1, 1994
("Consolidated Pension Plan") with Appendix A to the
Consolidated Pension Plan as Amended and Restated effective
July 31, 1994.(1) Filed as Exhibit 10.44 to the 1994 10-K and
incorporated by reference herein.
*10.30 Appendix B to the Consolidated Pension Plan as Amended and
Restated effective September 1, 1993.
*10.31 Appendix C to the Consolidated Pension Plan effective December
31, 1993.
*10.32 First Amendment to the Consolidated Pension Plan dated September
19, 1995.
10.33 Acme Metals Incorporated Supplemental Benefits Plan effective
January 1, 1994.(1) Filed as Exhibit 10.45 to the 1994 10-K and
incorporated by reference herein.
10.34 Acme Metals Incorporated Salaried Employees' Past Service
Pension Plan ("Past Service Pension Plan") dated June 1,
1992.(1) Filed as Exhibit 10.37 to the 1992 10-K and
incorporated by reference herein.
10.35 Amendment No. 1 to the Past Service Pension Plan.(1) Filed as
Exhibit 10.38 to the 1993 10-K and incorporated by reference
herein.
10.36 Amendment No. 2 to the Past Service Pension Plan.(1) Filed as
Exhibit 10.48 to the 1994 10-K and incorporated by reference
herein.
*13 Registrant's Annual Report to Security Holders for the fiscal year ended
December 31, 1995
*21 Subsidiaries of the registrant
23. Consent of experts and counsel
*23.1 Consent of Price Waterhouse LLP
*27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 1995.
* Filed herewith
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ACME METALS INCORPORATED
<TABLE>
<S> <C>
/s/ B. W. H. Marsden March 22, 1996
- ---------------------------------------------------------
Brian W. H. Marsden
Chairman and Chief Executive Officer
/s/ S. D. Bennett March 22, 1996
- ---------------------------------------------------------
Stephen D. Bennett
Director, President, and Chief Operating Officer
/s/ Jerry F. Williams March 22, 1996
- ---------------------------------------------------------
Jerry F. Williams
Vice President-Finance and Administration and Chief
Financial Officer (Principal Financial Officer)
/s/ Gregory J. Pritz March 22, 1996
- ---------------------------------------------------------
Gregory J. Pritz
Controller
(Principal Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ C. J. Gauthier March 22, 1996
- ---------------------------------------------------------
C. J. Gauthier
Director
/s/ Edward G. Jordan March 22, 1996
- ---------------------------------------------------------
Edward G. Jordan
Director
/s/ Andrew R. Laidlaw March 22, 1996
- ---------------------------------------------------------
Andrew R. Laidlaw
Director
/s/ Frank A. LePage March 22, 1996
- ---------------------------------------------------------
Frank A. LePage
Director
</TABLE>
33
<PAGE>
<TABLE>
<S> <C>
/s/ Reynold C. MacDonald March 22, 1996
- ---------------------------------------------------------
Reynold C. MacDonald
Director
/s/ Julien L. McCall March 22, 1996
- ---------------------------------------------------------
Julien L. McCall
Director
/s/ Carol O'Cleireacain March 22, 1996
- ---------------------------------------------------------
Carol O'Cleireacain
Director
/s/ W. P. Sovey March 22, 1996
- ---------------------------------------------------------
William P. Sovey
Director
/s/ L. Frederick Sutherland March 22, 1996
- ---------------------------------------------------------
L. Frederick Sutherland
Director
/s/ William R. Wilson March 22, 1996
- ---------------------------------------------------------
William R. Wilson
Director
</TABLE>
34
<PAGE>
ACME METALS INCORPORATED
FORM 10-K - ITEM 8 AND ITEMS 14 (A) (1) AND 14 (A) (2)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
The following Consolidated Financial Statements of Acme Metals Incorporated
and the related Report of Independent Accountants are included in Item 8 and
Item 14 (a) (1):
<TABLE>
<CAPTION>
PAGE IN THIS
FORM 10-K
---------------
<S> <C>
Report of Independent Accountants.................................................................... 36
Report of Management................................................................................. 36
Consolidated Statements of Operations for the fiscal years ended December 31, 1995, December 25, 1994
and December 26, 1993............................................................................... 37
Consolidated Balance Sheets at December 31, 1995 and December 25, 1994............................... 38
Consolidated Statements of Cash Flows for the fiscal years ended December 31, 1995, December 25, 1994
and December 26, 1993............................................................................... 39
Consolidated Statements of Changes in Shareholders' Equity for the fiscal years ended December 31,
1995, December 25, 1994 and December 26, 1993....................................................... 40
Notes to Consolidated Financial Statements........................................................... 41
</TABLE>
The following Consolidated Financial Statement Schedule of Acme Metals
Incorporated is included in Item 14 (a) (2):
<TABLE>
<S> <C>
Quarterly Results (Unaudited).................................................... 55
Schedule VIII - Valuation and Qualifying Accounts and Reserves................... 55
</TABLE>
All other schedules have been omitted because they are not applicable, or
not required, or because the required information is shown in the consolidated
financial statements or notes thereto.
35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Acme Metals Incorporated
In our opinion, the accompanying consolidated financial statements listed in
the index appearing on page 35 present fairly, in all material respects, the
financial position of Acme Metals Incorporated and its subsidiaries at December
31, 1995 and December 25, 1994 and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. 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 of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
January 25, 1996
Chicago, Illinois
REPORT OF MANAGEMENT
The management of Acme Metals Incorporated has prepared and is responsible
for the consolidated financial statements and other financial information
included in this Form 10-K Annual Report. The consolidated financial statements
have been prepared in conformity with generally accepted accounting principles
and include amounts that are based upon informed judgments and estimates by
management. The other financial information in this annual report is consistent
with the consolidated financial statements.
The Company maintains a system of internal accounting controls. Management
believes the internal accounting controls provide reasonable assurance that
transactions are executed and recorded in accordance with Company policy and
procedures and that the accounting records may be relied on as a basis for
preparation of the consolidated financial statements and other financial
information.
The financial statements have been audited by Price Waterhouse LLP, the
Company's independent accountants, whose report is included herein. In addition,
the Company has a professional staff of internal auditors who coordinate their
financial audits with the procedures performed by the independent accountants
and conduct operational and special audits.
The Audit Review Committee of the Board of Directors, composed of directors
who are not employees of the Company, meets periodically with management, the
internal auditors and the independent accountants to discuss the adequacy of
internal accounting controls and the quality of financial reporting. Both the
independent accountants and internal auditors have full and free access to the
Audit Review Committee.
/s/ B. W. H. Marsden /s/ J. F. Williams
Brian W. H. Marsden Jerry F. Williams
Chairman and Chief Executive Officer Vice President Finance and
Administration Chief Financial
Officer
36
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................................................. $ 521,619 $ 522,880 $ 457,406
COSTS AND EXPENSES:
Cost of products sold............................................... 424,158 431,615 397,526
Depreciation expense................................................ 13,013 14,977 14,657
------------ ------------ ------------
Gross profit.......................................................... 84,448 76,288 45,223
Selling and administrative expense.................................. 35,636 33,249 30,633
Nonrecurring charge................................................. 9,459 1,925
------------ ------------ ------------
Operating income...................................................... 48,812 33,580 12,665
NON-OPERATING INCOME (EXPENSE):
Interest expense.................................................... (20,801) (14,031) (5,384)
Interest income..................................................... 14,278 7,712 1,571
Other -- net........................................................ 1,846 1,432 370
Unusual income item................................................. 1,210
------------ ------------ ------------
Income before income taxes and extraordinary item..................... 44,135 28,693 10,432
Income tax provision.................................................. 15,889 9,935 4,173
------------ ------------ ------------
28,246 18,758 6,259
Extraordinary item (expense), net of tax.............................. (1,787)
------------ ------------ ------------
Net income............................................................ $ 28,246 $ 16,971 $ 6,259
------------ ------------ ------------
------------ ------------ ------------
PER SHARE:
Income before extraordinary item.................................... $ 2.44 $ 2.38 $ 1.15
Extraordinary item (expense), net of tax............................ (0.22)
------------ ------------ ------------
Net income............................................................ $ 2.44 $ 2.16 $ 1.15
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
37
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 25,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 53,043 $ 76,639
Short-term investments............................................................. 83,756 76,384
Receivables, less allowances of $1,335 in 1995 and $1,301 in 1994.................. 55,344 60,878
Inventories........................................................................ 51,932 44,982
Deferred income taxes.............................................................. 12,857 13,354
Other current assets............................................................... 1,855 1,605
------------ ------------
Total current assets............................................................. 258,787 273,842
------------ ------------
INVESTMENTS AND OTHER ASSETS:
Investments in associated companies................................................ 16,112 14,358
Restricted cash and investments.................................................... 50,305 201,397
Other assets....................................................................... 19,309 23,221
Deferred income taxes.............................................................. 31,052 20,683
------------ ------------
Total investments and other assets............................................... 116,778 259,659
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost............................................. 372,959 363,699
Construction in progress........................................................... 279,799 46,605
Accumulated depreciation........................................................... (273,580) (261,475)
------------ ------------
Total property, plant and equipment.............................................. 379,178 148,829
------------ ------------
$ 754,743 $ 682,330
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................... $ 62,355 $ 36,732
Accrued expenses................................................................... 41,192 42,718
Income taxes payable............................................................... 4,783 1,941
------------ ------------
Total current liabilities........................................................ 108,330 81,391
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt..................................................................... 276,831 265,055
Other long-term liabilities........................................................ 10,143 10,012
Postretirement benefits other than pensions........................................ 86,856 83,867
Retirement benefit plans........................................................... 24,472 18,727
------------ ------------
Total long-term liabilities...................................................... 398,302 377,661
------------ ------------
Commitments and contingencies (see note titled COMMITMENTS AND CONTINGENCIES)
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 2,000,000 shares authorized, no shares issued
Common stock, $1 par value, 20,000,000 shares authorized, 11,579,768 and 11,558,127
shares issued in 1995 and 1994, respectively...................................... 11,580 11,558
Additional paid-in capital......................................................... 164,987 164,599
Retained earnings.................................................................. 95,965 67,719
Minimum pension liability adjustment............................................... (24,421) (20,598)
------------ ------------
Total shareholders' equity....................................................... 248,111 223,278
------------ ------------
$ 754,743 $ 682,330
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
38
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26,
1995 1994 1993
------------ -------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................... $ 28,246 $ 16,971 $ 6,259
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Depreciation..................................................... 13,613 15,514 15,234
Accretion of senior discount notes............................... 11,776 4,055
Deferred income taxes............................................ (7,100) (2,893) (1,629)
Nonrecurring charge.............................................. 9,459 1,925
Investments in associated companies.............................. (1,754) 334 (596)
Pension contribution............................................. (1,988) (13,951) (100)
CHANGE IN CURRENT ASSETS AND LIABILITIES:
Receivables.................................................... 5,534 (2,399) (11,388)
Inventories.................................................... (6,950) 2,885 (8,379)
Accounts payable............................................... 6,761 3,932 6,815
Other current accounts......................................... 1,066 6,591 7,826
Other, net....................................................... 8,583 6,924 74
------------ -------------- ------------
Net cash provided by operating activities.......................... 57,787 47,422 16,041
------------ -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments........................................... (459,749) (1,310,998)
Sales and/or maturities of investments............................. 603,469 1,033,213
Capital expenditures............................................... (27,664) (11,677) (11,749)
Capital expenditures -- Modernization Project...................... (197,849) (44,662)
------------ -------------- ------------
Net cash used for investing activities............................. (81,793) (334,124) (11,749)
------------ -------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt.......................................... (50,000) (3,500)
Issuance of equity, net of costs................................... 119,262
Issuance of long-term debt......................................... 255,000
Debt issuance costs................................................ (14,253)
Exercise of stock options and other................................ 410 2,888 428
------------ -------------- ------------
Net cash provided by (used for) financing activities............... 410 312,897 (3,072)
------------ -------------- ------------
Net (decrease) increase in cash and cash equivalents............... (23,596) 26,195 1,220
Cash and cash equivalents at beginning of period................... 76,639 50,444 49,224
------------ -------------- ------------
Cash and cash equivalents at end of period......................... $ 53,043 $ 76,639 $ 50,444
------------ -------------- ------------
------------ -------------- ------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
39
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON ADDITIONAL MINIMUM
STOCK, $1 PAID-IN RETAINED PENSION
PAR VALUE CAPITAL EARNINGS LIABILITY
--------- ----------- --------- ----------
<S> <C> <C> <C> <C>
BALANCE -- DECEMBER 27, 1992..................................... $ 5,358 $ 47,679 $ 44,489 $ (8,231)
--------- ----------- --------- ----------
Net income..................................................... 6,259
Stock plans -- issuance of shares.............................. 48 635
Tax benefit arising from stock plan transactions............... 30
Minimum pension liability...................................... (13,064)
--------- ----------- --------- ----------
BALANCE -- DECEMBER 26, 1993..................................... 5,406 48,344 50,748 (21,295)
--------- ----------- --------- ----------
Net income..................................................... 16,971
Stock plans -- issuance of shares.............................. 177 2,711
Tax benefit arising from stock plan transactions............... 257
Issuance of equity............................................. 5,975 113,287
Minimum pension liability...................................... 697
--------- ----------- --------- ----------
BALANCE -- DECEMBER 25, 1994..................................... 11,558 164,599 67,719 (20,598)
--------- ----------- --------- ----------
Net income..................................................... 28,246
Stock plans -- issuance of shares.............................. 22 382
Tax benefit arising from stock plan transactions............... 6
Minimum pension liability...................................... (3,823)
--------- ----------- --------- ----------
BALANCE -- DECEMBER 31, 1995..................................... $ 11,580 $ 164,987 $ 95,965 $ (24,421)
--------- ----------- --------- ----------
--------- ----------- --------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
40
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Acme Metals
Incorporated and its wholly-owned subsidiaries (the "Company"). Investments in
mining and other minority ventures are accounted for by the equity method. All
intercompany transactions have been eliminated.
The Company's fiscal year ends on the last Sunday in December. Fiscal 1995
contained 53 weeks as compared to 52 weeks for fiscal years ended 1994 and 1993.
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
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash balances and highly liquid
investments with an original maturity of three months or less. The funds are
invested in compliance with the Company's bond indenture which restricts the
type, quality and maturity of investments.
SHORT-TERM INVESTMENTS
Short-term investments have an original maturity of more than three months
and a remaining maturity of less than 1 year. These investments are stated at
cost as it is the intent of the Company to hold these securities until maturity.
The funds are invested in compliance with the Company's bond indenture which
restricts the type, quality and maturity of investments.
INVENTORIES
Inventories are stated at the lower of cost or market. The primary method
used to determine inventory costs is the last-in, first-out ("LIFO") method.
RESTRICTED CASH AND INVESTMENTS
Restricted cash and investments consists of cash and investments held in
trust and committed for the construction of the continuous thin slab caster/hot
strip mill complex and payment of the related debt service according to the
Company's bond indenture. These investments are stated at cost as it is the
intent of the Company to hold these securities until maturity. The funds are
invested in compliance with the Company's bond indenture which restricts the
type, quality and maturity of investments.
PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is computed principally on a straight-line basis over the estimated
useful lives of the assets. Estimated useful lives of plant and equipment range
from 3 to 50 years with the majority of assets having 18 year lives.
Depreciation of assets classified as construction in progress commences when the
asset is placed in service. Expenditures for maintenance, repairs and minor
renewals and betterments are charged to expense as incurred. Furnace relines and
major renewals and betterments are capitalized.
Upon disposition of property, plant and equipment, the cost and related
accumulated depreciation are removed from the accounts, and the resulting gain
or loss is recognized.
41
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSTRUCTION IN PROGRESS
Construction in progress includes all costs, including capitalized interest,
associated with the construction of the Company's continuous thin slab
caster/hot strip mill complex at its Riverdale, Illinois steel making facility.
Also included in construction in progress are other capital projects not
completed at the end of the reporting period.
RETIREMENT BENEFIT PLANS
Pension costs include service cost, interest cost, return on plan assets and
amortization of unrecognized gains and losses. The Company's policy is to fund
not less than the minimum funding required under ERISA.
The Company has unfunded postretirement health care and life insurance
plans. Provisions for postretirement costs in 1995, 1994 and 1993 were
determined pursuant to the provisions of Financial Accounting Standards ("FAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Under this standard, the annual expense represents a combination of
interest and service cost provisions of the annual accrual. The postretirement
benefits are not funded.
INCOME TAXES
Income taxes were determined pursuant to the provisions of FAS No. 109,
"Accounting for Income Taxes." Under this standard, the provision for deferred
income taxes represents the tax effect of temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities.
PER SHARE DATA
Amounts per common share are based on the weighted average number of common
and dilutive common equivalent shares outstanding during the year; 11,595,886 in
1995, 7,872,642 in 1994 and 5,439,784 in 1993.
PENDING ACCOUNTING CHANGES
In October 1995, the Financial Accounting Standards Board ("FASB") issued
FAS No. 123, "Accounting for Stock-Based Compensation." This pronouncement,
which becomes effective in 1996, establishes financial accounting and reporting
standards for stock-based employee compensation plans. This Statement requires
the Company to determine the fair value of its stock options at the date of
grant and either record the fair value as compensation expense in the financial
statements or disclose the pro-forma impact of such compensation on net income
and earnings per share in the notes to the financial statements. The Company has
elected to adopt the disclosure method of presentation and such disclosures will
be made in the 1996 financial statements.
Also in 1995, the FASB issued FAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company is
required to adopt this pronouncement in 1996. The Company does not anticipate
that the adoption of this pronouncement will have a significant impact on the
financial condition or results of operations of the Company.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
NONRECURRING CHARGE:
During 1994, the Company completed financing for its Modernization and
Expansion Project ("Project"). As a result of the decision to commence with the
Project, the Company recorded a $9.5 million (pre-tax) nonrecurring charge. The
nonrecurring charge was recorded to address the impairment of the existing steel
making facilities ($7.2 million) and contractual employee reduction costs
related to the construction and commissioning of the Project ($2.3 million).
42
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company recorded a $1.9 million nonrecurring charge in 1993 including
$1.3 million in connection with a decision made during the year to permanently
idle Acme Steel's No. 3 Hot Strip Mill and Billet Mill; a $0.6 million charge to
close Acme Packaging's Pittsburg-East facility in California; and the
elimination of a strapping line at its New Britain, Connecticut facility
following a determination made during the year to consolidate production
facilities and eliminate unprofitable lines.
UNUSUAL INCOME ITEM:
In 1993, the Company recorded a benefit in connection with its investment in
Wabush Iron Company ("WabIron"). As a result of the finalization of a plan of
reorganization for LTV Steel Company, a former participant in WabIron, Acme was
awarded $1.2 million (market value) of LTV securities in a settlement of a
bankruptcy claim filed by all of the participants in the Wabush Mines Project
joint venture.
INVENTORIES:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.................................................................... $ 8,397 $ 5,200
Semi-finished and finished products.............................................. 36,339 31,434
Supplies......................................................................... 7,196 8,348
--------- ---------
$ 51,932 $ 44,982
--------- ---------
--------- ---------
</TABLE>
On December 31, 1995 and December 25, 1994, inventories valued on the LIFO
method were less than the current costs of such inventories by $58.2 million and
$58.3 million, respectively.
In 1994, inventory quantities decreased from the prior year which resulted
in the liquidation of LIFO inventory quantities carried at the lower cost that
prevailed in prior years, the effect of which decreased cost of products sold
and increased income before income taxes and extraordinary item by $0.7 million.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................................ $ 3,770 $ 3,786
Buildings................................................................... 41,365 41,117
Equipment................................................................... 327,824 318,796
Construction in progress, Modernization and Expansion Project............... 261,372 44,662
Construction in progress, other............................................. 18,427 1,943
------------ ------------
652,758 410,304
Less accumulated depreciation............................................... (273,580) (261,475)
------------ ------------
$ 379,178 $ 148,829
------------ ------------
------------ ------------
</TABLE>
The difference between depreciation expense presented in the Consolidated
Statements of Cash Flows and the Consolidated Statements of Operations
represents that portion of depreciation expense that is classified in selling
and administrative expense on the Consolidated Statements of Operations.
43
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has capitalized expenditures related to the construction of the
Project totaling $261.4 million at December 31, 1995. The capitalized
expenditures are comprised of $240.8 million in payments to Raytheon Engineers &
Constructors, Inc., the general contractor for the Project, $16.6 million of
related capitalized interest, and $4.0 million of other costs directly related
to the Project.
Cash and accrued payments to the general contractor of $240.8 million at
December 31, 1995 includes an accrual of $18.9 million for services performed
during 1995, which due to its non-cash nature has been excluded from the
Statement of Cash Flows.
At December 31, 1995, construction in progress, other includes certain major
replacement projects and expenditures to upgrade the Company's management
information systems.
RETIREMENT BENEFIT PLANS:
The Company has various retirement benefit plans covering substantially all
salaried and hourly employees. Certain salaried employees with one full calendar
quarter of service are eligible to participate in the Company's defined
contribution plan and employee stock ownership plan ("ESOP"). Company
contributions to the defined contribution plan and employee stock ownership plan
are based upon 7.5 and 3.5 percent (the ESOP contribution was reduced from 6.5
to 3.5 percent in the second quarter of 1993), respectively, of eligible
compensation. Amounts charged to operations under these plans were $3.5 million
in 1995 and 1994 and $3.4 million in 1993.
Salaried employees who joined the Company prior to December 31, 1981 and
certain hourly employees participate in defined benefit retirement plans which
provide benefits based upon either years of service and final average pay or
fixed amounts for each year of service.
The net defined benefit pension cost, as determined pursuant to the
provisions of FAS No. 87, "Employer's Accounting for Pensions," included the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................................................... $ 2,492 $ 2,605 $ 1,852
Interest cost on projected benefit obligation..................... 15,924 14,700 14,526
Actual (return) loss on plan assets............................... (34,304) 1,558 (16,094)
Net amortization and deferral..................................... 18,120 (17,371)
---------- ---------- ----------
Net pension cost.................................................. $ 2,232 $ 1,492 $ 284
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Actuarial assumptions used for the Company's pension plan valuations were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate:
For defined benefit pension costs.............................................. 8.5% 7.5% 8.5%
For projected benefit obligation............................................... 7.5% 8.5% 7.5%
Increase in future compensation levels........................................... 5.0% 5.0% 5.0%
Expected rate of return on plan assets........................................... 9.75% 9.75% 9.75%
</TABLE>
44
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the funded status of the Company's defined
benefit retirement plans and amounts recognized in the balance sheet.
<TABLE>
<CAPTION>
1995 1994
------------ -------------------------
UNDERFUNDED UNDERFUNDED OVERFUNDED
PLANS PLANS PLANS
------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of $184,633
in 1995 and $165,271 in 1994......................................... $ 209,785 $ 174,308 $ 8,626
Effect of increase in compensation levels............................. 3,654 4,119 655
------------ ------------ -----------
Projected benefit obligation for service rendered to date............. 213,439 178,427 9,281
Plan assets at fair value, primarily common stock of publicly traded
companies and U.S. government bonds and notes.......................... (185,313) (155,581) (9,779)
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions.................................. (52,234) (48,510) (1,554)
Prior service cost not yet recognized in net periodic pension cost...... (4,805) (5,334)
Unrecognized net asset at December 30, 1985 being recognized over 15
years.................................................................. 9,629 11,038 518
Minimum pension liability adjustment.................................... 43,756 38,687
------------ ------------ -----------
Accrued (prepaid) pension cost.......................................... $ 24,472 $ 18,727 $ (1,534)
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
In accordance with FAS No. 87, the Company has recorded an adjustment as
shown in the table above, to recognize a minimum pension liability relating to
certain underfunded pension plans.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company and its subsidiaries sponsor several unfunded defined benefit
postretirement plans that provide medical, dental, and life insurance for
retirees and eligible dependents.
The net periodic postretirement benefit cost for 1995, 1994 and 1993, net of
retiree contributions of approximately 10 percent of costs, included the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the period......... $ 1,696 $ 1,685 $ 1,185
Interest cost on accumulated postretirement benefit obligation........... 8,131 7,203 6,743
Net amortization and deferral............................................ (144) 239 (64)
--------- --------- ---------
Net periodic postretirement benefit cost................................. $ 9,683 $ 9,127 $ 7,864
--------- --------- ---------
--------- --------- ---------
</TABLE>
45
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the plans' combined unfunded status at
December 31, 1995 and December 25, 1994:
<TABLE>
<CAPTION>
1995 1994
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................................... $ 67,052 $ 56,859
Fully eligible active plan participants...................................... 19,457 10,716
Other active plan participants............................................... 30,623 24,332
----------- ---------
117,132 91,907
Unrecognized net (loss) and prior service cost................................. (23,678) (1,497)
----------- ---------
Accrued postretirement benefit cost............................................ $ 93,454 $ 90,410
----------- ---------
----------- ---------
</TABLE>
The accumulated postretirement benefit obligation was determined by
application of the terms of medical, dental, and life insurance plans, together
with relevant actuarial assumptions and health care cost trend rates projected
at annual rates ranging ratably from 11 percent in 1993 to 5 percent through
1999 and beyond. The effect of a 1 percent annual increase in these assumed cost
trend rates would increase the accumulated postretirement benefit obligation by
approximately $13.9 million and the net periodic postretirement benefit cost by
approximately $1.2 million. The obligation for postretirement benefits as of
December 31, 1995 was determined using a 7.5 percent discount rate, as compared
to the 8.5 percent discount rate used at December 25, 1994.
The decrease in the discount rate contributed to a net increase in the
obligation of approximately $14.5 million, with the remainder of the increase in
the obligation resulting from normal growth of service and related interest
costs and other assumption changes. As the measurement of net periodic
postretirement benefit cost is based on beginning of the year assumptions, the
higher revalued obligation at the end of fiscal 1995 did not have any impact on
the expense recorded for 1995.
ACCRUED EXPENSES:
Included in the Consolidated Balance Sheets caption ACCRUED EXPENSES are the
following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accrued salaries and wages....................................................... $ 13,310 $ 15,650
Accrued postretirement benefits other than pensions.............................. 6,598 6,543
Accrued taxes other than income taxes............................................ 5,587 5,283
Accrued interest................................................................. 7,205 6,675
Other current liabilities........................................................ 8,492 8,567
--------- ---------
$ 41,192 $ 42,718
--------- ---------
--------- ---------
</TABLE>
INVESTMENTS IN ASSOCIATED COMPANIES:
The Company has a 39.9 percent interest in an iron ore mining venture with a
carrying value of $14.3 million at December 31, 1995 and 1994. In 1995, 1994 and
1993, the Company made iron ore purchases of $21.8 million, $20.7 million, and
$18.3 million, respectively from the venture. At December 31, 1995, $5.2 million
was owed to the venture for iron ore purchases; amounts owed to the venture for
such ore purchases were $5.6 million at December 25, 1994.
The Company has a 37 percent interest in Olga Coal Company. In 1987, Olga
Coal Company filed for protection under Chapter 11 of the U.S. Bankruptcy Act
and the coal mining operation was idled. The coal mining investment is carried
at no value in the Consolidated Balance Sheets.
46
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Company invested capital of $1.8 million in a joint venture
which will perform processing of certain of the Company's steel products. The
Company agreed to invest capital of $3.5 million for a total interest of 40
percent. The investment will be accounted for by the equity method of
accounting. The joint venture will lease the property on which the facility is
being constructed from the Company. There were no other transactions between the
Company and the venture during 1995.
INCOME TAXES:
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Taxes on income:
Current:
Federal.......................................................... $ 18,510 $ 10,108 $ 5,399
State............................................................ 4,479 2,720 403
--------- --------- ---------
22,989 12,828 5,802
Deferred........................................................... (7,100) (2,893) (1,629)
--------- --------- ---------
$ 15,889 $ 9,935 $ 4,173
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effective income tax rates for 1995, 1994 and 1993 are reconciled to the
Federal statutory tax rate in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Statutory Federal income tax rate....................................... 35.0% 35.0% 34.0%
Change in tax rate due to:
Federal surtax........................................................ -- -- 1.9
Federal audit adjustment.............................................. 2.5 -- --
State taxes -- net of Federal tax effect.............................. 5.0 5.3 4.7
Penalties............................................................. -- -- 0.6
Municipal bond interest............................................... (7.8) (4.8) --
Rate change impact on net deferred tax asset.......................... -- (1.4) --
Other -- net.......................................................... 1.3 0.5 (1.2)
--- --- ---
36.0% 34.6% 40.0%
--- --- ---
--- --- ---
</TABLE>
47
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
at December 31, 1995 and December 25, 1994 are summarized below:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES
Property, plant and equipment.................................................... $ 16,839 $ 17,733
--------- ---------
Gross deferred tax liabilities................................................. 16,839 17,733
--------- ---------
DEFERRED TAX ASSETS
Postretirement benefits other than pensions...................................... 37,080 36,004
Pensions......................................................................... 6,523 3,308
Other employee benefits.......................................................... 4,519 3,741
Inventories...................................................................... 4,188 4,541
Interest expense................................................................. 6,135 1,591
Other liabilities................................................................ 1,934 1,204
Other assets..................................................................... 983
Miscellaneous.................................................................... 369 398
--------- ---------
Gross deferred tax assets...................................................... 60,748 51,770
--------- ---------
Net deferred tax asset....................................................... $ 43,909 $ 34,037
--------- ---------
--------- ---------
</TABLE>
In 1995 and 1994, the change in the deferred tax asset primarily represents
the effect of changes in the amounts of temporary differences from the prior
year. In addition, based on the Company's expected future profitability, the net
deferred tax asset was increased in 1994 recognizing the effect of legislation
enacted during 1993 which increased the maximum corporate tax rate from 34 to 35
percent.
The Company believes it is more likely than not to realize the net deferred
tax asset and accordingly no valuation allowance has been provided. This
conclusion is based on, (i) reversing deductible temporary differences
(excluding postretirement benefit amounts) being offset by reversing taxable
temporary differences, (ii) the extremely long period that is available to
realize the future tax benefits associated with the postretirement related
deductible temporary differences and, (iii) the Company's expected future
profitability.
Cash flows from operating activities were reduced by net cash paid for
income taxes of $20.3 million, $12.3 million and $4.5 million during 1995, 1994
and 1993, respectively.
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT:
The Company's long-term debt at December 31, 1995 and December 25, 1994 is
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Senior Secured Notes, 12.5%, due 2002......................................... $ 125,000 $ 125,000
Senior Secured Discount Notes, 13.5%, due 2004................................ 95,831 84,055
Term loan, three month LIBOR plus 400 basis points (9.9375% at December 31,
1995), due 1998-2001......................................................... 50,000 50,000
Notes payable, 6.5% to 6.75%, due 1998-2008................................... 6,000 6,000
----------- -----------
$ 276,831 $ 265,055
----------- -----------
----------- -----------
</TABLE>
During 1994, the Company issued long-term debt in the form of Senior Secured
Notes, Senior Secured Discount Notes and a Term Loan for gross cash proceeds of
$255 million in connection with
48
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the financing of the Project. The gross proceeds were reduced by debt issuance
costs of $14.3 million which are being amortized over the lives of the
respective bond issues and the term loan. During 1995 and 1994 the Company
amortized deferred debt issuance costs of $1.9 million and $0.7 million,
respectively, a portion of which has been capitalized in construction in
progress, Modernization and Expansion Project.
Coincident with the issuance of new debt, the Company prepaid the total
principal remaining on the previously existing Senior Notes of $50 million and
incurred approximately $3 million ($1.8 million after-tax) in prepayment
penalties which are shown as an extraordinary expense item, net of taxes, in the
Consolidated Statements of Operations.
SENIOR SECURED NOTES
The Senior Secured Notes were issued for $125 million, bearing 12.5 percent
interest due in 2002. The Senior Secured Notes may be redeemed at the option of
the Company, in whole, or in part on or after August 1, 1998 at fixed redemption
prices, together with accrued and unpaid interest to the redemption date.
SENIOR SECURED DISCOUNT NOTES
The Senior Secured Discount Notes provided gross proceeds of $80 million and
mature in 2004, which will yield 13.5 percent and accrete to an aggregate
principal amount of $117.9 million on August 1, 1997. During 1995, the Senior
Secured Discount Notes accreted from a value of $84.1 million, at December 25,
1994, to a value of $95.8 million at December 31, 1995. The Senior Secured
Discount Notes may be redeemed at the option of the Company in whole or in part,
on or after August 1, 1999, at fixed redemption prices, together with accrued
and unpaid interest to the redemption date.
TERM LOAN
The Term Loan provided gross proceeds of $50 million and matures on a
graduated schedule beginning in 1998, and may be redeemed at par, in whole or in
part, by the Company on the last day of any quarterly interest period. The Term
Loan bears interest at 400 basis points above the three month LIBOR rate. At
December 31, 1995, the interest rate in effect was 9.9375 percent. In 1995 the
Company entered into an agreement to cap the total interest rate at 12.5 percent
for the period May 2, 1996 to November 2, 1997.
WORKING CAPITAL FACILITY
The Company has a Working Capital Facility agreement with a group of banks
which provides aggregate commitments of $80 million secured by the inventories
and accounts receivable of the Company's subsidiaries of which approximately $76
million is available for borrowing at December 31, 1995 as calculated under the
borrowing base calculation. The Company is currently obligated to issue a letter
of credit, totaling approximately $12 million, for deferred payments relating to
the Modernization and Expansion Project. Issuance of such a letter of credit
would reduce the borrowing base in 1996 and 1997 in the amounts equivalent to
the outstanding balances of such deferred payments. The Working Capital Facility
requires maintenance of minimum levels of: consolidated tangible net worth;
consolidated ratio of current assets to current liabilities; consolidated ratio
of funded indebtedness to capital; and consolidated cash flow ratio. No amounts
were outstanding under the credit agreement during 1995 and 1994, and
essentially all of the unused working capital facility remained available for
the years then ended. The Company pays an annual commitment fee of one-half
percent on the unused portion of the credit line. Interest on borrowings under
the credit line are subject at the option of the Company to either LIBOR or the
prime rate plus a factor, which varies subject to the term of the borrowing.
49
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's obligations under the Senior Secured and Senior Secured
Discount Notes and Term Loan are secured by a pledge of all capital stock of the
Company's direct subsidiaries. The guarantee of the Notes and Term Loan by Acme
Steel is secured by a first property lien on substantially all existing and
future real property and equipment of Acme Steel, including all of the assets
required in connection with the Modernization and Expansion Project. The
guarantee of the Notes and Term Loan by Acme Packaging are secured by a pledge
of all of the capital stock of its subsidiaries.
The maturities during the five years ending December 27, 2000 are $4.3
million in 1998, $15.2 million in 1999, and $16.5 million in 2000. Cash flows
from operating activities were reduced by cash paid for interest on debt of
$21.6 million in 1995, $5.3 million in 1994 and $5.2 million in 1993.
The Senior Notes, Term Loan and Working Capital Facility contain certain
restrictive covenants that limit the Company's ability to incur additional
indebtedness, create liens, pay dividends, repurchase capital stock, engage in
transactions with affiliates, sell assets, engage in sale or leaseback
transactions and engage in mergers or consolidations.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND RESTRICTED CASH AND
INVESTMENTS
The carrying value of cash and cash equivalents, short-term investments and
restricted cash and investments approximates fair value.
LONG-TERM DEBT
The fair value of the Company's Senior Secured Notes and Senior Secured
Discount Notes is determined by using the quoted market price at the end of the
reporting period.
The fair value of the Term Loan and Notes Payable are estimated by
calculating the present value of the remaining interest and principal payments
on the debt to maturity. The present value of the Term Loan and Notes Payable
are calculated based upon a discount rate equal to the three month LIBOR rate
plus 400 basis points at the end of each reporting period.
The following table presents information on the Company's financial
instruments:
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and Cash Equivalents..................................... $ 53,043 $ 53,000 $ 76,639 $ 76,639
Short-term Investments........................................ 83,756 84,100 76,384 76,107
Restricted Cash and Investments............................... 50,305 50,300 201,397 201,204
Long-term debt
- Senior Secured Notes...................................... 125,000 127,500 125,000 121,250
- Senior Secured Discount Notes............................. 95,831 99,100 84,055 80,211
- Term Loan................................................. 50,000 50,000 50,000 50,000
- Notes Payable............................................. 6,000 4,900 6,000 4,533
</TABLE>
ISSUANCE OF COMMON STOCK:
During 1994, the Company issued 5.6 million shares of $1 par value common
stock in exchange for 5.6 million special warrants sold on March 2, 1994. The
issue price of the special warrants was $21 providing gross proceeds to the
Company of $117.6 million. The gross proceeds were reduced by related equity
issuance costs of $6.8 million providing net equity proceeds of $110.8 million.
50
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In addition, on September 23, 1994, Raytheon entered into an agreement with
the Company to purchase 375,000 shares of its common stock for $24 per common
share. The gross proceeds of $9 million were reduced by the related issuance
costs of $0.5 million. The sale closed on October 7, 1994. These common shares
have not been registered.
COMMON STOCK:
The Company has a stock incentive program which provides, among other
benefits, for the granting of stock options and stock awards to officers and key
employees. Stock options for the Company's common stock are granted at prices
not less than the market price at date of grant and no option may be exercised
more than ten years from the grant date.
Information regarding stock options is summarized below:
<TABLE>
<CAPTION>
OPTION
SHARES PER SHARE OPTION PRICE
-------- ----------------------
<S> <C> <C> <C> <C>
OUTSTANDING AT DECEMBER 27, 1992................. 576,975
Granted.......................................... 88,500 $ 14.50
Exercised........................................ (39,450) $ 8.375 -- $ 17.00
Canceled......................................... (17,675) $ 13.563 -- $ 24.25
--------
OUTSTANDING AT DECEMBER 26, 1993................. 608,350
Granted.......................................... 83,500 $ 23.875
Exercised........................................ (165,400) $ 8.375 -- $ 24.25
Canceled......................................... (5,750) $ 17.875 -- $ 24.25
--------
OUTSTANDING AT DECEMBER 25, 1994................. 520,700
Granted.......................................... 108,500 $ 16.875 -- $18.375
Exercised........................................ (7,600) $13.5625 -- $ 14.50
Canceled......................................... (14,650) $ 16.875 -- $ 24.25
--------
OUTSTANDING AT DECEMBER 31, 1995................. 606,950
--------
--------
</TABLE>
At December 31, 1995 and December 25, 1994, 466,450 and 394,450 options were
exercisable, respectively. Options vest over a two year period.
Stock awards granted in 1995 totaled 22,700 shares at a value of either
$17.25 or $18.375 per share, depending on the grant date. Stock awards granted
in 1994 totaled 13,000 shares at a value of either $23.19 or $22.88 per share
depending on the grant date. Stock awards granted in 1993 totaled 15,400 shares
at a value of either $16.00 or $16.75 per share depending on the grant date. The
compensation expense for the value of stock awards granted is generally
recognized ratably over the vesting period of 5 years. The compensation expense
for 4,200 stock awards granted in 1995 will be recognized ratably over their
vesting period of 3 years.
Remaining shares available for grant under the Company's stock incentive
program were 337,600 and 466,500 at December 31, 1995 and December 25, 1994,
respectively.
COMMITMENTS AND CONTINGENCIES:
The Company's interest in an iron ore mining joint venture requires payment
of its proportionate share of all fixed operating costs, regardless of the
quantity of ore received, plus the variable operating costs of minimum ore
production for the Company's account. Normally, the Company reimburses the joint
venture for these costs through its purchase of ore. During 1995, the Company
obtained approximately 47 percent of its iron ore needs from the joint venture.
During 1994, the Company entered into a turnkey contract with Raytheon
Engineers & Constructors, Inc. ("Raytheon") to build the Modernization and
Expansion Project at its steel making
51
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
facilities located in Riverdale, Illinois. Based on the turnkey contract without
taking into account financing costs, internally generated costs directly related
to the project or additional changes that may be requested by Acme during
construction, management estimates the cost of the Modernization and Expansion
Project, including ancillary facilities, construction, general contractor fees
and certain other project costs that will be paid by the Company will
approximate $392 million.
The Company is subject to various Federal, state and local environmental
statutes and regulations which provide a comprehensive program for controlling
the release of materials into the environment and require responsible parties to
remediate certain waste disposal sites. In addition, various health and safety
statutes and regulations apply to the work-place environment. Administrative,
civil and criminal penalties may be applicable for failure to comply with these
laws. These environmental laws and regulations are subject to periodic revision
and modification. The United States Congress, for example, has recently
completed a major overhaul of the Federal Clean Air Act which is a major
component of the Federal environmental statutes affecting the Company's
operations.
From time to time, the Company is also involved in administrative
proceedings involving the issuance, or renewal, of environmental permits
relating to the conduct of its business. The final issuance of these permits
have been resolved on terms satisfactory to the Company; and, in the future, the
Company expects such permits will similarly be resolved on satisfactory terms.
Although management believes it will be required to make further substantial
expenditures for pollution abatement facilities in future years, because of the
continuous revision of these regulatory and statutory requirements, the Company
is not able to reasonably estimate the specific pollution abatement
requirements, the amount or timing of such expenditures to maintain compliance
with these environmental laws. While such expenditures in future years may be
substantial, management does not presently expect they will have a material
adverse effect on the Company's future ability to compete within its markets.
In those cases where the Company has been identified as a Potentially
Responsible Party ("PRP") or is otherwise made aware of a possible exposure to
incur costs associated with an environmental matter, management determines (i)
whether, in fact, the Company has been properly named or is otherwise obligated,
(ii) the extent to which the Company may be responsible for costs associated
with the site in question, (iii) an assessment as to whether another party may
be responsible under various indemnification agreements or insurance policies
the Company is a party to, and (iv) an estimate, if one can be made, of the
costs associated with the clean-up efforts or settlement costs. It is the
Company's policy to make provisions for environmental clean-up costs at the time
that a reasonable estimate can be made. At December 31, 1995 and 1994, the
Company had recorded reserves of approximately $0.3 million, for environmental
clean-up matters. While it is not possible to predict the ultimate costs of
resolving environmental related issues facing the Company, based upon
information currently available, they are not expected to have a material effect
on the consolidated financial condition or results of operations of the Company.
In connection with the Spin-Off from The Interlake Corporation ("Interlake")
on May 29, 1986, Acme Steel Company (a subsidiary of the Company) entered into
certain indemnification agreements with Interlake. Pursuant to the terms of the
indemnification agreements, Interlake undertook to defend, indemnify and hold
Acme Steel Company harmless from any claims, as defined, relating to Acme Steel
Company operations or predecessor operations occurring before May 29, 1986, the
inception of Acme Steel Company. The indemnification agreements cover certain
environmental matters including certain litigation and Superfund sites in
Duluth, Minnesota and Gary, Indiana for which either Interlake or Acme Steel
Company's predecessor operations have been named as defendants or PRP's, as
applicable. To date, Interlake has met its obligations under the indemnification
agreements and has provided the defense and paid all costs related to these
environmental matters. The Company
52
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
does not have sufficient information to determine the potential liability, if
any, for the matters covered by the indemnification agreements in the event
Interlake fails to meet its obligations thereunder in the future. In the event
that Interlake, for any reason, was unable to fulfill its obligations under the
indemnification agreements, the Company could have increased future obligations
which could be significant.
Also in connection with the Spin-Off from Interlake, Acme Steel Company
entered into a Tax Indemnification Agreement ("TIA") which generally provides
for Interlake to indemnify Acme Steel Company for certain tax matters. While
certain issues have been negotiated and settled between the Company, Interlake
and the Internal Revenue Service, certain significant issues for the tax years
beginning in 1982 through 1986 remain unresolved.
On March 17, 1994, Acme Steel Company received a Statutory Notice of
Deficiency ("Notice") in the amount of $16.9 million in tax as a result of the
Internal Revenue Service's examination of the 1982-1984 tax years. The Company
is contesting the unresolved issues and the Notice. Should the government
sustain its position as proposed for those unresolved issues and those contained
in the Notice, substantial interest would also be due (potentially in an amount
greater than the tax claimed). The taxes claimed relate principally to
adjustments for which Acme Steel Company is indemnified by Interlake pursuant to
the TIA. The Company has adequate reserves to cover that portion for which it
believes it may be responsible per the TIA. To date, Interlake has met its
obligations under the TIA with respect to all covered matters. In the event that
Interlake, for any reason, were unable to fulfill its obligations under the TIA,
the Company could have increased future obligations.
The Company's subsidiaries also have various litigation matters pending
which arise out of the ordinary course of their businesses. In the opinion of
management, the ultimate resolution of these matters will not have a material
adverse effect on the financial position of the Company.
BUSINESS SEGMENTS:
The Company presents its operations in two segments, Steel Making and Steel
Fabricating.
Steel making operations include the manufacture of sheet, strip and
semifinished steel in low-, mid-, and high-carbon alloy and specialty grades.
Principal markets include agricultural, automotive, industrial equipment,
industrial fasteners, welded steel tubing, processor and tool manufacturing
industries.
The Steel Fabricating Segment processes and distributes steel strapping,
strapping tools and industrial packaging (Acme Packaging Corporation), welded
steel tubing (Alpha Tube Corporation) and auto and light truck jacks (Universal
Tool & Stamping Co., Inc.). The Steel Fabricating Segment sells to a number of
markets.
All sales between segments are recorded at current market prices. Income
from operations consists of total sales less operating expenses. Operating
expenses include an allocation of expenses incurred at the Corporate Office that
are considered by the Company to be operating expenses of the segments rather
than general corporate expenses. Income from operations does not include other
non-operating income or expense, interest income or expense, income taxes, or
extraordinary items. Identifiable assets are those that are associated with each
business segment. Corporate assets are principally cash and cash equivalents,
short-term investments and restricted cash, other investments and deferred
income tax assets.
The products and services of the Steel Making and Steel Fabricating Segments
are distributed through their own respective sales organizations which have
sales offices at various locations in the United States. Export sales are
insignificant for the years presented.
53
<PAGE>
SEGMENT INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- ----------- -----------
<S> <C> <C> <C>
Net Sales
Steel Making
Sales to unaffiliated customers...... $ 234,903 $ 231,224 $ 187,750
Intersegment sales................... 121,929 118,196 116,094
--------- ----------- -----------
356,832 349,420 303,844
Steel Fabricating
Sales to unaffiliated customers...... 286,716 291,655 269,656
Intersegment sales................... 1,703 1,806 1,873
--------- ----------- -----------
288,419 293,461 271,529
Eliminations......................... (123,632) (120,001) (117,967)
--------- ----------- -----------
Total................................ $ 521,619 $ 522,880 $ 457,406
--------- ----------- -----------
--------- ----------- -----------
Income from Operations
Steel Making........................... $ 28,461 $ 14,536(1) $ 736(2)
Steel Fabricating...................... 20,351 19,044 11,929(3)
--------- ----------- -----------
Total................................ $ 48,812 $ 33,580 $ 12,665
--------- ----------- -----------
--------- ----------- -----------
Identifiable Assets
Steel Making........................... $ 495,338 $ 248,876 $ 203,366
Steel Fabricating...................... 115,332 105,699 108,254
Corporate.............................. 144,073 327,755 22,249
--------- ----------- -----------
Total................................ $ 754,743 $ 682,330 $ 333,869
--------- ----------- -----------
--------- ----------- -----------
Depreciation
Steel Making........................... $ 9,749 $ 11,753 $ 11,285
Steel Fabricating...................... 3,747 3,696 3,842
Corporate.............................. 117 65 107
--------- ----------- -----------
Total................................ $ 13,613 $ 15,514 $ 15,234
--------- ----------- -----------
--------- ----------- -----------
Capital Expenditures
Steel Making........................... $ 238,177 $ 53,205 $ 9,368
Steel Fabricating...................... 6,078 3,076 2,283
Corporate.............................. 119 58 98
--------- ----------- -----------
Total................................ $ 244,374 $ 56,339 $ 11,749
--------- ----------- -----------
--------- ----------- -----------
Flat-rolled Steel Shipments (in tons).... 619,052 675,430 659,736
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ------------------------
(1) Includes a $9.5 million nonrecurring charge to recognize asset impairment
costs and contractual employee reduction costs related to construction of
the Modernization and Expansion Project.
(2) Includes a $1.3 million write off of Acme Steel Company's No. 3 Hot Strip
Mill and Billet Mill.
(3) Includes a $0.6 million expense to close Acme Packaging's Pittsburg- East
facility in California and to write-off of a strapping line at its New
Britain, Connecticut facility.
54
<PAGE>
QUARTERLY RESULTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
1995
Net Sales............................. $131,548 $136,171 $122,211 $131,689
Gross profit.......................... 23,132 25,140 17,911 18,265
Net income............................ 8,046 8,781 5,256 6,163
Net income per share.................. $ 0.69 $ 0.75 $ 0.45 $ 0.53
- --------------------------------------------------------------------------------
1994
Net Sales............................. $123,560 $132,863 $123,142 $143,315
Gross profit.......................... 13,519 19,617 18,141 25,011
Net income (loss)..................... 3,598 6,856 (1,019) 7,536
Net income (loss) per share........... $ 0.64 $ 1.20 $ (0.12) $ 0.65
Net income before extraordinary
item................................. $ 768
Net income per share before
extraordinary item................... $ 0.09
- --------------------------------------------------------------------------------
1993
Net sales............................. $107,863 $117,169 $111,919 $120,455
Gross profit.......................... 7,518 11,670 9,206 16,829
Net income............................ 114 2,056 115 3,974
Net income per share.................. $ 0.02 $ 0.38 $ 0.02 $ 0.73
- --------------------------------------------------------------------------------
</TABLE>
The first quarter of 1995 includes a $1.6 million gain on the sale of the
Company's interest in the LAS Virginia Properties.
The third quarter of 1994 includes a $9.5 million nonrecurring charge to
address the impairment of existing steel making facilities and contractual
employee costs related to construction and commissioning of the Modernization
and Expansion Project. In addition, the third quarter also includes a $1.8
million extraordinary expense item resulting from prepayment of previously
existing senior notes.
The fourth quarter of 1993 includes a $1.2 million benefit related to Acme's
investment in Wabush Mines, a $1.3 million expense to write-off the Steel
Subsidiary's No. 3 Hot Strip Mill and Billet Mill and $0.6 million of expense
associated with the closure of the Packaging subsidiary's Pittsburg-East
facility in California and the write-off of a strapping line at the Packaging
subsidiary's New Britain, Connecticut facility.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
FISCAL YEAR OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
---------- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful accounts
receivable........................... $1,301 $123 $ 60(a) $ (149)(b) $ 1,335
---------- ----- ----- ----------- -------
---------- ----- ----- ----------- -------
1994
Allowance for doubtful accounts
receivable........................... $1,155 $541 $240(a) $ (635)(b) $ 1,301
---------- ----- ----- ----------- -------
---------- ----- ----- ----------- -------
1993
Allowance for doubtful accounts
receivable........................... $1,081 $240 $232(a) $ (398)(b) $ 1,155
---------- ----- ----- ----------- -------
---------- ----- ----- ----------- -------
</TABLE>
- ------------------------
(a) Consists principally of recoveries of accounts charged off in prior years.
(b) Uncollectible accounts charged off.
55
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-17235,
33-19437, and 33-30841) and in the Registration Statements on Form S-8 (Nos.
33-38747 and 33-59627) of Acme Metals Incorporated of our report dated January
25, 1996 appearing on page 36 in this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Chicago, Illinois
March 22, 1996
56
<PAGE>
EXHIBIT 3(i)
RESTATED
CERTIFICATE OF INCORPORATION
OF
ACME METALS INCORPORATED
PURSUANT TO SECTIONS 242 AND 245
OF THE GENERAL CORPORATION LAW OF DELAWARE
(AS FILED MAY 15, 1992)
ACME METALS INCORPORATED, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is ACME METALS INCORPORATED. The date of
filing its original Certificate of Incorporated with the secretary of State was
January 9, 1992.
2. This Restated Certificate of Incorporation restates and amends the
Certificate of Incorporation of this corporation by (a) increasing the number of
shares of Common Stock that the corporation is authorized to issue and creating
a new class of Serial Preferred Stock and (b) adding certain provisions
creating, defining and regulating the powers of the corporation and its
directors and stockholders.
3. The text of the Certificate of Incorporation as amended and restated
is as follows:
FIRST:
The name of the Corporation is ACME METALS INCORPORATED.
SECOND:
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, 19801. The
name of the Corporation's registered agent at such address is The Corporation
Trust Company.
THIRD:
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH:
A. GENERAL AUTHORIZATION
The aggregate number of shares which the Corporation is authorized to issue
is 22,000,000 shares, consisting of 20,000,000 shares of Common Stock having a
par value of $1.00 per share, and 2,000,000 shares of Serial Preferred Stock
having a par value of $1.00 per share.
<PAGE>
B. SERIAL PREFERRED STOCK
The Board of Directors hereby is authorized, subject to the limitations
prescribed by law and by the provisions of this Section B, to provide for the
issuance of the Serial Preferred Stock in series, and by filing a certificate
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
to establish the number of shares to be included in each such series, and to fix
the designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions of the shares of
each such series. The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the following:
(a) The number of shares constituting the series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in the case of redemption, which amount may vary under different conditions and
at different redemption dates;
(f) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation; and
(g) Any other designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of that series.
C. COMMON STOCK
The rights of the shares of Common Stock of the Corporation and limitations
or restrictions thereof, are as follows:
(1) DIVIDENDS AND DISTRIBUTIONS. No dividend, other than in Common
Stock or any other class of shares of the Corporation subordinate to the Serial
Preferred Stock as to both dividends and assets, shall be declared or paid upon,
or set apart for, the Common Stock unless (i) as to each series of the Serial
Preferred Stock entitled to cumulative dividends, dividends for all past
dividend periods shall have been paid or shall have been declared and a sum
sufficient for the payment thereof set apart and (ii) as to all Serial Preferred
Stock, the amount of the dividend for the current period shall be fully paid, or
the dividend for the current dividend period shall be declared and a sum
sufficient for the payment thereof set apart.
2
<PAGE>
(2) LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation none of the assets of the
Corporation shall be distributed to the holders of the Common Stock until after
the holders of the Serial Preferred Stock shall have been paid in the full
preferential amounts to which they are entitled.
FIFTH:
The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
J. L. Austin Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
V. A. Brookens Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
T. L. Ford Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
SIXTH:
A. NUMBER, ELECTION AND TERMS OF DIRECTORS
The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not fewer than three nor
more than fifteen directors, the exact number of directors to be determined from
time to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors. The directors shall be divided into three classes,
as nearly equal in number as possible, designated Class I, Class II and Class
III. Class I directors shall hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1993, Class II directors to hold
office initially for a term expiring at the annual meeting of stockholders to be
held in 1994, and Class III directors to hold office initially for a term
expiring at the annual meeting of stockholders to be held in 1995. At each
annual meeting of stockholders, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term.
Elections of directors need not be by written ballot unless required by the By-
Laws of the Corporation.
B. CHANGE IN NUMBER OF DIRECTORSHIPS AND VACANCIES
If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director
3
<PAGE>
shall hold office until the annual meeting for the year in which his term
expires and until his successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office. Any vacancy in the Board of Directors that results from an
increase in the number of directors shall be filled by a majority of the Board
of Directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors shall be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor.
Notwithstanding the foregoing paragraphs A and B, whenever the holders of
any one or more classes or series of stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Amended and Restated Certificate of Incorporation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article SIXTH unless expressly provided by such terms.
C. REMOVAL OF DIRECTORS
Any director may be removed from office only for cause.
SEVENTH:
Notwithstanding any provision of the General Corporation Law of the State
of Delaware now or hereafter in force requiring for any corporate action the
vote of a lesser portion of the shares of the Corporation or of any class of
shares thereof or of any other securities having voting power, the affirmative
vote of (a) two-thirds of the outstanding shares of the Corporation entitled to
vote, voting together and not by class, and (b) two-thirds of the outstanding
shares of Common Stock of the Corporation, voting separately as a class, shall
be necessary:
(1) to approve (i) the sale, lease, or exchange by the Corporation of
all or substantially all of its property and assets to a related company or
an affiliate of a related company, or (ii) the consolidation of the
Corporation, or its merger, into a related company or an affiliate of a
related company, or (iii) the merger into the Corporation of a related
company or an affiliate of a related company, or (iv) a transaction other
than a merger or consolidation in which the Corporation is the acquiring
company and its voting shares are issued or transferred to a related company
or an affiliate of a related company or to shareholders of a related company
or an affiliate of a related company; or
(2) to approve any agreement, contract or other arrangement with a
related company providing for any of the transactions described in
subparagraph (1) above.
For the purpose of this Article SEVENTH (i) a "related company" in respect
of a given transaction shall be any corporation which, together with its
affiliates and associated persons, owns of record or beneficially, directly or
indirectly, more than 5% of the shares of any outstanding class of stock of the
Corporation entitled to vote upon such transaction, as of the record date used
to determine the stock of the Corporation entitled to vote upon such
transaction; (ii) an "affiliate" of
4
<PAGE>
a related company shall be any individual, joint venture, trust, partnership or
corporation which, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the related
company; and (iii) an "associated person" of a related company shall be any
officer or director or any beneficial owner, directly or indirectly, of 10% or
more of any class of equity security of such related company or any of its
affiliates.
The determination of the Board of Directors of the Corporation, based on
information known to the Board of Directors and made in good faith, shall be
conclusive as to whether any company is a related company as defined in this
Article SEVENTH.
Nothing hereinabove contained shall (i) require any transaction to be
submitted to stockholders for adoption or approval if such adoption or approval
is not required by the provisions of the General Corporation Law of Delaware as
now or hereafter in force or (ii) affect or alter the separate class or serial
voting rights of holders of Serial Preferred Stock fixed as provided in Article
FOURTH hereof.
EIGHTH:
Any action required or permitted to be taken by the stockholders must be at
an annual or special meeting of stockholders of the Corporation and may not be
effected by any consent in writing of such stockholders.
NINTH:
Notwithstanding any other provisions of the Certificate of Incorporation of
the Corporation or of the By-Laws of the Corporation (and notwithstanding the
fact that a lesser percentage may be specified by law, the Certificate of
Incorporation or the By-Laws), the affirmative vote of the holders of not less
than eighty percent (80%) of the voting power of the Corporation, and of the
holders of eighty percent (80%) of the shares of the Common Stock at the time
outstanding, voting together as a separate class, shall be required to amend or
repeal or adopt any provisions inconsistent with Articles SIXTH, SEVENTH,
EIGHTH, NINTH and TENTH.
TENTH:
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the By-Laws of the Corporation, without any action on the part of the
stockholders, by the affirmative vote of at least a majority of the Board of
Directors, only if the Board of Directors is composed solely of directors who
are directors immediately after the date hereof, or who have been elected or
recommended to be elected as directors by two-thirds of such initial directors.
The By-Laws may also be altered, amended or repealed by the affirmative vote of
the holders of shares representing at least two-thirds of the shares of the
Corporation entitled to vote in the election of directors, voting as one class;
provided, however, that the affirmative vote of the holders of shares
representing only a majority of the shares of the Corporation entitled to vote
in the election of directors, voting as one class, shall be required if such
alteration, amendment or repeal of the By-Laws has been previously approved by
the affirmative vote of at least two-thirds of the entire Board of Directors of
the Corporation.
5
<PAGE>
ELEVENTH:
No 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 Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. This Article shall not eliminate or limit the liability of a
director for any act or omission occurring prior to the effective date of its
adoption. If the Delaware General Corporation Law hereafter is amended to
authorize, with the approval of a corporation's stockholders, further reductions
in the liability of the Corporation's directors for breach of fiduciary duty,
then a Director of the Corporation shall not be liable for any such breach to
the fullest extent permitted by the Delaware General Corporation Law as so
amended. Any repeal or modification of the foregoing provisions of this Article
ELEVENTH, directly or by adoption of an inconsistent provision of this
Certificate of Incorporation, by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
4. This Restated Certificate of Incorporation was duly adopted by the
unanimous written consent of the sole stockholder of the corporation in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the corporation has caused this Certificate to be
executed on its behalf and attested to by its duly authorized officers as of the
13th day of May, 1992.
ACME METALS INCORPORATED
/s/ Brian W. H. Marsden
By:
------------------------------------------
Brian W. H. Marsden
Its: President and Chief Executive Officer
-----------------------------------------
ATTEST:
/s/ Roberta A. Glab
- --------------------------------
Roberta A. Glab
Its: ASSISTANT SECRETARY
----------------------------
6
<PAGE>
FORM OF
CERTIFICATE OF DESIGNATIONS
OF JUNIOR PARTICIPATING PREFERRED STOCK, SERIES A
OF
ACME METALS INCORPORATED
PURSUANT TO SECTION 151 OF THE CORPORATION LAW
OF THE STATE OF DELAWARE
We, Brian W. H. Marsden, Chairman and Chief Executive Officer and Edward P.
Weber, Jr., Secretary, of Acme Metals Incorporated, a corporation organized and
existing under the Corporation Law of the State of Delaware, in accordance with
the provisions of Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of the said Corporation, the said Board of
Directors on July 15, 1994, adopted the following resolution creating a series
of 120,000 shares of Preferred Stock designated as Junior Participating
Preferred Stock, Series A:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation be,
and it hereby is, created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Junior Participating Preferred Stock, Series A" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
120,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of common stock $1.00 par
value per share, of the Company (the "Common Stock") and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $25.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
<PAGE>
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Company shall
at any time on or after August 5, 1994 declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision of combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $25.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Company. In the
event the Company shall at any time on or after August 5, 1994 declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock then
in each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such
2
<PAGE>
event shall be adjusted by multiplying such number by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event, and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Company.
(C) Except as set forth herein, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Company shall not:
(i) declare or pay dividends on, or make any other distributions on,
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Company ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
3
<PAGE>
(B) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company could, under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of preferred
stock and may be reissued as part of a new series of preferred stock to be
created by resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Company shall at any time on or
after August 5, 1994 declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under the proviso in clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock then outstanding shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Company shall at any time on or after August 5,
1994 declare or pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the
4
<PAGE>
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. AMENDMENT. The Restated Certificate of Incorporation of the
Company shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of
the outstanding shares of Series A Preferred Stock voting together as a single
class.
IN WITNESS WHEREOF, we have executed and subscribed this certificate and do
affirm the foregoing as true under the penalties of perjury as of this 3rd day
of August, 1994.
/s/ Brian W. H. Marsdan
-----------------------------------
Brian W. H. Marsden
Chairman and Chief Executive Officer
ATTEST:
/s/ Edward P. Weber, Jr.
- --------------------------------
Edward P. Weber, Jr.
Secretary
5
<PAGE>
EXHIBIT 10.4
ACME GROUP
FIRST AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
NBD Bank, N.A.
Detroit, Michigan
Mercantile Bank of St. Louis National Association
St. Louis, Missouri
National City Bank
Cleveland, Ohio
General Electric Capital Corporation
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
August 11, 1994 (the "CREDIT AGREEMENT") between the undersigned, Acme Steel
Company, a Delaware corporation ("ACME STEEL"), Acme Packaging Corporation, a
Delaware corporation ("ACME PACKAGING"), Alpha Tube Corporation, a Delaware
corporation ("ALPHA TUBE"), and Universal Tool & Stamping Company, Inc., an
Indiana corporation ("UNIVERSAL TOOL") (Acme Steel, Acme Packaging, Alpha Tube
and Universal Tool are being hereinafter referred to collectively as the
"BORROWERS" and individually as a "BORROWER") and you (the "LENDERS"). All
capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.
The Borrowers have requested that the Lenders make certain amendments to
the financial reporting requirements contained in the Credit Agreement, and the
Lenders are willing to do so under the terms and conditions set forth in this
Amendment.
1. AMENDMENTS.
Upon your acceptance hereof in the space provided for that purpose below,
the Credit Agreement shall be and hereby is amended as follows:
(a) Section 7.5(a)(ii) of the Credit Agreement shall be amended by
inserting the phrase "(but within one hundred twenty (120) days after the
end of the last such period in each fiscal year)" immediately after the
word "Company" appearing in the second line thereof.
(b) Section 7.5(b) of the Credit Agreement shall be amended by
deleting the phrase "or (iv)" appearing in the first line thereof.
<PAGE>
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
(a) The Borrowers and the Lenders shall have executed and delivered
this Amendment.
(b) The Lenders shall have received copies (executed or certified, as
may be appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Amendment to the extent
the Lenders or their counsel may reasonably request.
(c) Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Lenders and their counsel.
3. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment, the
Borrowers hereby represent to the Lenders that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.6 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Lenders) and the Borrowers are in
full compliance with all of the terms and conditions of the Credit Agreement and
no Default or Event of Default has occurred and is continuing under the Credit
Agreement or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
(a) Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
or any other instrument or document executed in connection therewith, or in any
certificate, letter or communication issued or made pursuant to or with respect
to the Credit Agreement, any reference in any of such items to the Credit
Agreement being sufficient to refer to the Credit Agreement as amended hereby.
(b) The Borrowers agree to pay on demand all costs and expenses of or
incurred by the Agent in connection with the negotiation, preparation, execution
and delivery of this Amendment, including the fees and expenses of counsel for
the Agent.
(c) This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the
parties hereto may execute this Amendment by
<PAGE>
signing any such counterpart and each of such counterparts shall for all
purposes be deemed to be an original. This Amendment shall be governed by the
internal laws of the State of Illinois.
Dated as of this 21st day of May, 1995.
ACME STEEL COMPANY
/s/ James W. Hoekwater
By
------------------------------------------------
Its Treasurer
------------------------------------------
ACME PACKAGING CORPORATION
/s/ James W. Hoekwater
By
------------------------------------------------
Its Treasurer
------------------------------------------
ALPHA TUBE CORPORATION
/s/ James W. Hoekwater
By
------------------------------------------------
Its Treasurer
------------------------------------------
UNIVERSAL TOOL & STAMPING COMPANY, INC.
/s/ James W. Hoekwater
By
------------------------------------------------
Its Treasurer
------------------------------------------
ACME METALS INCORPORATED
/s/ James W. Hoekwater
By
------------------------------------------------
Its Treasurer
------------------------------------------
<PAGE>
Accepted and agreed to as of the date and year last above written.
HARRIS TRUST AND SAVINGS BANK
/s/ Richard H. Robb
By
------------------------------------------------
Its Vice President
NBD BANK, N.A.
/s/ Timothy Monahan
By
------------------------------------------------
Its Vice President
------------------------------------------
MERCANTILE BANK OF ST. LOUIS NATIONAL
ASSOCIATION
/s/ David Bentzinger
By
------------------------------------------------
Its Vice President
------------------------------------------
NATIONAL CITY BANK
/s/ Frank F. Pagura, Jr.
By
------------------------------------------------
Its Assistant Vice President
------------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
/s/ Shaun Pettit
By
------------------------------------------------
Its Region Operations Manager
------------------------------------------
<PAGE>
EXHIBIT 10.5
ACME GROUP
SECOND AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
NBD Bank, N.A.
Detroit, Michigan
Mercantile Bank of St. Louis National Association
St. Louis, Missouri
National City Bank
Cleveland, Ohio
General Electric Capital Corporation
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
August 11, 1994 between the undersigned, Acme Steel Company, a Delaware
corporation ("ACME STEEL"), Acme Packaging Corporation, a Delaware corporation
("ACME PACKAGING"), Alpha Tube Corporation, a Delaware corporation ("ALPHA
TUBE"), and Universal Tool & Stamping Company, Inc., an Indiana corporation
("UNIVERSAL TOOL") (Acme Steel, Acme Packaging, Alpha Tube and Universal Tool
are being hereinafter referred to collectively as the "BORROWERS" and
individually as a "BORROWER") and you (the "LENDERS") as amended by that certain
First Amendment to Credit Agreement date as of May 21, 1995 (said Credit
Agreement as so amended being referred to herein as the "CREDIT AGREEMENT"). All
capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.
The Borrowers have requested that the Lenders make certain amendments to
Section 7.12 of the Credit Agreement, and the Lenders are willing to do so under
the terms and conditions set forth in this Amendment.
1. AMENDMENTS.
Upon your acceptance hereof in the space provided for that purpose
below, subsections (g) and (h) of Section 7.12 of the Credit Agreement shall be
amended and as so amended shall be restated in their entirety to read as
follows:
<PAGE>
"(g) acquisitions of all or substantially all of the assets
or business of any other Person or division thereof, or all or any part
of the Voting Stock of or other equity interest in any Person (including
as such an acquisition, any action to participate as a joint venturer in
any joint venture or as a partner in any partnership), in each case if
and so long as (i) no Default or Event of Default exists or would exist
after giving effect to such acquisition, (ii) the Board of Directors or
other governing body of such Person whose Property or Voting Stock or
other equity interest is being so acquired has approved the terms of
such acquisition, (iii) the Company shall have delivered to the Lenders
an updated Schedule 5.3 to reflect any new Subsidiary resulting from
such acquisition, (iv) at the time of each such acquisition and
immediately after giving effect thereto, the aggregate amount expended
by the Acme Group and its Subsidiaries as consideration for such
acquisition (and in any event including as such, any Indebtedness for
Borrowed Money assumed or incurred as a result of such acquisition),
when taken together with the aggregate amount expended as consideration
for all other acquisitions permitted solely by this Section 7.12(g) and
all investments in Persons (other than Subsidiaries) permitted solely by
subsection (h) below, in each case on a cumulative basis after the date
hereof, does not exceed $15,000,000, and (v) the Company can demonstrate
that on a pro forma basis (including financial projections prepared by
the Company) after giving effect to the subject acquisition that the
Acme Group will continue to comply with the all of the terms and
conditions of the Loan Documents;
(h) equity investments by the Company in, and loans and
advances by the Company to, any Subsidiary (or an entity which,
following and as a result of such investment, loan or advance, becomes a
Subsidiary of the Company) or any other Person in which the Company has
already acquired any Voting Stock or other equity interest in compliance
with the provisions of subsection (g) above, provided in each case that
(i) a Subsidiary that only becomes a Subsidiary through such investment,
loan or advance and any other Person in which the Company acquires any
Voting Stock or other equity interest only through such investment, loan
or advance in each case must comply with the provisions of subsection
(g) above, (ii) at the time of each such investment in, or loan or
advance to, any Person other than a Subsidiary (each, a "MINORITY
INVESTMENT"), the aggregate amount of Minority Investments, when taken
together with the aggregate amount expended for all acquisitions
permitted solely by subsection (g) above, in each case on a cumulative
basis after the date hereof, does not exceed $15,000,000, and (iii) the
obligations of each Subsidiary to the Company with respect to any such
loan or advance by the Company to such Subsidiary funded directly or
indirectly out of the proceeds (net of (i) costs and expenses directly
incurred and payable as a result of the issuance and sale hereinafter
described and (ii) the amount necessary to fully pay and satisfy the
indebtedness described in Sections 6.2(f) and 6.2(g) hereof) from the
Company's issuance and sale of the Special Stock Purchase Warrants are
subject to a subordination agreement between the Company and such
Subsidiary providing for the subordination of such obligations in right
of payment from and after such time as the Revolving Credit Notes issued
and outstanding shall become due and payable (whether at stated
maturity, by acceleration or otherwise) to the prior payment and
performance of the Obligations under the Revolving Credit Notes and
otherwise;"
<PAGE>
2. WAIVER.
The Lenders waive any non-compliance with the terms of the Credit
Agreement which, after giving effect to this Amendment, shall no longer exist.
3. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Borrowers and the Lenders shall have executed and
delivered this Amendment.
(b) The Lenders shall have received copies (executed or
certified, as may be appropriate) of resolutions of the Board of
Directors of each Borrower authorizing the execution, delivery and
performance of, and indicating the authorized signers of, this Amendment
and all other documents relating thereto and containing the specimen
signatures of such signers.
(c) Legal matters incident to the execution and delivery of
this Amendment shall be satisfactory to the Lenders and their counsel.
4. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment,
the Borrowers hereby represent to the Lenders that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.6 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Lenders) and the Borrowers are in
full compliance with all of the terms and conditions of the Credit Agreement and
no Default or Event of Default has occurred and is continuing under the Credit
Agreement or shall result after giving effect to this Amendment.
5. MISCELLANEOUS.
(a) Except as specifically amended herein, the Credit Agreement
shall continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
or any other instrument or document executed in connection therewith, or in any
certificate, letter or communication issued or made pursuant to or with respect
to the Credit Agreement, any reference in any of such items to the Credit
Agreement being sufficient to refer to the Credit Agreement as amended hereby.
(b) The Borrowers agree to pay on demand all costs and expenses of
or incurred by the Agent in connection with the negotiation, preparation,
execution and delivery of this Amendment, including the fees and expenses of
counsel for the Agent.
<PAGE>
(c) This Amendment may be executed in any number of counterparts,
and by the different parties on different counterpart signature pages, all of
which taken together shall constitute one and the same agreement. Any of the
parties hereto may execute this Amendment by signing any such counterpart and
each of such counterparts shall for all purposes be deemed to be an original.
This Amendment shall be governed by the internal laws of the State of Illinois.
ACME STEEL COMPANY
By /s/ Mr. James Hoekwater
Its Treasurer
ACME PACKAGING CORPORATION
By /s/ Mr. James Hoekwater
Its Treasurer
ALPHA TUBE CORPORATION
By /s/ Mr. James Hoekwater
Its Treasurer
UNIVERSAL TOOL & STAMPING COMPANY, INC.
By /s/ Mr. James Hoekwater
Its Treasurer
ACME METALS INCORPORATED
By /s/ Mr. James Hoekwater
Its Treasurer
<PAGE>
Accepted and agreed to as of the date and year last above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ Richard H. Robb
Its Vice President
NBD BANK, N.A.
By /s/ Timothy M. Monahan
Its Vice President
MERCANTILE BANK OF ST. LOUIS NATIONAL
ASSOCIATION
By /s/ David Benteinger
Its Vice President
NATIONAL CITY BANK
By /s/ Frank F. Pagura, Jr.
Its Account Officer
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Shaun Pettit
Its Region Operations Manager
<PAGE>
EXHIBIT 10.17
AMENDMENT TO CONSULTING AGREEMENT
THIS AMENDMENT entered into as of the first day of June, 1995
between Acme Metals Incorporated, a Delaware corporation ("Acme") and Reynold C.
MacDonald ("Mr. MacDonald").
RECITALS
WHEREAS, Acme and Mr. MacDonald entered into a consulting
agreement on June 1, 1992, which agreement is set to expire by its terms on May
31, 1995 ("Consulting Agreement"); and
WHEREAS, Acme and Mr. MacDonald desire to extend the said
Consulting Agreement for an additional two year term subject to the terms
thereof.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the Consulting Agreement, the parties hereby
agree as follows:
The Consulting Agreement shall terminate on the 31st day of
May, 1997, subject however to its earlier termination as therein provided. The
Consulting Agreement, except as modified by this amendment, shall continue in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed as of the date first specified above.
ACME METALS INCORPORATED
By: /s/ Brian W. H. Marsden
------------------------------------
B. W. H. Marsden
Chairman and Chief Executive Officer
/s/ Reynold C. MacDonald
------------------------------------
Reynold C. MacDonald
<PAGE>
EXHIBIT 10.20
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is made and entered into this _____ day
of (MONTH AND YEAR) by and between ACME METALS INCORPORATED, a Delaware
Corporation (hereinafter the "Company"), and (NAME), who as of the execution
date hereof is serving as (TITLE) of the Company (hereinafter the "Indemnitee").
W I T N E S S E T H:
WHEREAS, the Indemnitee is rendering valuable services to the Company;
and
WHEREAS, the Company desires to receive and continue to receive the
benefits of the Indemnitee's advice, experience, knowledge, counsel, dedication,
service to the Company and to maintain and preserve the continuity in the
management of the affairs and business of the Company for the benefit of the
Company's stockholders; and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware ("Corporation Law") providing for the indemnification of directors,
officers, employees and agents of the Company specifically provides that the
Corporation Law is not exclusive and authorizes any corporation formed
thereunder to enter into an agreement or agreements to indemnify directors,
officers, employees, agents and former directors, officers, employees and
agents, both as to actions in their official capacity and as to actions in
another capacity while holding such office, and as to persons who have ceased to
be a director, officer, employee or agent and that such indemnification shall
inure to the benefit of the heirs, executors and administrators of such persons;
and
WHEREAS, in accordance with the authorization provided by said
Corporation Law, the Company has purchased and presently maintains a policy or
policies of Directors and Officers Liability Insurance ("D & O Insurance")
covering certain liabilities which may be incurred by its directors, officers
and employees in the performance of their duties for the Company; and
WHEREAS, recent developments with respect to the terms and availability
of D & O Insurance and with respect to the application, amendment and
enforcement of statutory and by-law indemnification provisions generally have
raised questions concerning the adequacy and reliability of the protection
afforded to directors, officers and employees thereby; and
WHEREAS, the Company wishes to insure that the Indemnitee will be in a
position to exercise his best good-faith and independent judgment for the
benefit for the Company's stockholders in the management of the business and
affairs of the Company without undue cause or concern for his personal financial
liability and secure in the knowledge that the costs, expenses, liability and
loss which may be incurred by him in his good-faith performance of his duties
and service to the Company will be borne by the Company or its successors and
assignees in accordance with applicable law and the terms of this
Indemnification Agreement; and
<PAGE>
WHEREAS, the Company desires the Indemnitee to contest all unjustified
investigations, claims, actions, suits and proceedings which have or may arise
in the future as a result of the Indemnitee's service to the Company; and
WHEREAS, in order to resolve such questions and accomplish the foregoing
purposes and thereby induce the Indemnitee to continue to render said services
to the Company, the parties believe it appropriate and desirable to enter into
this Indemnification Agreement and memorialize and affirm the Company's
indemnification obligations to the Indemnitee, as authorized by the resolution
adopted by the Board of Directors on May 16, 1992;
NOW THEREFORE, in consideration of the mutual agreements set forth
herein, the parties hereto agree as follows:
1. DEFINITIONS
A. "Indemnitee" means any person who is, was or has agreed to
become a director, officer, employee or agent of the Company
or of any constituent corporation absorbed by the Company in a
consolidation, merger or acquisition and any person who is,
was or has agreed to become a director, officer, trustee,
employee or agent of any other enterprise and serving as such
at the request of the Company or of any such constituent
corporation, or the legal representative of any of the
foregoing persons;
B. "Other Enterprise" means any domestic or foreign corporation,
other than the Company, and any partnership, joint venture,
sole proprietorship, trust or other legal entity, whether for
profit or non-profit.
C. "Indemnifiable Litigation" means, collectively, any present or
future threatened, pending or contemplated investigation,
claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative;
D. "Indemnifiable Expenses" means the cost, expense, liability
and loss, including, but not limited to, attorney's fees and
disbursements and amounts of judgments, fines, penalties and
amounts actually paid or to be paid in any settlement approved
in advance by the Company (which approval shall not be
unreasonably withheld); PROVIDED, HOWEVER, that the same shall
not in any event, include any cost, expense, liability or loss
on account of profits realized in the purchase or sale of
securities of the Company.
2. INDEMNITY
Pursuant to its authority under Section l45 of the General
Corporation Law of the State of Delaware, its Certificate of Incorporation and
its by-laws:
-2-
<PAGE>
A. PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE COMPANY:
The Company hereby agrees to indemnify and hold Indemnitee
harmless from and against any and all Indemnifiable Expenses,
to the extent that the Indemnitee has not previously been
reimbursed by insurance, that may be reasonably incurred by or
imposed upon him in connection with, resulting from, or
arising out of any Indemnifiable Litigation (other than an
action by or in the right of the Company) to which the
Indemnitee is, or may become, a party, or otherwise, by reason
of him being or having been:
(a) a director, officer, employee or agent of this Company;
or
(b) a director, officer, employee or agent of any enterprise
when serving or having served as the same at the request
of this Company, whether or not he continues to be such
at the time the Indemnifiable Expenses shall be or have
been incurred or imposed, 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 Company, and, with
respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
B. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY:
The Company hereby agrees to indemnify and hold Indemnitee
harmless from and against any and all Indemnifiable Expenses,
to the extent that the Indemnitee has not previously been
reimbursed by insurance, that may be reasonably incurred by or
imposed upon him in connection with, resulting from, or
arising out of any Indemnifiable Litigation by or in the right
of the Company to procure a judgment in its favor to which the
Indemnitee is, or may become, a party, or otherwise, by reason
of him being or having been:
(a) a director, officer, employee or agent of this Company;
or
(b) a director, officer, employee or agent of any other
enterprise when serving or having served as the same at
the request of the Company, whether or not he continues
to be such at the time the Indemnifiable Expenses shall
be or have been incurred or imposed, 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 Company and
except that no indemnification shall be made in respect
of any claim, issue or matter as to which the Indemnitee
shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company
unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought
shall determine
-3-
<PAGE>
upon application that, despite the adjudication of
liability but in view of all the circumstances of the
case, the Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
C. TERMINATION OF PROCEEDINGS:
The termination of any Indemnifiable Litigation by judgment,
order, settlement, conviction, or upon a plea nolo contendere
or its equivalent shall not, of itself, create a presumption
that the Indemnitee 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 this Company, and with respect to any
criminal action or proceeding, the Indemnitee had no
reasonable cause to believe his conduct was unlawful.
D. CONTINUATION OF INDEMNITY:
All agreements and obligations of the Company contained herein
shall continue during the period Indemnitee is a director,
officer, employee or agent of the Company (or is or was
serving at the request of the Company as a director, officer,
employee, trustee or agent of another enterprise) and shall
continue thereafter so long as the Indemnitee shall be subject
to any Indemnifiable Litigation or Indemnifiable Expense.
3. MAINTENANCE OF INSURANCE AND SELF INSURANCE:
A. The Company represents that as of the date hereof it presently
has in force and effect a policy or policies of D & O
Insurance with an aggregate coverage in the amount of
$50,000,000. Subject only to the provisions of Section 3B
hereof, the Company agrees, so long as the Indemnitee shall be
subject to any possible Indemnifiable Litigation or
Indemnifiable Expenses arising out of or resulting therefrom,
the Company will employ its best efforts to purchase and
maintain in effect for the benefit of Indemnitee one or more
valid, binding and enforceable policy or policies of D & O
Insurance providing, in all respects, coverage at least as
comparable to that presently provided pursuant to the existing
policy or policies of insurance.
B. Notwithstanding Section 3A above, the Company shall not be
required to maintain or to obtain in substitution thereof,
said policy or policies of D & O Insurance in effect if said
insurance, in the reasonable business judgment of the then
directors of the Company, is not reasonably available or if
either:
(a) the premium cost for such insurance is substantially
disproportionate to the amount of coverage; or
-4-
<PAGE>
(b) the coverage provided by such insurance is so limited by
exclusions that there is insufficient benefit from such
insurance.
C. In the event the Company does not purchase and maintain said
policy or policies of D & O Insurance pursuant to the
provisions of Section 3B hereof, the Company agrees to
indemnify and hold Indemnitee harmless to the full extent of
the coverage which would otherwise have been provided for the
benefit of Indemnitee pursuant to said insurance.
4. REPAYMENT OF INDEMNIFIABLE EXPENSES:
Indemnifiable Expenses incurred by the Indemnitee with respect to
any Indemnifiable Litigation shall be advanced by the Company to
the Indemnitee prior to the final disposition thereof upon receipt
by the Company of the undertaking by, or on behalf of, the
Indemnitee, substantially in the form attached hereto as Exhibit
"A", to repay all amounts so advanced should it ultimately be
determined that the Indemnitee is not entitled to indemnification
by the Company pursuant to this Indemnification Agreement or
otherwise.
5. LEGAL COUNSEL:
The Indemnitee shall have the right to retain independent legal
counsel to represent him in connection with any Indemnifiable
Litigation or may designate the Company as his agent for the
retention of counsel.
6. NOTIFICATION:
The Indemnitee shall promptly advise the Company, in writing, of
the institution of any Indemnifiable Litigation which is or may be
subject to this Indemnification Agreement and keep the Company
informed of and consult with the Company with respect to the status
of any such Indemnifiable Litigation.
7. RIGHTS NOT EXCLUSIVE - OTHER RIGHTS:
The rights of indemnification provided in this Indemnification
Agreement shall not be deemed exclusive of any other rights to
which the Indemnitee may be entitled to indemnification by reason
of any statute, contract, agreement, by-law, vote of stockholders
or disinterested directors, as a matter of law, or otherwise.
8. BINDING EFFECT:
This Indemnification Agreement establishes contract rights which
shall be binding upon and shall inure to the benefit of the
successors, assignees, heirs, and legal representatives to the
parties hereto.
-5-
<PAGE>
9. SEPARABILITY:
Each of the provisions of this Indemnification Agreement is a
separate and distinct agreement and independent of the others, so
that if any provision or paragraph of this Indemnification
Agreement, or any clause thereof, be held to be invalid, illegal or
unenforceable in whole or in part, the remaining provisions,
paragraphs and clauses of this Indemnification Agreement shall
remain fully valid, enforceable and binding on the parties hereto.
10. AMENDMENT AND TERMINATION:
No amendment, modification, termination or cancellation of this
Indemnification Agreement shall be effective unless in writing and
signed by both parties hereto.
11. GOVERNING LAW:
The validity, interpretation, performance and enforcement of this
Indemnification Agreement shall be governed by the laws of the
State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Indemnification
Agreement to be duly executed on its behalf and the Indemnitee has duly executed
this Indemnification Agreement on the day and year first above written.
(CORPORATE SEAL) ACME METALS INCORPORATED
ATTEST:
By:
- ------------------------------ ------------------------------------
Edward P. Weber, Jr. Brian W. H. Marsden
Secretary Chairman and Chief Executive Officer
INDEMNITEE:
------------------------------------
(NAME)
-6-
<PAGE>
EXHIBIT A
UNDERTAKING AGREEMENT
THIS AGREEMENT is made and entered into this ______ day of _________)
l99__, between ACME METALS INCORPORATED, a Delaware corporation ("the
Company"), and __________________________________, who as of the execution date
hereof is serving as ___________________________________________ of ACME METALS
INCORPORATED ("the Indemnitee").
W I T N E S S E T H:
WHEREAS, the Indemnitee may become involved in investigations, claims,
actions, suits or proceedings which have arisen or may arise in the future as a
result of the Indemnitee's service to the Company; and
WHEREAS, the Indemnitee desires that the Company pay any and all
expenses (including, but not limited to, attorney's fees and court costs)
actually and reasonably incurred by the Indemnitee or on his behalf in defending
or investigating any such matters and that such payment be made in advance of
the final disposition of such investigations, claims, actions, suits or
proceedings to the extent that the Indemnitee has not previously been reimbursed
for the same by insurance; and
WHEREAS, the Company is willing to make such advance payments but, in
accordance with Section l45 of the General Corporation Law of the State of
Delaware and Article VIII of the by-laws of the Company, the Company may make
such payments only if it receives an undertaking from the Indemnitee to repay
the same if it is determined that the Indemnitee is not entitled to
indemnification; and
WHEREAS, the Indemnitee is willing to give such an undertaking;
NOW THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. In regard to any payments made either directly by the Company to
the Indemnitee, or on his behalf, pursuant to the terms of the
Indemnification Agreement made this same day between the parties,
the Indemnitee hereby undertakes and agrees to repay to the Company
any and all amounts so paid promptly and in any event within thirty
(30) days after the disposition, including any appeals, of any
litigation or threatened litigation on account of which payments
were made, PROVIDED, HOWEVER, to the extent that the Indemnitee is
entitled to be indemnified under the terms of said Indemnification
Agreement, Section l45 of the General Corporation Law of the State
of Delaware, Article VIII of the by-laws of the Company, or other
applicable law, Indemnitee shall not be required to repay the
amounts as to which he is determined to be entitled to
indemnification.
<PAGE>
2. This Agreement shall not affect in any manner any rights which the
Indemnitee may have against the Company, any insurer, or any other
person to seek indemnification for or reimbursement of any expenses
referred to herein or any judgment which may be rendered in any
litigation or proceeding.
IN WITNESS WHEREOF, the Company has caused this Undertaking Agreement to
be duly executed on its behalf and the Indemnitee has duly executed this
Undertaking Agreement on the day and year first above written.
(CORPORATE SEAL) ACME METALS INCORPORATED
ATTEST:
By:
- ------------------------------ ------------------------------------
Edward P. Weber, Jr. Brian W. H. Marsden
Secretary Chairman and Chief Executive Officer
INDEMNITEE:
------------------------------------
-2-
<PAGE>
EXHIBIT 10.24
KEY EXECUTIVE SEVERANCE PAY PLAN
This KEY EXECUTIVE SEVERANCE PAY PLAN ("Plan") is established on this
22nd day of January, 1987 by Acme Steel Company, a Delaware corporation (the
"Corporation").
RECITALS
A. The Board of Directors has determined that it is appropriate and
in the best interests of the Corporation and its shareholders to encourage,
reinforce and maintain the Corporation's executive officers (the "Participants"
as that term is hereafter defined) continued disinterested attention and
undistracted dedication to their duties in the potentially disturbing
circumstances of a Change in Control (as that term is hereafter defined) of the
Corporation by providing the Participants some degree of personal financial
security.
B. The Board of Directors of the Corporation has determined that the
Participants have individually and collectively, made and are expected to
continue to make an essential contribution to the profitability, growth and
financial strength of the Corporation.
C. The Corporation has given consideration over a period of time to
the establishment of a formal severance pay plan applicable to its executive
officers.
D. The Corporation wishes to assure itself of both present and
future continuity of management in the event of any actual or threatened Change
in Control.
E. Certain of the Participants may be entitled to payments pursuant
to other severance compensation, deferred compensation, retirement and/or
disability plans, programs or arrangements of, or agreements with, the
Corporation and/or its subsidiaries, including without limitation the
Consolidated Pension Plan for Acme Steel Company Salaried Employees and
Riverdale Plant Hourly Employees, as amended and restated effective May 29,
1986, as heretofore or hereafter amended or supplemented (the "Salaried Pension
Plan"), and the Group Benefits Plan for salaried employees of the Corporation,
including Long Term Disability benefits, (the "Group Benefits Plan") (the
Salaried Pension Plan, the Group Benefits Plan and any and all such other plans,
programs or arrangements of, or agreements with, the Corporation, other than the
Deferred Compensation Plan of Acme Steel Company, any defined contribution plans
of the Corporation and/or any of its subsidiaries and any stock award,
restricted stock or stock-related plans of the Corporation, being collectively
referred to herein as the "Other Plans").
F. The Corporation wishes to establish certain minimum compensation
rights of all Participants (taking into account their relative positions with
the Corporation and/or its subsidiaries) applicable in the event of a Change in
Control of the Corporation.
G. This Plan is not intended to alter materially the compensation or
benefits that the Participants could reasonably expect absent a Change in
Control, and, accordingly, any rights which any Participant may have pursuant to
any Other Plan shall not be affected in any manner by this Plan.
<PAGE>
I. DEFINITIONS AND GENERAL PROVISIONS
1.1. DEFINITIONS: As used in this Plan, the following terms (in
addition to terms defined elsewhere herein) shall have the following meanings
when used herein with initial capital letters:
1.1.1. CAUSE: The term "Cause" shall mean that a Participant shall,
prior to any Termination of Employment (as that term is hereafter defined), have
committed
(i) an act of fraud, embezzlement or theft in connection with
his duties or in the course of his employment with the
Corporation and/or its subsidiaries;
(ii) willful wrongful damage to property of the Corporation
and/or its subsidiaries;
(iii) willful wrongful disclosure of secret processes or
confidential information of the Corporation and/or its
subsidiaries; or
(iv) willful wrongful engagement in any Competitive Activity
(as that term is hereafter defined);
and the commission of any such act shall have been determined by the Board of
Directors of the Corporation to have been materially harmful to the Corporation.
1.1.2. CHANGE IN CONTROL: The term "Change in Control" shall mean the
occurrence at any time during the Plan Period of any of the following events:
(a) There shall be consummated any consolidation, merger
or reorganization of the Corporation in which the
Corporation is not the continuing or surviving
corporation or pursuant to which the outstanding
voting securities or other capital interests of the
Corporation would be converted into cash, securities
or other property, other than a consolidation, merger
or reorganization of the Corporation in which the
holders of the Corporation's outstanding voting
securities or other capital interests immediately
prior to such consolidation, merger or reorganization
shall have seventy-five percent (75%) or more of the
outstanding voting securities or other capital
interests of the surviving, resulting or acquiring
corporation or other legal entity;
(b) The Corporation sells, leases, exchanges or transfers
(in one transaction or a series of related
transactions) all or substantially all of its
business and/or assets to any other corporation or
other legal entity of which less than 75% of the out
standing voting securities or other capital interests
of said corporation or other legal entity are owned
in the aggregate by the stockholders of the
Corporation, directly or indirectly, immediately
prior to or after such sale;
2
<PAGE>
(c) The shareholders of the Corporation shall approve any
plan or proposal for the liquidation or dissolution
of the Corporation;
(d) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report)
each as promulgated pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in
Section 13(d) or Section 14(d)(2) of the Exchange
Act) other than the Corporation or a subsidiary or
any employee benefit plan sponsored by the
Corporation has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3
or any successor rule or regulation promulgated under
the Exchange Act) of 25% or more of the combined
voting power of the Corporation's then outstanding
voting securities ordinarily (and apart from rights
accruing in special circumstances) having the right
to vote in the election of directors, as a result of
a tender or exchange offer, open market purchases,
privately negotiated purchases, or otherwise; or
(e) At any time during any period of two consecutive
years, individuals who at the beginning of any such
period constitute the Directors of the Corporation
cease for any reason to constitute at least a
majority thereof unless the election, or the
nomination for election by the Corporation's
stockholders, of each new Director of the Corporation
was approved by a vote of at least two-thirds of such
Directors of the Corporation then still in office who
were Directors of the Corporation at the beginning of
any such two-year period.
(f) Such other event, or events, as shall be determined
by the Board of Directors to be a Change in Control.
1.1.3. COMPETITIVE ACTIVITY: The term "Competitive Activity" shall mean
a Participant's participation, without the written consent of an executive
officer of the Corporation, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the Corporation
and/or its subsidiaries and such enterprise's sales of any product or service
competitive with any product or service of the Corporation and/or its
subsidiaries amounted to 25% of such enterprise's net sales for its most
recently completed fiscal year and if the Corporation's consolidated net sales
of said product or service amounted to 10% of the Corporation's consolidated net
sales for its most recently completed fiscal year. "Competitive Activity" shall
not include (i) the mere ownership of securities in any publicly traded
enterprise and exercise of rights appurtenant thereto or (ii) participation in
management of any publicly traded enterprise or business operation thereof other
than in connection with the competitive operation of such enterprise.
1.1.4. PARTICIPANT: The term "Participant" shall mean the executive
officers of the Corporation or its subsidiaries who are listed on Exhibit 1
hereto and such additional executive offices of the Corporation or its
subsidiaries as the Board of Directors of the Corporation may, by
3
<PAGE>
resolution duly adopted prior to any Change in Control, from time to time
specify as being a Participant in this Plan. At any time prior to any Change in
Control, the Board of Directors may, be resolution duly adopted, delete persons
from Exhibit 1.
1.1.5. PLAN PERIOD: The term "Plan Period" shall mean the period during
which this Plan shall be in existence, which shall commence on the date hereof
and shall expire, except to the extent that any obligation of the Corporation
hereunder remains unpaid as of such time, on the date that the last Participant
shall die, attain age 65 or incur a Termination of Employment.
1.1.6. SEVERANCE PERIOD: The term "Severance Period" shall mean, as to
any Participant, the period commencing with the date of his Termination of
Employment and ending on the earlier of (i) three years after such date or (ii)
the date on which the Participant attains age 65 or if the Participant dies
during such period, the date on which the Participant would have, had he
survived, attained age 65.
1.1.7. TERMINATION OF EMPLOYMENT: The term "Termination of Employment"
shall mean, as to any Participant:
(a) any termination by the Corporation and/or, if
applicable, its subsidiaries of the employment of any
participant by the Corporation and, if applicable,
its subsidiaries within three years after a Change in
Control for any reason other than for Cause or as a
result of the death of the Participant; or
(b) Termination by any Participant of his employment by
the Corporation and/or any of its subsidiaries within
three years after a Change in Control and upon the
occurrence of any of the following events:
(i) Failure to elect or reelect the
Participant to, or removal of the
Participant from, the Board of Directors
of the Corporation (or any successor
thereto), if the Participant shall have
been a member of the Board of Directors
of the Corporation immediately prior to
the Change in Control, or the office of
the Corporation and/or its subsidiaries
which the Participant held immediately
prior to a Change in Control;
(ii) Unless otherwise agreed to in writing by the
Participant, a significant adverse change in the
nature or scope of the authorities, powers,
functions or duties attached to the position with
the Corporation and/or its subsidiaries which the
Participant had immediately prior to Change in
Control, or a reduction in the level of cash
compensation from the Corporation and/or its
subsidiaries, either of which is not remedied
within 30 calendar days after receipt by the
Corporation of written notice from the Participant
of such change or reduction, as the case may be;
4
<PAGE>
(iii) A determination by any Participant made
in good faith that as a result of a
Change in Control and a change in
circumstances thereafter significantly
affecting his position, he is unable to
carry out the authorities, powers,
functions or duties attached to his
position immediately prior to the Change
in Control, which situation is not
remedied within 30 calendar days after
receipt by the Corporation of written
notice from the Participant of such
determination;
(iv) The reorganization, liquidation,
dissolution, consolidation or merger of
the Corporation or sale, lease, exchange
or other transfer (in one transaction or
a series of related transactions) of all
or a significant portion of its business
and/or assets unless the successor or
successors (by merger, consolidation or
otherwise) to which all or a significant
portion of its business and/or assets
have been sold, leased, exchanged or
otherwise transferred (directly or by
operation of law) shall have assumed all
duties and obligations of the Corporation
under this Plan pursuant to Section 4.1
hereof; or
(v) The Corporation shall require any
Participant to have as his principal
location of work any location which is in
excess of 50 miles from his principal
residence as of the date on which a
Change in Control occurs or to travel
away from his office in the course of
discharging his responsibilities or
duties hereunder more than 30 consecutive
days or an aggregate of more than 60 days
in any consecutive 90-day period without
in either case his prior consent.
An election by any Participant to terminate his employment as contemplated by
this Section 1.1.7(b) shall not be deemed a voluntary termination of employment
by the Participant for the purpose of this Plan.
1.2. GENDER, NUMBER, ETC.: As used in this Plan, the singular shall
include the plural and the masculine shall include the feminine, and vice versa.
II. ESTABLISHMENT OF THE PLAN
2.1. THE PLAN: The Corporation, intending that the Participants shall
rely thereon, hereby irrevocably establishes this Plan and shall maintain the
same throughout the Plan Period.
2.2 AMENDMENTS, ETC.: Prior to the expiration of the Plan Period, the
Corporation shall not amend, terminate or suspend the Plan or any provision
hereof, including without limitation this Section 2.2, without the prior written
consent of any Participants adversely affected by such change. Any such
amendment, termination or suspension to which any affected Participants may
consent shall not affect any rights which any Participant may otherwise have
pursuant to any Other Plan.
5
<PAGE>
The commencement, suspension or termination of the payment of any compensation
pursuant to this Plan shall not affect any rights which any Participant may
otherwise have pursuant to any Other Plan.
2.3. CERTAIN LIMITATIONS: Without limiting any rights which any
Participant may have under any Other Plan, nothing in this Plan shall grant any
Participant any right to remain an executive officer, director or employee of
the Corporation and/or any of its subsidiaries, whether or not a Change in
Control shall occur.
III. COMPENSATION
3.1. COMPENSATION:
(a) If a Participant's employment by the Corporation or a subsidiary
is terminated (i) by the Corporation or subsidiary for Cause, Competitive
Activity or by reason of disability, retirement or death or (ii) by a
Participant other than pursuant to Section 1.1.7(b), a Participant shall not be
entitled to any severance compensation under this Plan, but the absence of a
Participant's entitlement to any benefits under this Plan shall not prejudice a
Participant's right to the full realization of any and all other benefits to
which a Participant shall be entitled pursuant to the terms of any Other Plans
in which a Participant is a participant or other agreements of the Corporation
or subsidiary to which the Participant is a party.
(b) In the event of a Termination of Employment of any Participant by
the Corporation and/or any subsidiary other than for Cause, Competitive Activity
or as a result of the disability, retirement or death of such Participant, then
in such event said Participant shall be entitled to the severance compensation
provided below:
(i) In lieu of any further salary payments to the
Participant for periods subsequent to the date of
Termination of Employment, the Corporation shall pay
as severance compensation to the Participant at the
time specified in subsection (ii) below, unless the
Participant elects the option set forth in subsection
(v) below, a lump sum severance payment equal to
three (3) times the sum of (x) the Participant's
highest annual base salary in effect at any time
within five (5) years prior to the date the Notice of
Termination of Employ- ment is given, plus (y) an
amount equal to the average compensation paid in the
last two calendar years as compensation under the
Corporation's Executive Incentive Compensation plan
(or any successor plan).
(ii) The severance compensation provided for in subsection
(i) above shall be paid not later than the tenth day
following the date of Termination of Employment,
provided, however, that if the amount of such
compensation cannot be finally determined on or
before such day, the Corporation shall pay to the
Participant on such day an estimate, as determined in
good faith by the Corporation but subject
6
<PAGE>
to the provisions of subsection (c), of the minimum amount
of such compensation and shall pay the remainder of such
compensation (together with interest at the rate equal to
the then applicable Prime Interest Rate Factor, as defined
in subparagraph (vi) hereinbelow, per annum) as soon as the
amount thereof can be determined but in no event later than
the thirtieth day after the date of Termination of
Employment. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the
Corporation to a Participant payable on the fifth day after
demand by the Corporation (together with interest at the
rate equal to the then applicable Prime Interest Rate
Factor per annum).
(iii) The Corporation shall also pay promptly to a
Participant all legal fees and expenses incurred by a
Participant as a result of such Termination of
Employment (including all such fees and expenses, if
any, incurred in contesting or disputing any such
Termination of Employment or in seeking to obtain or
enforce any right or benefit provided by this Plan).
(iv) The Corporation shall arrange to provide a
Participant for a period of thirty-six (36) months
following the date of Termination of Employment or
until a Participant's earlier death with life,
health, and accident insurance benefits and the
package of "executive benefits" (including use of an
automobile and certain club member ships)
substantially similar to those which a Participant
was receiving immediately prior to the date of
Termination of Employment.
(v) During the term of this Plan and through the period
of 36 months following the date of Termination of
Employment all benefits shall continue to accrue to a
Participant, crediting of service of a Participant
shall continue and a Participant shall be entitled to
receive all benefits provided to a Participant under
the Salaried Pension Plan or any other plan or
agreement relating to retirement benefits. To the
extent that the amount of any retirement benefit
under the Salaried Pension Plan or any such other
plan or agreement cannot take into account such
accrual or crediting by reason of a Participant's no
longer being an employee of the Corporation during
such period, the Corporation shall itself pay to a
Participant an amount equal to the additional
benefits that would have been provided had such
accrual or crediting been taken into account under
the Salaried Pension Plan or such other plan or
agreement. The obligation of the Corporation to
provide any retirement benefit payment under the
preceding sentence constitutes merely the unsecured
promise of the Corporation to make such payments from
its general assets, and a Participant shall have no
interest in, or lien or prior claim upon, any
property of the Corporation or any subsidiary.
7
<PAGE>
(vi) If a Participant so elects by notice to the
Corporation not later than five days after the date
of Termination of Employment, in lieu of the lump sum
severance compensation payment set forth in
subsection (b)(i), for a period of thirty-six (36)
months from the date of Termination of Employment,
the Corporation shall pay a Participant monthly an
amount equal to one thirty-sixth (l/36) of a total
amount which, payable over such period in such
installments, would have a value equal to the amount
of the lump sum severance compensation payment set
forth in subsection (b)(i), together with interest on
the unpaid balance thereof at the prime rate
announced by The First National Bank of Chicago (the
"prime Interest Rate Factor").
(c) If the severance compensation under this Section 3, either alone
or together with other payments to a Participant from the Corporation or a
subsidiary would constitute a "parachute payment" (as defined in Section 280G of
the Code), such severance compensation shall be reduced to the largest amount as
will result in no portion of the severance compensation payments under this
Section 3 being subject to the excise tax imposed by Section 4999 of the Code or
being disallowed as deductions to the Corporation under Section 280G of the
Code. The determination of any reduction in the severance compensation payments
under this Section 3 pursuant to the foregoing provision shall be made by the
Corporation's independent public accountants in good faith after consultation
with the Corporation and the Participant, and such determination shall be
conclusive and binding on the Corporation. The Corporation shall cooperate in
good faith with the independent public accountants and any Participant in making
such determination and in providing the necessary information for this purpose.
3.2. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) A Participant shall not be required to mitigate damages or the
amount of any payment provided for under this Plan by seeking other employment
or otherwise, nor shall the amount of any payment provided for under this Plan
be reduced by any compensation earned by a Participant as the result of
employment by another employer after the termination of a Participant's
employment, or otherwise.
(b) The provisions of this Plan, and any payment provided for here
under, shall not reduce any amounts otherwise payable, or in any way diminish a
Participant's existing rights, or rights which would accrue solely as a result
of the passage of time, under the Salaried Pension Plan, or Other Plans of the
Group Benefit Plan, Corporation, employment agreement or other contract, plan or
arrangement of the Corporation or any subsidiary.
(c) Except as expressly provided in Sections 3.1 and 3.2 hereof,
there shall be no right of set-off or counterclaim in respect of any claim, debt
or obligation against any payment to or benefit for any participant provided for
in this Plan.
8
<PAGE>
IV. GENERAL PROVISIONS
4.1. SUCCESSORS AND BINDING AGREEMENTS:
(a) The Corporation shall require any successor (whether director
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Corporation
expressly to assume and to agree to perform this Plan in the same manner and to
the same extent the Corporation would be required to perform if no such
succession has taken place. This Plan shall be binding upon the inure to the
benefit of the Corporation and any successor of or to the Corporation, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Corporation whether by
sale, merger, consolidation, reorganization or otherwise (and such successor
shall thereafter be deemed the "Corporation" for the purposes of this Plan), but
shall not otherwise be assignable or delegatable by the Corporation.
(b) This Plan shall inure to the benefit of and be enforceable by
each of the Participant's respective personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or legatees.
(c) Neither the Corporation nor any Participant hereunder shall
assign, transfer or delegate this Plan and/or any rights and/or obligations
hereunder except as expressly provided in Section 4.1(a) hereof. Without
limiting the generality of the foregoing, no Participant's right to receive
payments hereunder shall be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than by a transfer by his
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 4.1(c), the
Corporation shall have no liability to pay any amount so attempted to be
assigned or transferred.
4.2. NOTICES: For all purposes of this Plan, all communications
provided for herein shall be in writing and shall be deemed to have been duly
given when delivered or five (5) business days after having been mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed to the Corporation (to the attention of the Secretary of the
Corporation) at its principal executive office and to a Participant at his
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
4.3. GOVERNING LAW: The validity, interpretation, construction and
performance of this Plan shall be governed by the laws of the State of Delaware,
with out giving effect to the principles of conflict of laws of such State.
4.4. VALIDITY: The invalidity or unenforceability of any provision of
this Plan shall not affect the validity or enforceability of any other provision
of this Plan which shall remain in full force and effect.
4.5. WITHHOLDING OF TAXES: The Corporation may withhold from any
amounts payable under this Plan all federal, state, city and/or other taxes as
shall be legally required.
9
<PAGE>
4.6. COMPETITIVE ACTIVITY: No Participant who has received and/or is
continuing to receive severance compensation provided hereunder shall engage in
any Competitive Activity during the Severance Period.
4.7. LEGAL FEES AND EXPENSES:
(a) It is the intent of the Corporation that no Participant be
required to incur the expenses associated with the enforcement of his rights
under this Plan by litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Participants hereunder. Accordingly, if it should appear to the Participant
that the Corporation has failed to comply with any of its obligations under this
Plan, or in the event that the Corporation or any other person takes any action
to declare this Plan void and/or unenforceable, or institutes any litigation
designed to deny, and/or to recover from, any Participant the benefits intended
to be provided to such Participant hereunder, the Corporation irrevocably
authorizes such Participant from time to time to retain counsel of his choice,
at the expense of the Corporation as hereafter provided, to represent such
Participant in connection with the initiation or defense of any litigation
and/or other legal action, whether by or against the Corporation or any
Director, officer, stockholder or other person affiliated with the Corporation,
in any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Corporation and such counsel, the Corporation
irrevocably consents to such Participant's entering into an attorney-client
relationship with such counsel, and in that connection the Corporation
acknowledges that a confidential relationship shall exist between the
Participant and such counsel. The Corporation shall pay and be solely
responsible for any and all attorneys' and related fees and expenses incurred by
any such Participant as a result of the Corporation's failure to perform this
Plan or any provision hereof or as a result of the Corporation or any person
contesting the validity and/or enforceability of this Plan or any provision
hereof.
(b) The performance of the Corporation's obligations under this
Section 4.7 shall be secured by an irrevocable clean Letter of Credit, a
conformed copy of which is attached hereto as Exhibit 2 and is incorporated
herein by reference (the "Letter of Credit"), issued by (the "Bank") for the
benefit of the Participants, and providing that the fees and expenses of counsel
selected from time to time by any participant pursuant to this Section 4.7 shall
be paid, or reimbursed to the Participant if paid by the Participant, on a
regular, periodic basis upon presentation by the Participant to the Bank of a
statement or statements prepared by such counsel in accordance with its
customary practices. The Corporation shall pay all amounts and take all action
necessary to maintain the Letter of Credit during the Plan Period and for two
years thereafter and if, notwithstanding the Corporation's complete discharge of
such obligations, such Letter of Credit shall be terminated or not renewed, the
Corporation shall obtain a replacement irrevocable clean Letter of Credit on
substantially the same terms and conditions as contained in the Letter of Credit
drawn upon a commercial bank having total assets of at least $500,000,000
selected by the Corporation or any similar arrangement which, in any case,
assures the Participants the benefits of this Section 4.7.
10
<PAGE>
IN WITNESS WHEREOF, this Plan has been duly adopted by the Corporation
and the Board of Directors of the Company has duly caused this Plan to be duly
executed on the Corporation's behalf as of the date first set forth above.
ACME STEEL COMPANY
By: /s/ E. P. Berg
------------------------------------
E. P. Berg
Chairman of the Compensation Committee
of the Board of Directors of the
Corporation
11
<PAGE>
EXHIBIT 1
PARTICIPANT AND CURRENT TITLE PARTICIPATION PARTICIPATION
OR TITLE AT TERMINATION IN PLAN EFFECTIVE DATE TERMINATION DATE
- ------------------------------- ---------------- ----------------
Brian W. H. Marsden January 22, 1987
Chairman of the Board
and Chief Executive Officer
Acme Metals Incorporated
Stephen D. Bennett June 1, 1990
President and Chief
Operating Officer
Acme Metals Incorporated
Gerald J. Shope May 25, 1995
Vice President-Employee
Relations
Acme Metals Incorporated
Jerry F. Williams January 22, 1987
Vice President-Finance
and Administration
Acme Metals Incorporated
Edward P. Weber, Jr. January 22, 1987
Vice President, General
Counsel and Secretary
Acme Metals Incorporated
James W. Hoekwater May 25, 1995
Treasurer
Acme Metals Incorporated
Gregory J. Pritz May 25, 1995
Controller
Acme Metals Incorporated
Robert W. Dyke March 14, 1988
President
Acme Packaging Corporation
Gary S. Lucenti May 25, 1995
President
Acme Steel Company
12
<PAGE>
PARTICIPANT AND CURRENT TITLE PARTICIPATION PARTICIPATION
OR TITLE AT TERMINATION IN PLAN EFFECTIVE DATE TERMINATION DATE
- ------------------------------- ---------------- ----------------
Steven G. Jansto May 25, 1995
President
Alpha Tube Corporation
Larry C. Kipp May 25, 1995
President
Universal Tool & Stamping
Company, Inc.
Reynold C. MacDonald January 22, 1987 May 25, 1995
Chairman of the Board
Acme Steel Company
Richard J. Stefan January 22, 1987 May 25, 1995
Vice President-Employee
Relations
Acme Metals Incorporated
Reno P. Zenere January 22, 1987 May 25, 1995
Vice President
Acme Steel Company
Jerry D. Kendall February 1, 1988 May 25, 1995
Vice President Marketing
Acme Steel Company
James M. Schwyn May 26, 1992 May 25, 1995
President
Universal Tool & Stamping
Company, Inc.
13
<PAGE>
EXHIBIT 10.28
FIRST AMENDMENT
TO THE
ACME METALS INCORPORATED
SALARIED EMPLOYEES' RETIREMENT SAVINGS PLAN
The Acme Metals Incorporated Salaried Employees' Retirement Savings Plan
(the "Plan"), as amended and restated effective November 1, 1994, is hereby
amended by this First Amendment, effective as of November 1, 1994 unless
otherwise noted, as follows:
1. The last paragraph of Section 2.1 is deleted in its entirety and
substituted with the following:
Notwithstanding any other provisions in this Section 2.1,
if any former Participant in the Plan is reemployed, he shall be
eligible to participate in the Plan as of the date he resumes
employment with the Company. If the Participant executes an
election form for Qualified Elective Contributions before the
April 1, July 1, October 1 or January 1 coinciding with or next
following his reemployment date, his Qualified Elective
Contributions will be made to the Plan as of such date.
2. The last paragraph of Section 2.2 is deleted in its entirety and
substituted with the following:
The term "Highly Compensated Participant" means any
Participant who is determined to be included in subsection (a)
after applying the special rules in subsection (b):
(a) any Participant who, during the Plan Year for which the
determination is being made or the immediately preceding 12 month
period:
(i) was, at any time, an owner of 5% or more of the
outstanding stock of the Company or stock possessing more
than 5% of the voting power of the Company;
(ii) received Compensation from the Company in excess of
$93,518;
(iii) received Compensation from the Company in excess of
$62,345 and
<PAGE>
was in the top 20% of Employees for the Year (when ranked
on the basis of Compensation for such Year); or
(iv) was at any time an officer of the Company and received
Compensation greater than 50% of the dollar limitation in
effect under Section 415(b)(1)(A) of the Code for the
Plan Year.
(b) For purposes of determining the Participants who are to be
included in subsection (a) above, the following special rules
shall apply:
(i) Any Participant not described in subsection (a)(ii),
(iii), or (iv) of this section for the 12-month period
immediately preceding the Plan Year of determination
shall not be treated as described in subsection
(a)(ii), (iii) or (iv) of this section for the Plan
Year of determination unless, in addition to meeting
the requirements of subsection (a)(ii), (iii) or (iv)
for the Plan Year of determination, such Employee is a
member of the group consisting of the 100 Employees
paid the highest Compensation during that Plan Year.
(ii) In determining officers under subsection (a)(iv), no
more than 50 Employees (or, if less, the greater of 3
Employees or 10% of the Employees) shall be treated as
officers, and if in such Plan Year no officer is
described in subsection (a)(iv), the highest paid
officer of any Employer during such Plan Year shall be
treated as Highly Compensated for purposes of
subsection (a)(iv).
(iii) If any Employee is a Family Member of an Employee who
is a more than 5% owner of the Company or a Highly
Compensated Employee in the group consisting of the 10
Highly Compensated Employees paid the greatest
Compensation during the Plan Year (without regard to
this subsection (b)(iii)), then (A) such Family Member
shall not be considered a separate Employee and (B)
any Compensation paid to such Family Member (and any
applicable contribution or benefit on behalf of such
Employee) shall be treated as if it were paid to (or
on behalf of) the Employee who is the 5% owner or one
of the ten Highly Compensated Employees paid the
greatest Compensation during the PlanYear. The term
"Family Member" means the spouse and lineal ascendants
and descendants (and spouses of such ascendants and
descendants) of any Employee or former Employee.
(iv) A former Employee whose employment terminates prior to
the Plan Year of determination shall be treated as a
Highly Compensated Employee for the Plan Year of
determination if such Employee was a Highly
Compensated Employee upon termination of employment
with the Company, or such Employee was a Highly
Compensated Employee at any time after attaining age
55.
<PAGE>
(v) "Compensation" means compensation as defined in Code
Section 415(c)(3), but including (A) amounts deferred
pursuant to a salary reduction agreement under a
cafeteria plan as defined in Section 125 of the Code
sponsored by the Company, and (B) amounts deferred
pursuant to a salary reduction agreement under any
other plan described in Sections 401(k) and 408(k) of
the Code sponsored by the Company.
(vi) The dollar amounts in subsections (a)(ii) and (iii)
shall be adjusted to such other amounts as the
Secretary of the Treasury shall prescribe at the same
time and in the same manner as provided under Section
415(d) of the Code for adjusting the dollar limitation
in effect under Section 415(b)(1)(A) of the Code.
(vii) For purposes of determining which Employees are in the
top paid 20% of Employees, Employees described in
Section 414(q)(8) and Q&A 9(b) of Treas. Reg.
1.414(q)-lT are excluded.
(viii) Employers aggregated under Sections 414(b), (c), (m)
or (o) of the Code are treated as a single employer
for purposes of this section.
3. The following paragraph is added at the end of Section 5.3 as
follows:
For aggregated Family Members treated as a single Highly
Compensated Employee under this section, the ratio of the family
unit is the ratio determined by combining the aggregate qualified
elective contributions and qualified non-elective contributions
allocated to each Employee's account for such Plan Year and
dividing such sum by the Compensation considered in this section
for such Plan Year of all aggregated Family Members. Each Family
Member aggregated with a Highly Compensated Employee for purposes
of the preceding sentence shall not be considered a separate
Employee in determining the Actual Deferral Percentage for either
eligible Highly Compensated Employees or eligible Non-Highly
Compensated Employees. Each such separately calculated ratio
shall be referred to as an "Actual Deferral Ratio." For a Highly
Compensated Employee whose actual deferral ratio is determined
under the family aggregation rules, the actual deferral ratio is
reduced in accordance with the "leveling" method described in
Treas. Reg. 1.401(k)-1(f)(2) and the excess contributions are
allocated among the Family Members in proportion to the
contributions of each Family Member that have been combined.
4. The second paragraph of Section 9.1 is deleted in its entirety and
substituted with the following:
<PAGE>
The Company also shall have the right to make any amendment
retroactively which is necessary to qualify the Plan as amended
for tax exemption or to bring the Plan into conformity with the
Internal Revenue Code and regulations thereunder. If any
amendment is made which affects the vesting schedule of benefits
under the Plan, or if such vesting schedule is changed by reason
of the operation of the "top-heavy" provisions in Section 4.6
hereof, each Participant who has three or more years of
service may elect, within a reasonable period after such an
amendment or change, to have his nonforfeitable percentage
computed under the Plan without regard to such amendment. The
period during which the election may be made shall commence with
the date the amendment is adopted or the change becomes operative
and shall end on the later of:
(1) 60 days after adoption of the amendment or operation of
the change;
(2) 60 days after the amendment or the change is effective;
or
(3) 60 days after the Participant is issued written notice of
the amendment or change by the Committee.
EXECUTED this 19th day of September 1995, to be effective as of November
1, 1994.
Acme Metals Incorporated
/s/ J. W. Hoekwater
By----------------------
Treasurer
ATTEST:
/s/ Martha M. Hosp
- -------------------------------
Assistant Secretary
<PAGE>
EXHIBIT 10.30
APPENDIX B TO THE CONSOLIDATED PENSION PLAN
FOR ACME STEEL COMPANY SALARIED EMPLOYEES
AND
RIVERDALE PLANT HOURLY EMPLOYEES
AMENDED AND RESTATED
EFFECTIVE SEPTEMBER 1, 1993
<PAGE>
NOTE: The name of the Plan was changed as of December 31, 1993 to
Consolidated Pension Plan for Acme Steel Company Salaried and Hourly
Employees and was further changed as of July 31, 1994 to the
Consolidated Pension Plan for Acme Salaried and Hourly Employees.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Average Annual Earnings. . . . . . . . . . . . . . . . 2
Section 1.2 Average Monthly Earnings . . . . . . . . . . . . . . . 2
Section 1.3 Basic Agreement. . . . . . . . . . . . . . . . . . . . 4
Section 1.4 Board of Directors . . . . . . . . . . . . . . . . . . 5
Section 1.5 Code . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.6 Committee. . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.7 Company. . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.8 Continuous Service . . . . . . . . . . . . . . . . . . 5
Section 1.9 Earnings . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.10 Effective Date . . . . . . . . . . . . . . . . . . . . 8
Section 1.11 Eligible for Public Pension. . . . . . . . . . . . . . 8
Section 1.12 Employee . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.14 Fiduciary. . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.15 Participant. . . . . . . . . . . . . . . . . . . . . . 9
Section 1.16 Plan . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.17 Plan Year. . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.18 Public Pension . . . . . . . . . . . . . . . . . . . . 10
Section 1.19 Retirement . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.20 Trust. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.21 Trustee. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.22 Trust Fund . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.23 Union. . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II
ELIGIBILITY FOR PENSION. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.1 Normal Retirement. . . . . . . . . . . . . . . . . . . 13
Section 2.2 62/15 Retirement . . . . . . . . . . . . . . . . . . . 13
Section 2.3 30 Year Retirement . . . . . . . . . . . . . . . . . . 13
Section 2.4 60/15 Retirement . . . . . . . . . . . . . . . . . . . 13
Section 2.5 Permanent Incapacity Retirement. . . . . . . . . . . . 14
Section 2.6 70/80 Retirement . . . . . . . . . . . . . . . . . . . 15
Section 2.7 Rule of 65 Retirement. . . . . . . . . . . . . . . . . 16
Section 2.8 Deferred Vested Pension. . . . . . . . . . . . . . . . 18
Section 2.9 Sickness or Accident Benefits. . . . . . . . . . . . . 18
<PAGE>
ARTICLE III
AMOUNT OF PENSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.1 Types of Pension Payments. . . . . . . . . . . . . . . 19
Section 3.2 Special Payment. . . . . . . . . . . . . . . . . . . . 19
Section 3.3 Regular Pension. . . . . . . . . . . . . . . . . . . . 21
Section 3.4 Increased Pension - Permanent
Incapacity or 70/80 Retirement
Pension. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.5 Increased Pension - Rule of
65 Retirement Pension. . . . . . . . . . . . . . . . . 33
Section 3.6 Increased Pension - 62/15 or
30 Year. . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.7 Regular Pension - Part-time
Participants . . . . . . . . . . . . . . . . . . . . . 37
Section 3.8 Deduction for Public Pension . . . . . . . . . . . . . 37
Section 3.9 Deduction for Other Pension. . . . . . . . . . . . . . 39
Section 3.10 Deduction for Severance
Allowance. . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.11 Deduction for Disability
Payments . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.12 Pension Application. . . . . . . . . . . . . . . . . . 45
Section 3.13 Commencement and Termination
of Regular Pension . . . . . . . . . . . . . . . . . . 46
Section 3.14 Lump Sum Payment . . . . . . . . . . . . . . . . . . . 48
Section 3.15 Pre-Pension Spouse Coverage. . . . . . . . . . . . . . 49
Section 3.16 Pre-Retirement Survivor Annuity
Coverage . . . . . . . . . . . . . . . . . . . . . . . 53
Section 3.17 Automatic 50% Spouse Option. . . . . . . . . . . . . . 66
Section 3.18 Co-Pensioner Options . . . . . . . . . . . . . . . . . 73
Section 3.19 Minimum Distributions. . . . . . . . . . . . . . . . . 82
Section 3.20 Limitation on Benefits . . . . . . . . . . . . . . . . 86
Section 3.21 Five-Year Term Certain Payments. . . . . . . . . . . . 90
ARTICLE IV
SURVIVING SPOUSE'S BENEFIT . . . . . . . . . . . . . . . . . . . . . . . 93
Section 4.1 Eligibility. . . . . . . . . . . . . . . . . . . . . . 93
Section 4.2 Amount of Benefit. . . . . . . . . . . . . . . . . . . 94
Section 4.3 Calculation of Benefit . . . . . . . . . . . . . . . . 94
<PAGE>
Section 4.4 Commencement and Termination
of Benefit . . . . . . . . . . . . . . . . . . . . . . 98
Section 4.5 Determination of Status
as Surviving Spouse. . . . . . . . . . . . . . . . . . 99
Section 4.6 Information to be Provided
by the Company . . . . . . . . . . . . . . . . . . . . 99
Section 4.7 Surviving Spouse of Part-Time
Participants . . . . . . . . . . . . . . . . . . . . . 99
ARTICLE V
DETERMINATION OF CONTINUOUS SERVICE. . . . . . . . . . . . . . . . . . . 100
Section 5.1 Continuous Service Defined . . . . . . . . . . . . . . 100
Section 5.2 Elapsed Time . . . . . . . . . . . . . . . . . . . . . 105
ARTICLE VI
REEMPLOYMENT AFTER ATTAINMENT OF
PENSION ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 6.1 Applicability of Other Sections. . . . . . . . . . . . 108
Section 6.2 Effect on Pension. . . . . . . . . . . . . . . . . . . 108
Section 6.3 Continuous Service of Reemployed
Participant. . . . . . . . . . . . . . . . . . . . . . 109
Section 6.4 Special Pension Eligibility
after Reemployment . . . . . . . . . . . . . . . . . . 111
Section 6.5 Special Rules as to Amount
of Pension . . . . . . . . . . . . . . . . . . . . . . 112
Section 6.6 Amount of Reinstated
70/80 Retirement Pension . . . . . . . . . . . . . . . 112
ARTICLE VII
APPEALS PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 7.1 Disputes as to Eligibility
or Amount. . . . . . . . . . . . . . . . . . . . . . . 112
Section 7.2 Disputes as to Permanent
Incapacity . . . . . . . . . . . . . . . . . . . . . . 117
<PAGE>
ARTICLE VIII
TRUST AND FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Section 8.1 The Trust. . . . . . . . . . . . . . . . . . . . . . . 118
Section 8.2 Contributions. . . . . . . . . . . . . . . . . . . . . 119
ARTICLE IX
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 9.1 Fiduciaries. . . . . . . . . . . . . . . . . . . . . . 119
Section 9.2 Appointment of Committee . . . . . . . . . . . . . . . 120
Section 9.3 Quorum . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 9.4 Powers and Duties. . . . . . . . . . . . . . . . . . . 122
Section 9.5 Immunity of Committee. . . . . . . . . . . . . . . . . 123
Section 9.6 Claims and Review Procedures . . . . . . . . . . . . . 124
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Section 10.1 Permanency of the Plan . . . . . . . . . . . . . . . . 124
Section 10.2 Amendment of Plan. . . . . . . . . . . . . . . . . . . 126
Section 10.3 Merger or Consolidation of Plan. . . . . . . . . . . . 128
Section 10.4 No Interest in Trust Fund. . . . . . . . . . . . . . . 128
Section 10.5 No Contract of Employment. . . . . . . . . . . . . . . 128
Section 10.6 No Diversion of Trust Fund . . . . . . . . . . . . . . 129
Section 10.7 Alienation of Benefits
Prohibited . . . . . . . . . . . . . . . . . . . . . . 129
Section 10.8 Written Communications . . . . . . . . . . . . . . . . 131
Section 10.9 Name and Address Changes . . . . . . . . . . . . . . . 131
Section 10.10 Identity of Payee. . . . . . . . . . . . . . . . . . . 132
Section 10.11 Evidence Conclusive. . . . . . . . . . . . . . . . . . 132
Section 10.12 Individual Liability . . . . . . . . . . . . . . . . . 133
Section 10.13 Deductions for Insurance
Premiums . . . . . . . . . . . . . . . . . . . . . . . 133
Section 10.14 Number and Gender. . . . . . . . . . . . . . . . . . . 134
<PAGE>
ARTICLE XI
HOSPITAL-MEDICAL BENEFITS FORELIGIBLE PENSIONERS AND SURVIVING SPOUSES. 134
Section 11.1 Allocation of Funds to
Separate Account . . . . . . . . . . . . . . . . . . . 134
Section 11.2 Method of Allocation . . . . . . . . . . . . . . . . . 135
Section 11.3 Benefits Payable . . . . . . . . . . . . . . . . . . . 136
Section 11.4 Definitions. . . . . . . . . . . . . . . . . . . . . . 137
Section 11.5 Additional Requirements. . . . . . . . . . . . . . . . 138
EXHIBIT A
Tables of Percentages
EXHIBIT B
Special Rules Regarding Allowed Service
EXHIBIT C
Payments to Pre-1974 Surviving Spouses
EXHIBIT D
Payments to Certain Surviving Spouses
EXHIBIT E
Special Rules with Respect toRule-of-65 Retirement
EXHIBIT F
Coverage of Plant Protection Officers
EXHIBIT G
MODEL AMENDMENT REQUIRED
BY IRC SECTION 401(a)(17)
<PAGE>
APPENDIX B TO THE CONSOLIDATED PENSION PLAN
FOR ACME STEEL COMPANY SALARIED EMPLOYEES
AND
RIVERDALE PLANT HOURLY EMPLOYEES
AMENDED AND RESTATED
EFFECTIVE SEPTEMBER 1, 1993
Appendix B to the Consolidated Pension Plan for Acme Steel Company Salaried
Employees and Riverdale Plant Hourly Employees is hereby amended and restated
effective September 1, 1993. The Plan is intended to meet the requirements for
income tax qualification as a defined benefit pension plan under Section 401(a)
and related provisions of the Internal Revenue Code of 1986, as amended. This
version of the plan document shall govern the benefits to be provided to
Participants who retire or terminate employment on or after September 1, 1993.
Benefits of Participants who retired or terminated employment prior to
September 1, 1993 shall be governed by the terms of the Plan in effect on the
date of their retirement, subject to any changes in benefits made applicable to
them after such date.
<PAGE>
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ARTICLE I
DEFINITIONS
SECTION 1.1 AVERAGE ANNUAL EARNINGS. The term "Average Annual Earnings"
means the average of the gross earnings (as the term "earnings" is defined in
Section 1.9(b) and as modified by Sections 1.9(c) and (d)) of a Participant for
the years 1989, 1990, 1991 and 1992.
SECTION 1.2 AVERAGE MONTHLY EARNINGS. The term "Average Monthly Earnings"
means the average of the monthly earnings (as the term "earnings" is defined in
Section 1.9(a) and as modified by Sections 1.9(c) and (d)) of a Participant for
services rendered which are paid by the Company during the last 120 full
calendar months of continuous service prior to retirement determined as follows:
a) The Participant's earnings will be calculated for each of the
calculation years during the last 120 full calendar months of
continuous service prior to retirement, I.E., the first calculation
year will be the first 12 out of the last 120 full calendar months of
continuous service prior to retirement, the second calculation year
will be the second 12
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out of such 120 months and so forth through the tenth calculation year
which will be the last 12 out of such 120 months.
b) There will then be selected from such 10 calculation years a
"calculation period" which will be the 5 consecutive calculation years
in which the Participant's aggregated earnings were the highest.
c) Earnings during the calculation period will be divided by 60, except
that if during the calculation period the Participant has been absent
from work without pay because of disability or layoff, the divisor of
60 will be reduced by the greater of the aggregate of the full
calendar months of such absence:
1) in excess of 3 in each separate period, or
2) in excess of 6;
provided, however that in the case of permanent incapacity retirement
before making the foregoing reduction, if the calculation period is
the last 5 calculation years prior to retirement, there will be
deducted each full calendar month that the
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Participant has been absent without pay because of total disability
during the last 6 calendar months of such period. Months deducted
under the preceding sentence will not be counted as months of absence
under 1) or 2) above.
SECTION 1.3 BASIC AGREEMENT. The term "Basic Agreement" means the labor
agreement between the Company and the Union covering rates of pay, hours of
work, and other basic terms and conditions of employment at the Company's
Riverdale, Illinois operations, which is in effect from time to time
simultaneously with this Plan, and when used with respect to an Employee
represented by the United Steelworkers of America means the Basic Agreement
applicable to him. The term "Basic Agreement" also means the labor agreement
between the Company and the United Plant Guard Workers of America covering rates
of pay, hours of work, and other basic terms and conditions of employment at the
Company's Riverdale, Illinois operations, which is in effect from time to time,
and when used with respect to an Employee represented by the United Plant Guard
Workers of America means the Basic Agreement applicable to him.
<PAGE>
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SECTION 1.4 BOARD OF DIRECTORS. The term "Board of Directors" means the
board of directors of the Company.
SECTION 1.5 CODE. The term "Code" means the Internal Revenue Code of 1986,
as amended.
SECTION 1.6 COMMITTEE. The term "Committee" means the committee appointed
to administer the Plan as provided in Article IX hereof.
SECTION 1.7 COMPANY. The term "Company" means Acme Steel Company, a
Delaware corporation, or the successor or successors thereto.
SECTION 1.8 CONTINUOUS SERVICE. The term "continuous service" means
service that continues in the manner described in Article V.
SECTION 1.9 EARNINGS. (a) The term "earnings" for the purpose of the
term "average monthly earnings" in Section 1.2 and as used in Sections 3.3(a)
and (b) means the Participant's earnings (which includes the amount resulting
from a Cost-of-Living Adjustment provision only to the extent of the first Cost-
of-Living Adjustment which was included in the base hourly rates subsequent to
April 30, 1974), plus any elective deferrals of a Participant which are
contributed to a plan
<PAGE>
- 6 -
maintained by the Company which meets the requirements of Section 401(k) of the
Code, and less any inflation recognition payments, Profit-Sharing payments,
signing and lump sum payments (other than lump sum wage grievance settlements),
suggestion awards, severance pay, tuition reimbursement and premium
reimbursement payments.
(b) The term "earnings" for the purpose of the term "annual gross
earnings" in Sections 3.3(a), (b) and (d) means a Participant's earnings
calculated in accordance with subsection (a) above, including all amounts
resulting from a Cost-of-Living Adjustment provision both prior to and after
April 30, 1974.
(c) If a Participant has served as a member of the Grievance Committee,
Safety Committee, or Job Classification Committee (not to exceed the number
specified in the Basic Agreement at any time at the plant) as identified in the
Basic Agreement, or as a President, Vice President, Recording Secretary,
Financial Secretary and/or Treasurer of a local of the Union, or shall have been
absent from work because of leave of absence granted upon the request of the
Union to any Participant who shall be appointed or elected to any other
<PAGE>
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office in the Union at the plant and for that reason shall have been absent from
work in accordance with the terms of the Basic Agreement during that period, his
earnings for each month in which he so served, for purposes of computing his
"average monthly earnings" in (a) above and his "annual gross earnings" in (b)
above will be adjusted so as to be fairly representative of his normal earnings
had he not been so absent.
(d) For purposes of this Plan, earnings taken into account during any plan
year commencing prior to January 1, 1994 will not exceed $200,000 or such amount
as may be determined by the Secretary of the Treasury for such plan year. For
any plan year commencing on or after January 1, 1994, earnings taken into
account during the plan year will not exceed $150,000 (as provided in Exhibit G)
or such amount as may be determined by the Secretary of the Treasury for such
plan year. This limitation on earnings that may be considered for Plan purposes
will be applied by taking into account the earnings paid by the Company to all
members of the Participant's family to the extent required by Section 401(a)(17)
and Section 414(q) of the Code. If the limitation
<PAGE>
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is exceeded, the limitation will be prorated among the affected individuals in
proportion to each such individual's earnings prior to the application of this
limitation.
SECTION 1.10 EFFECTIVE DATE. The term "Effective Date" means September 1,
1993. The Plan was consolidated with Appendix A to the Consolidated Pension
Plan for Acme Steel Company Salaried Employees and Riverdale Plant Hourly
Employees effective November 30, 1983 and has been amended and restated from
time to time thereafter.
SECTION 1.11 ELIGIBLE FOR PUBLIC PENSION. The phrase "Eligible for Public
Pension" is used with respect to a Participant when he is eligible to receive,
or would upon application be eligible to receive, a Public Pension or would be
so eligible except for an offset or suspension imposed by law.
SECTION 1.12 EMPLOYEE. The term "Employee" means any employee who, from
time to time during the period in which this Plan is effective, is covered by
the Basic Agreement and, in addition, all other persons on the payroll of the
Company's Riverdale, Illinois operations who are paid wages based on an hourly
rate, excluding any person paid on a salaried basis.
<PAGE>
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The term "Employee" does not include leased employees, provided that leased
employees do not constitute 20% or more of the Company's non-highly compensated
employees within the meaning of Section 414(q) of the Code; however, leased
employees will be taken into account in determining whether the Plan meets
applicable coverage and nondiscrimination tests under the Code.
SECTION 1.13 ERISA. The term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
SECTION 1.14 FIDUCIARY. The term "Fiduciary" includes the Company, the
Trustee and the Committee, and the use of the term is intended to be consistent
with the definition of "fiduciary" in ERISA and in regulations and official
governmental interpretations issued pursuant to ERISA.
SECTION 1.15 PARTICIPANT. The term "Participant" means any Employee who
has had at least one year of continuous service and has attained age 21 and who,
from time to time during the period in which this Plan is effective, is accruing
continuous service; and, where so indicated, the term "Participant" also means
any person who is no longer accruing continuous service but who had attained
pension eligibility
<PAGE>
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under this Plan at the date he or she ceased to accrue continuous service,
including a person who is retired and is receiving or is entitled to receive
pension benefits under this Plan. The term "Participant" also refers to any
former hourly employee of Interlake, Inc. at its Riverdale, Illinois operation
who was entitled to pension benefits under this Plan prior to May 29, 1986
SECTION 1.16 PLAN. The term "Plan" means this Appendix B of the
Consolidated Pension Plan for Acme Steel Company Salaried Employees and
Riverdale Plant Hourly Employees, as amended from time to time.
SECTION 1.17 PLAN YEAR. The term "Plan Year" means the calendar year,
January 1 through December 31 of each year.
SECTION 1.18 PUBLIC PENSION. The term "Public Pension" means a benefit in
the nature of an annuity, pension or payment of similar kind (i) under Title II
of the Social Security Act or its successor (the "Social Security Act") or (ii)
under the Railroad Retirement Act or its successor, or under a provision of law
hereafter established, if for such benefit the Company has contributed directly
or indirectly by tax or otherwise with respect to employment of the Participant.
<PAGE>
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SECTION 1.19 RETIREMENT. The term "Retirement" means, and for purposes of
this Plan retirement shall be considered to occur:
a) in the case of a Participant who applies for a pension prior to a
break in continuous service, on the date he specifies as the date he
wishes to retire, which will be a date on or after the latest of:
1) the date of his request for retirement;
2) the date of his attainment of eligibility for a pension under
this Plan; or
3) the last day for which he earned wages from the Company,
but not later than the last day of his continuous service; or
b) in the case of a Participant who applies for a pension after a break
in continuous service, on the last day of his continuous service,
provided that on such last day he was eligible for an immediate or
deferred pension under this Plan.
<PAGE>
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SECTION 1.20 TRUST. The term "Trust" means the trust agreement pursuant
to which the assets utilized to finance the benefits payable under this Plan are
held and administered.
SECTION 1.21 TRUSTEE. The term "Trustee" means the corporation or
individuals or any successor trustee duly appointed by the Board of Directors to
administer the Trust Fund in accordance with the Trust.
SECTION 1.22 TRUST FUND. The term "Trust Fund" means all property held by
the Trustee which the Company deposits pursuant to the Trust to finance the
payment of benefits and defray administrative expenses and includes the income
earned on such property.
SECTION 1.23 UNION. The term "Union" means the United Steelworkers of
America with respect to Employees in the bargaining unit represented by the
United Steelworkers of America or the United Plant Guard Workers of America with
respect to Employees in the bargaining unit represented by the United Plant
Guard Workers of America.
<PAGE>
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ARTICLE II
ELIGIBILITY FOR PENSION
SECTION 2.1 NORMAL RETIREMENT. Any Participant who has completed at least
5 years of continuous service and who has attained age 65 will be eligible to
retire and will, upon his retirement, be eligible for a normal retirement
pension.
SECTION 2.2 62/15 RETIREMENT. Any Participant who has not attained age 65
but who has completed at least 15 years of continuous service and has attained
age 62 will be eligible to retire and will, upon his retirement, be eligible for
a 62/15 retirement pension.
SECTION 2.3 30 YEAR RETIREMENT. Any Participant who has not attained age
62 but who has completed at least 30 years of continuous service will be
eligible to retire and will, upon his retirement, be eligible to receive a 30-
year retirement pension.
SECTION 2.4 60/15 RETIREMENT. Any Participant who has completed at least
15 but less than 30 years of continuous service and who has attained age 60 but
not age 62 will be eligible to retire and will, upon his retirement, be eligible
to receive a 60/15 retirement pension.
<PAGE>
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SECTION 2.5 PERMANENT INCAPACITY RETIREMENT. Any Participant who has
completed at least 15 years of continuous service and who has become permanently
incapacitated will be eligible to retire and will, upon his retirement, be
eligible to receive a permanent incapacity retirement pension. For purposes of
this Plan, a Participant will be considered to be "permanently incapacitated"
only (i) if he has been totally disabled by bodily injury or disease so as to be
prevented thereby from engaging in any employment of the type covered by the
Basic Agreement, and (ii) after such total disability has continued for a period
of 5 consecutive months and, in the opinion of a qualified physician, it will be
permanent and continuous during the remainder of his life. Incapacity
contracted, suffered or incurred while the Participant was engaged in, or
resulted from his having engaged in, a criminal enterprise, or resulting from
future service in the armed forces and which prevents him from returning to
employment with the Company for which he receives a military pension, will not
entitle a Participant to a pension under this paragraph. Such pension shall be
discontinued if the Participant ceases to be permanently incapacitated prior to
age 62. The Plan Administrator may require verification of the permanency of
<PAGE>
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incapacity by medical examination prior to age 62 at any reasonable time.
SECTION 2.6 70/80 RETIREMENT. Any Participant who has not attained age 62
but who has completed at least 15 years of continuous service and either (i) has
attained age 55 and whose combined age and years of continuous service equal 70
or more, or (ii) whose combined age and years of continuous service equal 80 or
more and:
a) whose continuous service is broken by reason of a permanent shutdown
of a plant, department or subdivision thereof or by reason of a layoff
or physical disability, or
b) whose continuous service is not broken and who is absent from work by
reason of:
1) a layoff resulting from his election to be placed on layoff
status pursuant to the provisions of the Basic Agreement
applicable in the event of a permanent shutdown, or
2) a physical disability or a layoff other than a layoff resulting
from an election referred to above and whose return to active
<PAGE>
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employment is declared unlikely by the Company, or
c) whose continuous service is not broken and who, while on layoff status
by reason of his election to be placed on such status pursuant to the
provisions of the Basic Agreement applicable in the event of a
permanent shutdown, accepts a job with the Company and, prior to the
expiration of 90 consecutive calendar days from the first day worked
on such job, elects to retire,
will be eligible to retire and will, upon his retirement, be eligible for a
70/80 retirement pension.
SECTION 2.7 RULE OF 65 RETIREMENT. Any Participant (i) who has completed
at least 20 years of continuous service as of his last day worked, (ii) who has
not attained age 55, and (iii) whose combined age and years of continuous
service equal 65 or more but less than 80, and
a) whose continuous service is broken by reason of a layoff or
disability, or
b) whose continuous service is not broken and who is absent from work by
reason of a layoff resulting from his election to be placed on layoff
<PAGE>
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status pursuant to the provisions of the Basic Agreement applicable in
the event of a permanent shutdown, or
c) whose continuous service is not broken and who is absent from work by
reason of a physical disability or a layoff other than a layoff
resulting from an election referred to above and whose return to
active employment is declared unlikely by the Company,
and who has not been offered suitable long-term employment, as defined in
Exhibit E hereto, will be eligible to retire and will, upon his retirement, be
eligible to receive a Rule of 65 retirement pension; provided, however, that if
at the time of application for retirement the Company has not yet determined
whether the Participant will be offered suitable long-term employment, the
Participant will not be eligible to retire until the earlier of the date on
which the Company advises the Participant that he will not be offered suitable
long-term employment or the date on which the Participant incurs a break in
continuous service.
<PAGE>
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SECTION 2.8 DEFERRED VESTED PENSION. Any Participant not eligible to
receive a pension under any other provision of this Article II whose continuous
service is broken for any reason and who, at the time of such break in
continuous service, has completed at least 5 years of continuous service will be
eligible for a deferred vested retirement pension, subject to the provisions
relating to application set forth in Section 3.12 and commencement of pension
set forth in subsections (d) and (e) of Section 3.13. At the time of such break
in continuous service, the Company will furnish the Participant with an
appropriate written notice of the eligibility requirements and his relevant
employment data.
SECTION 2.9 SICKNESS OR ACCIDENT BENEFITS. Notwithstanding anything to
the contrary contained in this Plan, no pension (including any special payment)
will be payable for any month with respect to which the Participant claims and
is eligible for sickness or accident benefits for Employees provided under a
Company program or similar benefits provided under law.
<PAGE>
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ARTICLE III
AMOUNT OF PENSION
SECTION 3.1 TYPES OF PENSION PAYMENTS. A pension granted pursuant to
Article II will consist of:
a) a special initial pension amount ("special payment"), except in the
case of any Participant eligible for a permanent incapacity retirement
pension or a deferred vested retirement pension (or as provided in
Section 6.5), and
b) a regular pension amount ("regular pension"), payable in monthly
installments except as otherwise provided in Section 3.14,
provided in accordance with the provisions of this Article III.
SECTION 3.2 SPECIAL PAYMENT. The amount of a special payment for a
Participant who was entitled to receive a vacation in the year of retirement or
who would have been entitled to receive a vacation in the year of retirement
except for such retirement will be calculated as follows:
a) a Participant's "vacation pay" as defined below will be multiplied by
13 (14 in the case of a Participant eligible for more than 4 weeks of
<PAGE>
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regular vacation in the year of retirement);
b) the amount determined in a) above will be reduced by all vacation pay
the Participant received in such year.
The amount of the special payment for a Participant not in any event
entitled to vacation in the year of retirement will be calculated under the
formula established above as though the Participant had retired in the year in
which he was last entitled to a vacation.
The special payment will be payable for the first 3 full calendar months
following the month in which retirement occurs. Such special payment will be
made in a lump sum within the first full calendar month following the month in
which retirement occurs, or within the month following the month in which
retirement occurs, or within the month in which application for pension is made,
whichever is later.
With respect to any Participant on a leave of absence referred to in the
provision contained in Section 1.9(c), if any such Participant makes application
for pension in a year in which he is not in any event entitled to vacation, for
the purpose of determining the amount of his special payment the vacation pay to
<PAGE>
- 21 -
which he would have been entitled had he not been on leave of absence will be
used for determination of the rate to be used in calculating the special payment
and the amount deductible therefrom for vacation.
As used in this Plan, when used in connection with Employees covered by the
Basic Agreement, the word "vacation" means the vacation provided under the
vacation section of the Basic Agreement, "vacation pay" means the pay for a week
of vacation calculated as provided in the vacation section of the Basic
Agreement. When used with respect to Employees not covered by the Basic
Agreement the words "vacation" and "vacation pay" will have their normal
meaning.
SECTION 3.3 REGULAR PENSION. A Participant's regular pension will be the
highest of the monthly amounts calculated in accordance with subsections (a),
(b), (c), and (d) below, adjusted in accordance with the provisions of Sections
3.4 through 3.11 and 3.15 and 3.16, if applicable:
a) "RETIREMENT DATE EBU": the monthly amount determined by multiplying
the Participant's number of years (and fractions thereof calculated to
the nearest month) of his continuous service by the Enriched Benefit
<PAGE>
- 22 -
Unit ("EBU") determined on the basis of the level of the Participant's
annual gross earnings (as the term "earnings" is defined in Section
1.9(b)) in 1986, 1987, or 1988, whichever is the highest, as follows:
<PAGE>
- 23 -
FOR RETIREMENTS ON OR AFTER SEPTEMBER 1, 1993
<TABLE>
<CAPTION>
Earnings in
Highest Year
- --------------------------------------------------------------------------------
EBU per year
Level At least Less than of service
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $32,000 $32
2 $32,000 $36,000 $36
3 $36,000 $40,000 $40
4 $40,000 $44,000 $44
5 $44,000 $48,000 $48
6 $48,000 $52,000 $52
7 $52,000 - $56
</TABLE>
A participant who has no earnings in 1986, 1987, or 1988 will be
treated as entitled to a Level 1 EBU. Notwithstanding the foregoing,
Participant's EBU attributable to his years of continuous service as
of December 31, 1992 shall not be less than the monthly amount equal
to a Participant's average monthly earnings (as the term is defined in
Section 1.2) multiplied by:
(i) for a Participant with more than 30 years of continuous service
as of December 31, 1992, 33% plus a percentage determined by
<PAGE>
- 24 -
multiplying 1.2% by the number of years (and fractions thereof
calculated to the nearest month) of his continuous service as of
December 31, 1992 in excess of 30 years, or
(ii) for a Participant with 30 or less years of continuous service as
of December 31, 1992, 1.1% multiplied by the number of years (and
fractions thereof calculated to the nearest month) of his
continuous service as of December 31, 1992,
plus an additional amount determined by multiplying the amount
determined in accordance with (i) or (ii) above, whichever is
applicable, by 5%.
For purposes of this subparagraph, a Participant's average
monthly earnings shall be determined in accordance with Section 1.9(a)
but by assuming that the Participant's retirement occurred on December
31, 1992 and by taking into account only earnings through such date.
A Participant's earnings shall include a cost-of-living adjustment
add-on of $2.36 for each hour paid during the five
<PAGE>
- 25 -
consecutive calculation years considered in the computation of his
average monthly earnings.
b) "1989 EBU": the monthly amount determined by multiplying the
Participant's number of years (and fractions thereof calculated to the
nearest month) of his continuous service prior to August 31, 1989, by
the Participant's EBU determined on the basis of the level of the
Participant's annual gross earnings (as the term "earnings" is defined
in Section 1.9(b)) in 1986, 1987, or 1988, whichever is the highest,
as follows:
FOR RETIREMENTS OCCURRING BETWEEN
AUGUST 31, 1989 AND AUGUST 31, 1993
<TABLE>
<CAPTION>
Earnings in
Highest Year
- --------------------------------------------------------------------------------
EBU per year
Level At least Less than of service
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $28,000 $28
2 $28,000 $32,000 $32
3 $32,000 $36,000 $36
4 $36,000 $40,000 $40
5 $40,000 $44,000 $44
6 $44,000 - $48
<PAGE>
- 26 -
7 $48,000 $52,000 $52
8 $52,000 - $56
</TABLE>
A participant who has no gross earnings in 1986, 1987, or 1988 will be
treated as entitled to a Level 1 EBU.
Notwithstanding the foregoing, a Participant's EBU attributable to his
years of continuous service as of August 31, 1989 shall not be less
than the monthly amount equal to the Participant's average monthly
earnings (as that term is defined in Section 1.2) multiplied by:
(i) for a Participant with more than 30 years of continuous service
as of August 31, 1989, 33% plus a percentage determined by
multiplying 1.2% by the number of years (and fractions thereof
calculated to the nearest month) of his continuous service as of
August 31, 1989 in excess of 30 years, or
(ii) for a Participant with 30 or less years of continuous service as
of August 31, 1989, 1.1% multiplied by the number of years (and
<PAGE>
- 27 -
fractions thereof calculated to the nearest month) of his
continuous service as of August 31, 1989,
plus an additional amount determined by multiplying the amount
determined in accordance with (a) or (b) above, whichever is
applicable, by 5%.
For purposes of this subsection, a Participant's average monthly
earnings shall be determined in accordance with Section 1.9(a) but by
assuming that the Participant's retirement occurred on August 31,
1989, and by taking into account only earnings through such date. A
Participant's earnings shall include a cost-of-living adjustment add-
on of $2.36 for each hour paid during the five consecutive calculation
years considered in the computation of his average monthly earnings.
c) "30-YEAR MINIMUM PENSION": For a Participant who retires on or after
September 1, 1993 with 30 or more years of continuous service, an
amount equal to $1,200 per month.
<PAGE>
- 28 -
d) "1997 EBU": For a Participant who retires on or after January 1,
1997, a monthly amount determined by multiplying his years of
continuous service by his EBU determined under (a) above based on his
single highest annual gross earnings (as the term "earnings" is
defined in Section 1.9(b)) for the years 1986, 1987 and 1988 or his
EBU determined under (a) above based on his average annual earnings
(as that term is defined in Section 1.1), whichever is greater.
For a 60/15 retirement the monthly amount determined above is applicable
only if regular pension commences after attainment of age 62 ("deferred 60/15
retirement pension"), and for any deferred vested pension the monthly amount
determined above is applicable only if:
a) with respect to a Participant who incurs a break in continuous service
after attaining age 40 and completing at least 15 years of continuous
service, regular pension commences after the Participant has attained
age 62; or
<PAGE>
- 29 -
b) with respect to a Participant who incurs a break in continuous service
either prior to attaining age 40, or after attaining age 40 and before
completing at least 15 years of continuous service, regular pension
commences after the Participant has attained age 65.
A Participant may in his application for 60/15 pension elect an immediate
pension, and a Participant who incurs a break in continuous service after
attaining age 40 and completing at least 15 years of continuous service who is
entitled to a deferred vested pension may, pursuant to Section 3.12, make
application for commencement of pension payments after attainment of age 60 and
prior to attainment of age 62, and in either such case the monthly amount
calculated above shall be reduced to the actuarial equivalent thereof using the
following percentages for each age of a Participant indicated below:
<TABLE>
<CAPTION>
Age at Start
of Pension Percentage
------------ ----------
<C> <C>
60 83.72%
60-1/12 84.46%
60-2/12 85.09%
<PAGE>
- 30 -
60-3/12 85.73%
60-4/12 86.36%
60-5/12 87.00%
60-6/12 87.64%
60-7/12 88.27%
60-8/12 88.91%
60-9/12 89.54%
60-10/12 90.18%
60-11/12 90.81%
61 91.45%
61-1/12 92.16%
61-2/12 92.87%
61-3/12 93.59%
61-4/12 94.30%
61-5/12 95.01%
61-6/12 95.72%
61-7/12 96.44%
61-8/12 97.15%
61-9/12 97.86%
61-10/12 98.57%
61-11/12 99.29%
62 100.00%
</TABLE>
The above percentages shall be applied on the basis of the Participant's age to
the nearest month.
<PAGE>
- 31 -
A Participant who incurs a break in continuous service either prior to
attaining age 40, or after attaining age 40 and before completing at least 15
years of continuous service, and who is entitled to a deferred vested pension
may, pursuant to Section 3.12, make application for commencement of pension
payments after attainment of age 60 and prior to attainment of age 65, and in
such case the monthly amount calculated above shall be reduced to the actuarial
equivalent thereof using the following percentage for each age of a Participant
indicated below:
<PAGE>
- 32 -
<TABLE>
<CAPTION>
Age at Start Age at Start
of Pension Percentage of Pension Percentage
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
60 63.10 62-7/12 79.51
60-1/12 63.58 62-8/12 80.11
60-2/12 64.06 62-9/12 80.71
60-3/12 64.54 62-10/12 81.32
60-4/12 65.02 62-11/12 81.93
60-5/12 65.50 63 82.53
60-6/12 65.98 63-1/12 83.21
60-7/12 66.45 63-2/12 83.89
60-8/12 66.93 63-3/12 84.58
60-9/12 67.41 63-4/12 85.26
60-10/12 67.89 63-5/12 85.94
60-11/12 68.37 63-6/12 86.62
61 68.85 63-7/12 87.30
61-1/12 69.38 63-8/12 87.99
61-2/12 69.92 63-9/12 88.67
61-3/12 70.45 63-10/12 89.35
61-4/12 70.99 63-11/12 90.03
61-5/12 71.53 64 90.72
61-6/12 72.06 64-1/12 91.49
61-7/12 72.60 64-2/12 92.26
61-8/12 73.14 64-3/12 93.04
61-9/12 73.67 64-4/12 93.81
61-10/12 74.21 64-5/12 94.58
61-11/12 74.75 64-6/12 95.36
<PAGE>
- 33 -
Age at Start Age at Start
of Pension Percentage of Pension Percentage
- --------------------------------------------------------------------------------
62 75.28 64-7/12 96.13
62-1/12 75.89 64-8/12 96.91
62-2/12 76.49 64-9/12 97.68
62-3/12 77.10 64-10/12 98.45
62-4/12 77.70 64-11/12 99.23
62-5/12 78.30 65 100.00
62-6/12 78.91
</TABLE>
The preceding percentages shall be applied on the basis of the Participant's age
to the nearest month.
Section 3.4 INCREASED PENSION - PERMANENT INCAPACITY OR 70/80 RETIREMENT
PENSION. In the determination of the amount of any regular pension for
permanent incapacity or 70/80 retirement, the monthly amount determined in
accordance with Section 3.3 will be increased by $400; provided, however, that
such increase will not be applicable with respect to such regular pension
payable for any month for which the Participant is eligible for Public Pension.
Section 3.5 INCREASED PENSION - RULE OF 65 RETIREMENT PENSION. In the
determination of the amount of any regular Rule of 65 retirement pension, the
monthly amount determined
<PAGE>
- 34 -
in accordance with Section 3.3 will be increased by $400; provided, however,
that such increase will not be applicable with respect to such regular pension
payable for any month for which the Participant is eligible for Public Pension;
and provided, further, that if the Participant has earned income after
retirement and prior to attainment of eligibility for Public Pension which
exceeds $8,880 during any calendar year ("excess earned income"), the increased
pension payable pursuant to this Section 3.5 ("increased pension") for any
calendar year will be reduced by $1 for each $2 of excess earned income. The
above $8,880 amount will be prorated for the year in which retirement occurs and
for the year in which the Participant becomes eligible for Public Pension.
For purposes of this section, earned income shall include wages, salaries,
tips, bonuses, commissions, and earnings resulting from self-employment. To
facilitate determination of his annual earned income, each Participant will at
the time of Rule of 65 retirement authorize the Social Security Administration
and/or the Railroad Retirement Board to release to the Company a record of his
creditable earnings for Social Security and/or Railroad Retirement Act purposes
and agree to
<PAGE>
- 35 -
give the Company by April 15th of each year a copy of his W-2 forms and a
statement of his annual earned income for the preceding year on a form provided
by the Company. If the Participant revokes the authorization to the Social
Security Administration and/or the Railroad Retirement Board or fails to submit
the required information to the Company by April 15th of each year, the
Participant will be presumed ineligible for increased pension for the preceding
year; provided, however, that such presumption of ineligibility will be
disregarded in the event that the Participant reinstates the required
authorization or submits the required information at a later date.
If it is determined above that the Participant was not eligible for all or
part of the increased pension which he received for the preceding year, payment
of increased pension will be suspended and not resumed until the month following
the month in which the Participant notifies the Company that he does not expect
his earned income for the current year to exceed $8,880. The amount of any
overpayment will be recouped by reducing or discontinuing payment of the
Participant's regular pension (and his increased pension, if he notifies the
<PAGE>
- 36 -
Company that he does not expect his earned income for the current year to exceed
$8,880) until the full amount of the overpayment has been recovered.
At the request of the Participant, the Company may reduce or discontinue
payment of increased pension for a period specified by the Participant. If it
is determined that the Participant did not receive all of the increased pension
to which he was entitled for a given year, the amount due shall be paid
promptly.
SECTION 3.6 INCREASED PENSION - 62/15 OR 30 YEAR. In the determination of
the amount of any regular 62/15 or 30 Year retirement pension, the monthly
amount determined in accordance with Section 3.3 will be increased by $300 for
Participants who retire on or after September 1, 1993 but prior to August 31,
1999; provided, however, that such increase will not be applicable with respect
to such regular pension payable for any month for which the Participant is
eligible for Public Pension, as a result of his death or disability, or after
which the Participant attains age 62. In no event will the Participant receive
less than 12 months of
<PAGE>
- 37 -
such supplement unless the Participant's death occurs during the 12-month
period.
SECTION 3.7 REGULAR PENSION - PART-TIME PARTICIPANTS. Notwithstanding
anything to the contrary contained in the foregoing provisions of this Article
III, the amount of the minimum pension otherwise applicable will, in the case of
any Participant the Company finds to be a part-time Participant, be reduced to
an amount equitably related to the hours worked by him in comparison to hours
worked by other Participants but not less than the amount which would have been
payable if he had retired under the Pension Agreement in effect immediately
prior to July 31, 1966. The Company will not find a Participant to be a part-
time Participant unless for the mutual convenience of the Participant and the
Company he was, in the 120 months preceding his retirement, regularly scheduled
to work fewer hours than the straight-time schedule of full-time Participants.
SECTION 3.8 DEDUCTION FOR PUBLIC PENSION. Deductions for Public Pension
will be made from the amount determined in accordance with Section 3.3 provided
that:
<PAGE>
- 38 -
(a) a regular pension will not be affected by Public Pension related to
the Social Security Act;
(b) for any month a Participant is eligible for Public Pension not related
to the Social Security Act, there will be a deduction for such Public
Pension from the amount determined in accordance with Section 3.3.
The amount of such deduction will be the amount of Public Pension paid
or payable to the Participant, or that would upon application become
payable to him for such month, without regard to any offset,
suspension or reduction imposed by law (including any reduction by
reason of commencement of such Public Pension prior to the age at
which it is first provided under law without such a reduction), except
that for a Participant whose original date of hire was prior to
January 1, 1975 the amount of such deduction will be equal to 50% of
the Tier II benefit determined in accordance with the Railroad
Retirement Act; provided such deduction will be limited to the amount,
to the extent reasonably determinable, of such Public Pension
<PAGE>
- 39 -
attributable to employment by the Company; and provided, further, that
in the case of a Participant eligible for Public Pension under the
Railroad Retirement Act, the amount of such deduction will be based on
the provisions of such Act in effect as of the date the Participant
retires; and
(c) after deduction for Public Pension first becomes applicable, it shall
not be changed to reflect any increase of such Public Pension
resulting from either (i) an amendment of the law under which such
Public Pension is provided, if the effective date of such increase
occurs after the first month with respect to which a deduction for
such Public Pension became applicable, or (ii) subsequent employment
by other than the Company.
SECTION 3.9 DEDUCTION FOR OTHER PENSION. If any Participant entitled to
pension benefits pursuant to this Plan is or shall become, or upon application
would become, entitled to any other pension or payment in the nature of a
pension (other than a payment covered by Section 3.11, a benefit in the nature
of an annuity, pension or payment made pursuant to this
<PAGE>
- 40 -
Plan) from any source or fund to which the Company has directly or indirectly
contributed ("Other Pension"), then the amount determined in accordance with
Sections 3.3 through 3.6 otherwise payable to such Participant for any period
will be reduced by the amount of such Other Pension paid or payable to him or
that would upon application become payable to him for the corresponding period;
provided, however, that if such Participant has contributed to such source or
fund, then the amount by which such amount would otherwise be reduced in
accordance with the foregoing provisions of this section will be decreased by
the amount of that part of such Other Pension which shall be attributable to the
contributions made by the Participant to such source or fund; provided, further,
such deduction will be limited to the amount, to the extent reasonably
determinable, of such Other Pension attributable to employment with the Company
during a period in which the Participant has been credited with continuous
service for the purpose of calculating the amount of any regular pension under
this Plan. The term "Other Pension" includes any pension or payment under The
Interlake Companies, Inc. Merchant Iron Hourly Employees Pension Plan.
<PAGE>
- 41 -
SECTION 3.10 DEDUCTION FOR SEVERANCE ALLOWANCE. If any Participant is or
becomes entitled to or is paid any discharge, liquidation or dismissal or
severance allowance or payment of a similar kind ("severance allowance") by
reason of any plan or policy of the Company, or in respect of which it shall
have directly or indirectly contributed, or by reason of any law, then the total
amount of such severance allowance paid or payable to him shall, in accordance
with the standards set forth below, be deducted from the amount determined in
accordance with Sections 3.3 through 3.6 upon retirement; provided, however,
that (i) such severance allowance will not be deducted from or charged against
any deferred vested pension, and (ii) if such Participant has contributed to the
source or fund out of which such severance allowance is paid or becomes payable,
then the amount deducted from or charged against such amount in accordance with
the foregoing provisions of this section will be decreased by the amount of that
part of such severance allowance which is attributable to the contributions
which such Participant has made to such source or fund.
<PAGE>
- 42 -
If any Participant becomes entitled under the Basic Agreement or otherwise
to severance allowance which may be deducted from the amount determined in
accordance with Sections 3.3 through 3.6 as set forth above, he may waive
payment of the severance allowance and, for the purposes of the Basic Agreement,
be considered to have received it. Such waiver must be in writing on a form
provided by the Company. If the Participant waives such severance allowance,
the total amount of regular pension paid to or on behalf of him and his co-
pensioner (if any) will not be less than the amount of such severance allowance.
The following standards will apply to the deduction explained above. The
deduction will be made in full in each case in which the amount of pension
determined in accordance with Sections 3.3, through 3.6 after application of the
deduction, or the cost of such pension after the deduction, is equal to or
greater than the greatest amount or cost of any such pension which would be
payable to a Participant under age 40 who is eligible for a deferred vested
pension and who has the same years of service and compensation history as the
Participant in question. The deduction will not be made in
<PAGE>
- 43 -
any case in which the amount or cost of such pension after the deduction for
severance pay is less than the amount or cost of such deferred vested pension.
In all other cases, the deduction will be made but only to the extent that the
amount or cost of such pension after the deduction for severance pay is equal to
the amount or cost of such deferred vested pension. In any case in which there
is a difference between the amount and the cost of any such pension or a
difference between the amount or cost of any such deferred vested pension, the
determination required by this Section 3.10 shall be based on the factor that
produces the largest deduction. In determining the cost of any such pension and
such deferred vested pension for purposes of this Section 3.10, the assumptions
reported in the filing of the most recent Schedule B to Form 5500 shall govern.
SECTION 3.11 DEDUCTION FOR DISABILITY PAYMENTS. Any amount paid to or on
behalf of any Participant on account of injury or occupational disease incurred
in the course of his employment by the Company or any other employer causing
disability in the nature of a permanent disability, whether pursuant to Workers'
Compensation, Occupational Disease or
<PAGE>
- 44 -
similar statutory law (except fixed statutory payments for the loss of, or 100%
loss of use of, any bodily member or a benefit in the nature of an annuity,
pension or payment of similar kind by reason of any law), will be deducted from
or charged against the amount determined in accordance with Sections 3.3 through
3.6 provided, however, that any such deduction or charge will be adjusted to
take into account expenses such as reasonable attorneys' fees and medical
expenses incurred by the Participant in processing a claim for such payment, and
that any payments received by the Participant under such laws will not be
deducted from any such amount for permanent incapacity retirement payable prior
to age 65 or from the increase in pension provided in Section 3.4. If any
amount which is to be deducted from or charged against the amount determined in
accordance with Sections 3.3 through 3.6 pursuant to this section is determined
with respect to a period of time, such deduction or charge will be made only
with respect to the same period. If any such amount is not determined with
respect to a period of time, the Company will apportion the amount to a period
of time which approximates the period over which the local government
organization having
<PAGE>
- 45 -
authority over workers' compensation and occupational disability claims might
award a disability payment for similar conditions.
This offset will be waived, however, for Participants who have retired or
who will retire prior to September 1, 1999 and who are having or would have had
their pensions offset pursuant to this Section 3.11, and the waiver will be
effective during the term of the 1993 Basic Agreement effective with the first
regular pension check payable for the months following August 31, 1993.
Section 3.12 PENSION APPLICATION. Each application for a pension must be
in writing on a form provided by the Company. The Company may require any
applicant for a pension to furnish to it such information as may reasonably be
required.
A Participant may make application for pension at any time prior or
subsequent to his retirement; however, a Participant may make application for a
deferred vested pension not earlier than 90 days prior to the first day of the
month for which the first installment of pension is payable as provided in
subsections (d) and (e) of Section 3.13.
<PAGE>
- 46 -
Section 3.13 COMMENCEMENT AND TERMINATION OF REGULAR PENSION.
a) In the case of a Participant who is eligible for any type of pension
other than permanent incapacity retirement pension, 60/15 retirement
pension, or deferred vested retirement pension, the first installment
of any regular pension will be payable for the first full calendar
month following the 3 calendar months for which the special payment is
made.
b) In the case of a Participant who is eligible for permanent incapacity
retirement pension, the first installment of any regular pension will
be payable for the first full calendar month following the month in
which retirement occurs.
c) In the case of a Participant who is eligible for a 60/15 retirement
pension, the first installment of any regular pension will be payable
for the fourth calendar month following the month in which the
Participant attains age 62 unless the Participant elects earlier
commencement in accordance with
<PAGE>
- 47 -
Section 3.3, in which case the first installment of regular pension
will be payable for the first full calendar month following the 3
calendar months for which the special payment is made.
d) In the case of a Participant who is eligible for a deferred vested
retirement pension and who incurs a break in continuous service after
attaining age 40 and completing at least 15 years of continuous
service, the first installment of regular pension will be payable for
the calendar month next following the Participant's 62nd birthday
unless the Participant elects earlier commencement in accordance with
Section 3.3, in which case the first installment of regular pension
will be payable for the later of (i) the calendar month specified by
the Participant in his application for pension, provided such month is
subsequent to the month in which he attains age 60, or (ii) the
calendar month in which application for pension is made.
<PAGE>
- 48 -
e) In the case of a Participant who is eligible for a deferred vested
retirement pension and who incurs a break in continuous service either
prior to attaining age 40, or after attaining age 40 and before
completing at least 15 years of continuous service, the first
installment of regular pension will be payable for the calendar month
next following the Participant's 65th birthday unless the Participant
elects earlier commencement in accordance with Section 3.3, in which
case the first installment of regular pension will be payable for the
later of (i) the calendar month specified by the Participant in his
application for pension, provided such month is subsequent to the
month in which he attains age 60, or (ii) the calendar month in which
application for pension is made.
f) The last installment of any regular pension will be payable for the
month in which the death of the Participant occurs.
Section 3.14 LUMP SUM PAYMENT. The Company shall make a lump sum payment
which will be the equivalent actuarial
<PAGE>
- 49 -
value of the regular pension otherwise payable if such equivalent actuarial
value is not more than $3,500. In determining such equivalent actuarial value,
mortality will be based on UP-1984 unisex table with no adjustment. Interest
will be at the rate set by the Pension Benefit Guaranty Corporation for
immediate annuities as of the first day of the month in which the amount of a
lump sum payment is to be determined.
Section 3.15 PRE-PENSION SPOUSE COVERAGE. Any Participant who is accruing
continuous service, who has a spouse and:
a) who has attained age 55 and has completed at least 15 years of
continuous service, or
b) who has attained age 60 and has completed at least 5 years of
continuous service,
may, as provided below, obtain Pre-Pension Spouse Coverage which would provide a
lifetime monthly payment for the Participant's spouse following the
Participant's death. Any monthly payment resulting from such coverage will be
in addition to any surviving spouse's benefit provided under Article IV.
<PAGE>
- 50 -
Any Participant who is accruing continuous service, who has a spouse and
who, prior to August 23, 1984, attained age 65 and completed at least 5 years of
continuous service is automatically deemed to have elected the Pre-Pension
Spouse Coverage unless the Participant revokes the coverage in writing.
The effective date of Pre-Pension Spouse Coverage for those Participants
who are not automatically covered will be the date 2 years following the date
the Participant elects such coverage or the date the Participant attains the
required age and service, whichever is later. Notwithstanding anything to the
contrary contained in the foregoing, if a Participant dies as a result of an
accident which occurs after having attained the required age and service and
after he has elected Pre-Pension Spouse Coverage but prior to the date that such
coverage becomes effective, such coverage will be deemed to have become
effective as of the date such Participant elected such coverage.
The Participant who will be automatically covered will be notified at least
180 days prior to attainment of the required age and service with such coverage
becoming effective as of
<PAGE>
- 51 -
the date the Participant attains the required age and service unless the
Participant revokes such coverage.
A Participant may terminate Pre-Pension Spouse Coverage at any time with
such termination to be effective as of the date the form prescribed for this
purpose is filed with the Company. Such coverage will automatically terminate
as of the earliest of:
a) the date the Participant is divorced from his spouse;
b) the date the spouse dies;
c) the date preceding the Participant's retirement; or
d) the date the Participant incurs a break in continuous service.
The effective date of Pre-Pension Spouse Coverage for a Participant who is
reemployed following retirement or a break in continuous service, which
terminated such coverage as outlined above, will be the date of reemployment;
provided, however, that the Participant may within 30 days after such
reemployment revoke such coverage effective as of the date of reemployment.
<PAGE>
- 52 -
If a Participant elects or is automatically covered by Pre-Pension Spouse
Coverage, the amount determined in accordance with Section 3.3 will be reduced
by an amount equal to the product of: 7/10 of 1% of such amount, multiplied by
the number of years (and fractions thereof) that such coverage was in effect.
If a Participant dies while the Pre-Pension Spouse Coverage is in effect,
the surviving spouse will receive 50% of an amount equal to the product of:
a) the amount determined in accordance with Section 3.3 as though the
Participant had retired on the date of his death and, in the case of a
Participant who died prior to attainment of age 65, as though he had
been age 65 on the date of his death, reduced as determined above,
multiplied by
b) the applicable percentage obtained from Exhibit A, based on the ages
of the Participant and his spouse as of the Participant's date of
death.
The first installment of the amount payable to the Participant's spouse
pursuant to this section will be payable for the month following the month in
which the Participant's
<PAGE>
- 53 -
death occurs and the last installment will be payable for the month in which the
spouse's death occurs.
Satisfactory proof of marriage of the Participant and his spouse and of the
age of the Participant's spouse will be required prior to the payment of monthly
installments under this coverage. Satisfactory proof of divorce or of the death
of the Participant's spouse will be required for automatic termination of Pre-
Pension Spouse Coverage as provided above.
In the event a Participant who has elected Pre-Pension Spouse Coverage dies
as the result of an accident prior to the date Pre-Pension Spouse Coverage
becomes effective and such Participant has not revoked the coverage provided
under Section 3.16, the Pre-Pension Spouse Coverage will be paid in lieu of any
benefit under Section 3.16.
Section 3.16 PRE-RETIREMENT SURVIVOR ANNUITY COVERAGE.
a) ELIGIBILITY. Survivor Annuity Coverage is automatically applicable to
any Participant, as described below, who has been married for at least
1 year and who has not, with the concurrence of his spouse, revoked
such coverage; provided, however that Survivor Annuity Coverage is not
applicable to
<PAGE>
- 54 -
a Participant who has elected and is covered by the Pre-
Pension Spouse Benefit provisions of Section 3.15 as long as such
coverage is in effect:
1) any Participant who is accruing continuous service and who has
completed at least 5 years of continuous service;
2) any Participant who incurs a break in continuous service after
age 60 with eligibility for a 60/15 or deferred vested retirement
pension and who does not elect immediate commencement of pension;
and
3) any Participant who incurs a break in continuous service prior to
age 60 with eligibility for only a deferred vested retirement
pension.
b) COMMENCEMENT AND TERMINATION OF SURVIVOR ANNUITY. The surviving
spouse, as defined under Section 3.15, of a Participant who dies while
Survivor Annuity Coverage is in effect will be eligible for a monthly
payment:
<PAGE>
- 55 -
1) commencing with the month following the month in which the
Participant's death occurs, in the case of a Participant who dies
while accruing continuous service and after the Participant (i)
has attained age 60, or (ii) has completed 30 years of continuous
service; or
2) commencing with the later of (i) the month following the month in
which the Participant's 60th birthday would have occurred, or
(ii) the month following the month in which the Participant's
death occurs, in the case of a Participant not covered under
subsection (b)(1) above.
The last installment of the Survivor Annuity will be payable for the
month in which the spouse's death occurs.
c) AMOUNT OF SURVIVOR ANNUITY. The amount of the Survivor Annuity will
be determined as follows:
<PAGE>
- 56 -
1) in the case of a Participant who dies while accruing continuous
service, the Survivor Annuity will be equal to:
i) the amount determined in accordance with Section 3.3 as
though the Participant had been age 65 and had retired on
the date of his death, with such result multiplied by;
ii) the applicable percentage obtained from subsection (4)
below, based on the difference between the ages of the
Participant and his spouse as of the date of the
Participant's death, reduced by;
iii) the Surviving Spouse's benefit payable, if any, pursuant to
Article IV;
2) in the case of a Participant who had retired on a 60/15 or
deferred vested retirement pension after attainment of age 60 and
who had elected to defer commencement of pension payments and who
dies prior to commencement of
<PAGE>
- 57 -
such payments, the Survivor Annuity will be equal to:
i) the amount determined in accordance with Sections 3.3 as
though the Participant had elected to have pension payments
commence with the first of the month following the date of
death, with such result multiplied by;
ii) the applicable percentage obtained from subsection (4)
below, based on the difference between the ages of the
Participant and his spouse as of the date of the
Participant's death, reduced by;
iii) the Surviving Spouse's benefit payable, if any, pursuant to
Article IV.
3) in the case of a Participant eligible for a deferred vested
pension who dies prior to attainment of age 60, the Survivor
Annuity will be equal to:
i) the amount determined in accordance with Section 3.3 as
though the Participant
<PAGE>
- 58 -
survived until age 60 and elected to have pension payments
commence as of the first of the month following attainment
of age 60, with such result multiplied by;
ii) the applicable percentage obtained from subsection (4)
below, based on the difference between the ages of the
Participant and his spouse as of the date of the
Participant's death, reduced by;
iii) the Surviving Spouse's benefit payable, if any, pursuant to
Article IV.
4) the following table is to be used in subsections (c)(1), (2) and
(3) above:
<TABLE>
<CAPTION>
Participant's Age at Death
Difference Between --------------------------
Ages of Participant Prior to 64 and
and Spouse 61 61 to 63 Over
------------------- -------- -------- ------
<S> <C> <C> <C>
Participant Older:
-----------------
20 or more years 36.5% 37.0% 37.0%
17, 18 or 19 years 37.0% 37.5% 37.5%
14, 15 or 16 years 37.5% 38.0% 38.0%
11, 12 or 13 years 38.5% 38.5% 39.0%
8, 9 or 10 years 39.0% 39.5% 40.0%
5, 6 or 7 years 39.5% 40.5% 40.5%
2, 3 or 4 years 40.5% 41.0% 41.5%
Less than 2 years 41.5% 42.0% 42.5%
</TABLE>
<PAGE>
- 59 -
<TABLE>
<CAPTION>
Participant Younger:
-------------------
<S> <C> <C> <C>
Less than 2 years 41.5% 42.0% 42.5%
2, 3 or 4 years 42.0% 43.0% 44.0%
5, 6 or 7 years 43.0% 44.0% 44.5%
8, 9 or 10 years 44.0% 45.0% 45.5%
11, 12 or 13 years 45.0% 46.0% 46.5%
14, 15 or 16 years 45.5% 46.5% 47.0%
17, 18 or 19 years 46.5% 47.5% 48.0%
20 or more years 47.0% 48.0% 48.0%
</TABLE>
d) NOTIFICATION, REVOCATION, ELECTION AND TERMINATION.
1) At least 180 days prior to the month in which the Participant
will complete 5 years of continuous service, each eligible
Participant who is accruing continuous service will be advised
regarding Survivor Annuity Coverage, the benefits provided and
the effect, or cost, of such Coverage on the regular pension
provided pursuant to this Article III. Such information will
also be furnished within a period beginning on the first day of
the plan year in which the Participant attains age 32 and ending
with the close of the plan year in which the Participant attains
age 34 and will include a written explanation of:
<PAGE>
- 60 -
i) the Participant's right to waive such Coverage and the
effect of such waiver;
ii) the rights of the Participant's spouse with respect to such
waiver; and
iii) the Participant's right to revoke such waiver and the effect
of such revocation.
The period for furnishing information will also include a
reasonable period after an employee becomes a Participant
following the period described in the preceding sentence and a
reasonable period after a Participant terminates employment
before he attains age 35.
2) A Participant covered by Section 3.15 who has a spouse will be
advised upon termination of employment regarding Survivor Annuity
Coverage, the benefits provided, and the effect, or cost, of such
Coverage on the pension provided pursuant to this Article III.
There shall be no charge for coverage after retirement or the
break in continuous service
<PAGE>
- 61 -
if a Participant, with the concurrence of his spouse, files a
valid revocation within 90 days of the date he is notified
regarding such Coverage.
3) A Participant, with the concurrence of his spouse, may revoke
Survivor Annuity Coverage after completion of 5 years of
continuous service.
4) Revocation of Survivor Annuity Coverage by a Participant must be
consented to by the Participant's spouse. The revocation must
designate a beneficiary or beneficiaries or a form of benefit
payment which may not be changed without the spouse's consent,
except that the spouse's consent may expressly permit future
changes in the designation of beneficiary or form of benefit
payment without further consent of the spouse. To be effective,
a spouse's consent must be given in writing and must be witnessed
by a representative of the Company or a notary
<PAGE>
- 62 -
public. Such revocation will be effective the date the form is
received by the Company.
5) Survivor Annuity Coverage will automatically terminate as of the
earliest of:
i) the date the Participant is divorced from his spouse;
ii) the date the spouse dies;
iii) except in the case of a Participant covered by Section 3.15,
the date of the Participant's retirement;
iv) in the case of a Participant covered by Section 3.15, the
last day of the month preceding the first month for which
pension is paid;
v) the day following the date the Participant dies.
6) A Participant will automatically be covered by Survivor Annuity
Coverage as of the later of (i) the date that is one year after
the date the Participant and his spouse are first married, or
(ii) the date the Participant
<PAGE>
- 63 -
completes 5 years of service unless the Participant and the
spouse revoke such coverage. Any revocation of the Survivor
Annuity Coverage by a Participant prior to the Plan Year in which
the Participant attains age 35 will cease to be effective on the
first day of the Plan Year in which he attains age 35. A new
waiver of consent shall be required in order to continue
revocation of the Survivor Annuity Coverage.
7) Subject to requirements as to a spouse's consent to future
changes as provided above, a Participant who revokes Survivor
Annuity Coverage may subsequently elect such coverage at any time
by submitting the prescribed form, together with copies of the
Participant's marriage certificate and birth certificates for the
Participant and spouse, to the Company. Such election will not
be effective until the form and documents required are received
by the Company.
<PAGE>
-64-
8) A Participant who returns to the employ of the Company after
having been retired and having received a pension or after
incurring a break in continuous service with eligibility for a
60/15 or deferred vested retirement pension, will automatically
be provided Survivor Annuity Coverage effective with his first
day of reemployment unless the Participant, with the concurrence
of his spouse, revokes such coverage within 90 days of the date
of reemployment.
9) Satisfactory proof of marriage of the Participant and his spouse
and the age of the Participant's spouse will be required prior to
the payment of monthly installments under Survivor Annuity
Coverage.
10) The surviving spouse for the purpose of this Section 3.16 will be
that person to whom the Participant was married as of the date of
the Participant's death, but only if the Participant and spouse
were married throughout the 1
<PAGE>
-65-
year period immediately preceding the date of death.
11) Notwithstanding anything to the contrary contained in this
Agreement, spousal consent will not be required to revoke the
coverage provided under this Section 3.16 if it is established to
the satisfaction of the Company that the signature of the spouse
cannot be obtained because there is no spouse, because the spouse
cannot be located or because of such other circumstances as the
Secretary of the Treasury may by regulations prescribe.
e) EMPLOYEE COST FOR SURVIVOR ANNUITY COVERAGE. No charge or deduction
shall be made to the amount of regular pension determined in
accordance with Section 3.3 to be payable to any Participant who has
Pre-Retirement Survivor Annuity Coverage in effect in order to take
into account the actuarial cost of such coverage.
<PAGE>
-66-
f) Notwithstanding anything to the contrary contained herein, in the
event a Participant has elected Pre-Pension Spouse Coverage and has
not revoked Survivor Annuity Coverage and dies accidentally after
having met the age and service requirements for Pre-Pension Spouse
Coverage, and before the effective date of Pre-Pension Spouse
Coverage, the Survivor Annuity Benefit will not be payable.
SECTION 3.17 AUTOMATIC 50% SPOUSE OPTION. Unless a Participant who has a
spouse at the time pension payments commence revokes the Automatic 50% Spouse
Option within the period established below, he will receive a "net reduced
pension" during his lifetime and after the death of the Participant his spouse
will receive a lifetime payment equal to one-half of his "reduced pension."
For the purpose of this Section 3.17, "reduced pension" means an amount
equal to the product of:
a) the amount determined in accordance with Sections 3.3 reduced in
accordance with Sections 3.15 and 3.16, if applicable, and subject to
the deductions
<PAGE>
-67-
provided pursuant to Sections 3.8 and 3.9, if applicable, multiplied
by:
b) the applicable percentage obtained from Exhibit A, based on the ages
of the Participant and his spouse at the date pension payments
commence;
and "net reduced pension" means the reduced pension increased in accordance with
the provisions of Sections 3.4, 3.5 and 3.6, if applicable, and decreased in
accordance with the provisions of Section 3.10 and 3.11, if applicable.
A Participant may revoke the Automatic 50% Spouse Option by written notice
duly filed with the Company at any time within the 90-day period prior to the
date pension payments commence, or within 90 days following the date on which
the Company provides written notice to the Participant regarding the Automatic
50% Spouse Option, or, if the Participant has not been given specific
information regarding the terms and conditions of such Option and the financial
effect upon his pension of electing such Option and within 60 days of receiving
the notice regarding the Option makes a written request for such specific
information, within 90 days
<PAGE>
-68-
following the date on which the Company provides such information, whichever is
later, and
a) receive the regular pension otherwise payable under this Plan during
his lifetime, or
b) elect a Co-Pension Option in accordance with the provisions set forth
in Section 3.18.
Such written notice from the Company will include an explanation of the
terms and conditions of the Automatic 50% Spouse Option and the effect of an
election not to take it.
Any monthly payment resulting from the Automatic 50% Spouse Option will be
in addition to any surviving spouse's benefit provided under Article IV.
In the case of a Participant who has not revoked the Automatic 50% Spouse
Option, the first installment of net reduced pension will be payable for the
month in which he is first entitled under Section 3.13 to receive regular
pension. The last installment of such net reduced pension will be payable for
the month in which the Participant's death occurs; provided, however, that any
monthly installments payable to such Participant and remaining unpaid at the
time of his death will be paid to his spouse, if then surviving. The first
<PAGE>
-69-
monthly payment to the Participant's spouse will be payable for the month
following the month in which the Participant's death occurs, but not for any
month prior to the month for which the Participant would have first been
entitled to receive a net reduced pension, and the last monthly payment to such
spouse shall be payable for the month in which such spouse dies.
Any revocation of the Automatic 50% Spouse Option will be executed on the
form prescribed for this purpose by the Company and will be deemed to be duly
filed when it has been received by the Company. The revocation must designate a
beneficiary or beneficiaries or a form of benefit payment which may not be
changed without the spouse's consent, given in the manner provided below, except
that the spouse's consent may expressly permit future changes in the designation
of beneficiary or form of benefit payment without further consent of the spouse.
Subject to requirements as to spouse's consent to future changes as provided
above, a Participant may cancel a revocation of the Automatic 50% Spouse Option
at any time during the period in which he may revoke such Option.
<PAGE>
-70-
Satisfactory proof of marriage of the Participant and his spouse and of the
age of the Participant's spouse will be required prior to the payment of monthly
installments under this coverage.
If any Participant dies prior to commencement of pension payments, the
Participant's spouse will not be entitled to any payments pursuant to this
Section 3.17.
If a Participant does not revoke the Automatic 50% Spouse Option within the
period established above and his spouse dies after the end of such period, but
prior to the death of such Participant, such Participant will continue to
receive net reduced pension installments.
If a Participant does not revoke the Automatic 50% Spouse Option and his
spouse dies within the period established above, the Participant will be treated
as if he had revoked such option.
Notwithstanding anything to the contrary contained in this Section 3.17,
if, after the retirement of a Participant who has not revoked the Automatic 50%
Spouse Option, the amount of regular pension which would have been payable to
him under this Plan had he revoked such option is subject to any
<PAGE>
-71-
further deduction, change, offset or correction, then the amount payable under
such option to such Participant and/or his spouse will be adjusted to reflect
any such further deduction, change, offset or correction.
Notwithstanding anything to the contrary in this Section 3.17, in the case
of a Participant who retires under a 60/15 retirement and who elects to defer
the commencement of pension payments until after attainment of age 62, and who
does not revoke the Automatic 50% Spouse Option as provided above, such
Participant will receive a net reduced pension commencing with the fourth
calendar month following the month in which the Participant attains age 62. If
the Participant dies prior to attainment of age 62, the amount payable to the
Participant's spouse shall be equal to one-half the reduced pension which would
have been payable to the Participant, had he been permitted to and had he
elected to receive a net reduced pension commencing on the date of death, based
on the ages of the Participant and his spouse as of the date of the
Participant's death. If the spouse of any Participant who has not revoked the
Automatic 50% Spouse Option dies prior to commencement of regular pension, the
Participant will still
<PAGE>
-72-
receive the net reduced pension commencing with the fourth calendar month
following the month in which the Participant attains age 62 as provided above.
For the purpose of this Section 3.17, in the case of a Participant who
retires on other than a deferred vested pension, pension payments will be deemed
to commence as of the date of retirement and, in the case of a Participant
eligible for a deferred vested pension, pension payments will be deemed to
commence as of the first of the month for which regular pension is first payable
under the provisions of Section 3.13.
Notwithstanding anything to the contrary contained in this Section 3.17, a
Participant may revoke the Automatic 50% Spouse Option only with the written
consent of his spouse. Revocation of this option may be effected by filing the
prescribed form with the Company. To be valid, the form must be signed by the
Participant and his spouse in the presence of a representative of the Company or
in the presence of a notary public and the form notarized. This notarized form
will be effective only when the form is filed with the Company. Within a
reasonable time prior to retirement the Company will furnish a written
explanation of:
<PAGE>
-73-
a) the terms and conditions of the Automatic 50% Spouse Option;
b) the Participant's right to waive such Option and the effect of such
waiver;
c) the rights of the Participant's spouse with respect to such waiver;
and
d) the Participant's right to rescind such waiver and the effect of such
rescission.
Notwithstanding anything contained in the previous paragraph, spousal
consent will not be required to revoke the coverage under this Section 3.17 if
it is established to the satisfaction of the Company that the signature of the
spouse cannot be obtained because there is no spouse, because the spouse cannot
be located or because of such other circumstances as the Secretary of the
Treasury may by regulations prescribe.
SECTION 3.18 CO-PENSIONER OPTIONS. Any Participant may, under the
conditions set forth below by written notice duly filed with the Company:
a) elect to convert the regular pension otherwise payable to him under
this Plan upon retirement into
<PAGE>
-74-
a "net reduced pension," in accordance with the 100% Co-Pensioner
Option or the 50% Co-Pensioner Option described below; or
b) revoke any such election previously made, in which event he shall be
treated as if he had not made such election; or
c) change any such election from one to the other of such options and/or
change the person previously named as his co-pensioner.
A "100% Co-Pensioner Option" is a "net reduced pension" payable to the
Participant during his life, with the provision that after his death, an amount
equal to the "reduced pension" will be paid to such person, to be known as his
"Co-pensioner" as he has nominated by written designation duly filed with the
Company. A "50% Co-Pensioner Option" is a "net reduced pension" payable to the
Participant during his life, with the provision that after his death, an amount
equal to one-half of the "reduced pension" will be paid to such person, to be
known as his "co-pensioner," as he has nominated by written designation duly
filed with the Company.
<PAGE>
- 75 -
For the purpose of this Section 3.18, "reduced pension" means an amount
equal to the product of:
a) the amount determined in accordance with Section 3.3 reduced in
accordance with Section 3.15, if applicable, and subject to the
deductions provided pursuant to Sections 3.8 and 3.9, if applicable,
multiplied by;
b) the applicable percentage obtained from Exhibit A, based on the ages
of the Participant and his co-pensioner at the date pension payments
commence as described below;
and "net reduced pension" means the reduced pension increased in accordance with
the provisions of Sections 3.4 through 3.6, if applicable, and decreased in
accordance with the provisions of Sections 3.10 and 3.11, if applicable.
Notwithstanding anything to the contrary in (a) and (b) above, if the
Participant has elected either of the Co-Pensioner Options and if, upon
retirement or attainment of age 65, whichever is later, the Participant has a
spouse who can become eligible for a surviving spouse's benefit:
<PAGE>
- 76 -
a) The Participant will receive a pension equal to the sum of:
1) 50% of an amount equal to the monthly amount determined in
accordance with Section 3.3 reduced in accordance with Section
3.15, if applicable, and subject to Sections 3.8 and 3.9, if
applicable, and
2) 50% of his reduced pension,
increased in accordance with the provisions of Sections 3.4 through
3.6, if applicable, and decreased in accordance with the provisions of
Sections 3.10 and 3.11, if applicable.
b) The Participant's co-pensioner will, following the Participant's
death, receive an amount equal to 50% of the Participant's reduced
pension if the Participant had elected a 100% Co-Pensioner Option, or
an amount equal to 25% of the Participant's reduced pension if the
Participant had elected a 50% Co-Pensioner Option.
c) For the purposes of determining the appropriate reduced pension, if
the Participant's co-pensioner
<PAGE>
- 77 -
is other than the Participant's spouse, it will be presumed that the
Participant does not have a spouse unless he furnishes proof to the
contrary in the form of a marriage certificate or other evidence
satisfactory to the Company.
d) Any Participant may in accordance with the provisions of (a) above
elect an option, revoke an option election or change an option
election and/or co-pensioner at any time prior to the date on which
the Company provides written notice to the Participant regarding the
Co-Pensioner Options, or, if the Participant has not been given
specific information regarding the terms and conditions of such
options and the financial effect upon his pension of electing such
options, and within 60 days of receiving the notice regarding the
options, makes a request for such specific information, and, within 90
days following the date on which the Company provides such
information, whichever is later; provided, however, that with respect
to a Participant who has a spouse at the time pension payments com-
<PAGE>
- 78 -
mence, the election of either Co-Pensioner Option will be null and
void unless the Participant and his spouse revoke the Automatic 50%
Spouse Option provided under Section 3.17.
e) Any Participant who had elected Option 1 under a prior version of this
Plan will be deemed to have elected the 100% Co-Pensioner Option under
this Plan, and any Participant who had elected Option 2 under a prior
version of this Plan will be deemed to have elected the 50% Co-
Pensioner Option under this Plan; provided, however, that any such
election will be null and void if the Participant does not revoke
the Automatic 50% Spouse Option provided under Section 3.17.
f) In the case of a Participant who has elected one of the options
specified, the first installment of net reduced pension will be
payable for the month for which he is first entitled under Section
3.13 to receive a regular pension; and the last installment of such
net reduced pension to the Participant will be payable for the month
in which his death occurs;
<PAGE>
- 79 -
provided, however, that any monthly installments payable to such
Participant and remaining unpaid at the time of his death may be paid
to his co-pensioner, if then surviving. The first monthly payment to
his co-pensioner will be payable for the month following the month in
which such Participant's death occurs, but not for any month prior to
the month for which the Participant would have first been entitled to
receive a net reduced pension, and the last monthly payment that will
be payable to such co-pensioner will be payable for the month in which
such co-pensioner dies.
g) Any election or revocation of an option, or change of an option
election and/or co-pensioner pursuant to this Section 3.18 will be
executed on a form prescribed for such purpose by the Company and will
be deemed to be duly filed when it has been received by the Company.
h) Satisfactory proof of age of the named co-pensioner will be required
prior to payment of pension installments under an elected option. No
consent
<PAGE>
- 80 -
will be required of the person designated as co-pensioner in any
election under either Co-Pensioner Option in order to revoke such
election or to change the co-pensioner and/or the option elected.
i) If any Participant has elected an option under this Section 3.18 and
dies prior to his retirement, such election will cease to be of any
effect, and the co-pensioner will not be entitled to any payments by
reason of the election of such option.
j) If any Participant has elected an option under this Section 3.18 and
his co-pensioner dies after such Participant has commenced receiving
pension payments or after the expiration of the 90-day period
described in (d) above, but prior to the death of such Participant,
such Participant will continue to receive net reduced pension
installments in accordance with such option.
k) If any Participant has elected an option under this Section 3.18 and
his co-pensioner dies before the later of:
<PAGE>
- 81 -
i) the commencement of pension payments to the Participant, or
ii) the 90-day period described in (d) above,
then the Participant will be treated the same as if he had not made
such election.
l) Notwithstanding anything to the contrary contained in this Section
3.18, if, after the retirement of a Participant who has elected either
Co-Pensioner Option, the amount of regular pension which would have
been payable to him under this Plan had he not elected an option is
subject to any further deduction, change, offset or correction, then
the amount payable under an elected option to such Participant and/or
his co-pensioner will be adjusted to reflect any such further
deduction, change, offset or correction.
m) Notwithstanding anything to the contrary contained in this Section
3.18, in the event that the amount payable to a co-pensioner is
determined as though the Participant did not have a spouse who could
become eligible for a surviving spouse's benefit,
<PAGE>
- 82 -
because such Participant who had a spouse at retirement failed to
notify the Company that he had such a spouse, the amount otherwise
payable to the co-pensioner for any month will be reduced by the
amount of any surviving spouse's benefit provided for the same month
pursuant to Article IV of this Plan.
n) For the purpose of this Section 3.18, in the case of a Participant who
retires on other than a deferred vested pension or a deferred 60/15
pension, pension payments shall be deemed to commence as of the date
of retirement and, in the case of a Participant who retires on a
deferred vested pension or a deferred 60/15 pension, pension payments
shall be deemed to commence as of the first of the month for which
regular pension is first payable under the provisions of Section 3.13.
Section 3.19 MINIMUM DISTRIBUTIONS. Notwithstanding any other provision
of this Plan, the entire interest of a Participant will be distributed in
conformity to Section 401(a)(9) of the Code. The entire interest of each
Participant, if
<PAGE>
- 83 -
living, which is payable as a lump sum will be distributed not later than
April 1 of the calendar year following the calendar year in which the
Participant attains age 70-1/2. If distribution to a Participant who attains
age 70-1/2 is to be in periodic payments, distribution shall begin no later than
such April 1 and shall be made in accordance with regulations --
a) over the life of the Participant;
b) over the lives of such participant and a designated beneficiary;
c) over a period certain not extending beyond the life expectancy of such
Participant, or
d) over a period certain not extending beyond the life expectancies of
such Participant and a designated beneficiary.
Any additional benefits that accrue after the April 1 described above shall
begin being distributed as of the January 1 following the calendar year in which
the additional benefits accrue.
If such periodic distribution has begun and the Participant dies before his
entire interest has been distributed to
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him, the remaining portion of such interest will be distributed at least as
rapidly as under the method of periodic distribution in force as of the date of
the Participant's death. If the Participant's spouse is not the designated
beneficiary, the method of distribution selected must assure that at least 50%
of the amount available for distribution is paid within the life expectancy of
the Participant.
If a Participant dies before periodic distribution of his interest has
begun, the entire interest will be distributed within 5 years after the death of
such Participant, unless (a) or (b) apply:
a) if, however, any portion of the Participant's interest is payable to
(or for the benefit of) a designated beneficiary, such portion may be
distributed in substantially equal installments (in accordance with
regulations) over the life of such designated beneficiary (or over a
period not exceeding beyond the life expectancy of such beneficiary).
Such distributions are required to begin no later than 1 year after
the date of the
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Participant's death or such later date as regulations prescribe; or
b) If such designated beneficiary is the surviving spouse of the
Participant, distribution is not required to begin until the date on
which the Participant would have attained age 70-1/2. If the spouse
dies before distribution begins, subsequent distributions will be made
as if the Participant had died on the date of the spouse's death.
For the purposes of applying the provisions of Section 401(a)(9) of the
Code, the life expectancy of a Participant and the Participant's spouse (other
than in the case of a life annuity) may be redetermined, but not more frequently
than annually. In the case of any other designated beneficiary, such life
expectancy will be calculated once at the time benefit payments commence and
will not be recalculated (unless such calculation is discovered to be
erroneous).
Any amount paid to a child of a Participant will be treated as if it had
been paid to the Participant's surviving spouse if such amount will become
payable to such surviving
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spouse when such child reaches majority (or upon another event permitted under
regulations).
Section 3.20 LIMITATION ON BENEFITS.
a) Subject to the adjustments in (b) and (c) below, the maximum annual
pension payable in the form of a life annuity to an eligible Employee
under this Plan will not exceed the lesser of $90,000 (or such amount
as the Internal Revenue Service permits in annual adjustments based on
the cost of living), or 100% of the eligible Employee's average
compensation for the 3 consecutive calendar years during which he
participated in the Plan and had the greatest aggregate compensation
from the Company. For a Participant who has less than 10 years of
participation, this limitation will be multiplied by a fraction in
which the numerator is the number of years (or part thereof) of
participation in the Plan and the denominator is 10. For a
Participant who has less than 10 years of continuous service, the
limitation will be multiplied by a fraction in which the numerator is
the number of
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years (or part thereof) of continuous service and the denominator is
10. The foregoing fractional limitations will be applied separately
to each change in the benefit structure of the Plan in accordance with
regulations of the Secretary of the Treasury.
For purposes of coordinating the application of this section with
the requirements of Section 415 of the Code, the "limitation year"
will be the calendar year. Compensation will be determined by
reference to Section 1.415-2(d) of the treasury regulations and will
include amounts actually paid or includable in gross income in each
calendar year.
b) In the case of a Participant whose pension becomes payable before the
Social Security retirement age, the $90,000 limitation on the maximum
pension will be reduced to the actuarial equivalent of an annual
pension in the amount of $90,000 beginning at the Social Security
retirement age. For purposes of this paragraph, the Social Security
retirement age
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will be used as the retirement age for the Participant under Section
216(1) of the Social Security Act, except that such section will be
applied without regard to the age increase factor and as if the early
retirement age were 62. The reduction will be made in such manner as
the Secretary may prescribe which is consistent with the reduction for
old age insurance benefits commencing before the Social Security
retirement age. The interest rate used in making these adjustments
will be the rate used in calculating the Participant's pension or 5%,
if greater.
c) If a Participant's pension becomes payable after the Social Security
retirement age, the $90,000 limitation will be increased to the
actuarial equivalent of a pension in the amount of $90,000 beginning
at the Social Security retirement age. The interest rate utilized in
such adjustment will be 5%.
d) In the event the eligible Employee's pension is payable in any form
other than a life annuity, the
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limitation prescribed will be actuarially adjusted in accordance with
Internal Revenue Service regulations issued pursuant to the provisions
of Section 415(b) of the Code; provided, however, that for purposes of
this paragraph, the portion of any joint and survivor annuity which
constitutes a qualified joint and survivor annuity, and any ancillary
benefits not directly related to retirement income benefits, will not
be taken into account.
e) The limitation herein will not apply to any eligible Employee who has
not at any time participated in any defined contribution plan
maintained by the Company if his total annual pension computed in
accordance with this section is not in excess of $10,000 in any year.
f) The limitations with respect to any Employee who at any time has
participated in any other defined benefit plan or in a defined
contribution plan maintained by the Company or by a corporation which
is a member of a controlled group of corporations
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(within the meaning of Section 1563(a), determined without regard to
Sections 1563(a)(4) and (e)(3)(C), and Section 415(h) of the Code) of
which the Company is a member will apply as if the total benefits
payable under all defined benefit plans in which the Employee has been
a Participant were payable from one plan, and as if the total annual
additions made to all defined contribution plans in which the Employee
has been a Participant, were made to one plan.
SECTION 3.21 FIVE-YEAR TERM CERTAIN PAYMENTS.
(a) Notwithstanding anything herein to the contrary, any Participant who
retires on other than a deferred vested pension on or after
September 1, 1993 will be entitled to receive the benefits described
in subsection (b) below for a minimum of 60 months following the date
of retirement.
(b) For any month which is prior to both the end of the 60-month period
defined in subsection (a) above and the month following the month in
which the Participant's death occurs, the monthly payment
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otherwise payable to the Participant under this Plan for such month
shall be increased to the extent necessary so that the total amount
payable to the Participant under this Plan for such month shall not be
less than the Participant's regular pension, as determined in
accordance with Section 3.3, after taking into account the adjustments
required by other provisions of this article.
For any month which is both (i) prior to the end of the 60-month
period defined in subsection (a) above, and (ii) after the month in
which the Participant's death occurs, the Participant's surviving
spouse shall be entitled to a monthly payment under this Section 3.21
equal to the difference between the monthly payment the Participant
would have been entitled to for such month if he had been living, as
determined in accordance with Section 3.3 after taking into account
the adjustments required by other provisions of this article and the
total of all amounts otherwise payable for such months under this Plan
on behalf
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of the Participant to his surviving spouse or co-pensioner.
(c) In the event that there is no surviving spouse, such benefit will be
paid to the person designated by the Participant as his designated
beneficiary, and if there is no surviving beneficiary, such benefit
will be paid to the estate of the Participant. Any Participant may,
in accordance with the provisions of subsection (b) above and on a
form prescribed for such purposes by the Company (i) designate a
beneficiary to receive the payments under subsection (b) above (A) in
the event of the waiver of the Automatic 50% Spouse Option and the Co-
Pensioner Option, or (B) in the event that his spouse or co-pensioner
shall predecease him, or (ii) change such a beneficiary designation at
any time prior to his death. Such beneficiary designation shall be
deemed to be effective when it shall have been received by the Company.
(d) In the event that a Participant who is eligible to retire (on other
than a deferred vested pension)
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and who has made application for retirement during any calendar month
and, has not revoked such application dies in the month in which his
retirement would otherwise have occurred, the benefits provided under
this Section 3.21 will be paid as if the Participant had survived
until such requested retirement date.
ARTICLE IV
SURVIVING SPOUSE'S BENEFIT
Section 4.1 ELIGIBILITY. With respect to any Participant who completed at
least 15 years of continuous service and who dies and either:
a) at a time (i) when he is accruing continuous service, or (ii) before
application for pension and after a break in continuous service which
occurred under conditions of eligibility for retirement on immediate
pension, or
b) after retirement on other than a deferred vested pension,
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his surviving spouse, as determined pursuant to Section 4.5, will be eligible
for a monthly benefit ("surviving spouse's benefit") as set forth below.
Section 4.2 AMOUNT OF BENEFIT. Unless the provisions of Section 4.3
result in a higher amount, the amount of any surviving spouse's benefit payable
will be $200.00 for any month before the month in which the surviving spouse
attains the age at which widow's or widower's benefits are first provided under
a law referred to in Section 1.18 and $150.00 for any month thereafter.
Section 4.3 CALCULATION OF BENEFIT. Unless the provisions of Section 4.2
result in a higher amount, the amount of any surviving spouse's benefit payable
will be determined in accordance with the following:
a) If eligibility for such a benefit arises by reason of the death of a
Participant covered by Section 4.1(a), the monthly amount of the
benefit, subject to the provisions of (d) and (e) below, will be equal
to 50% of the amount determined in accordance with Section 3.3 as
though the Participant had retired on the date of his death and, in
the case
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of a Participant who died prior to attainment of age 62, as though he
had been age 62 on the date of his death.
b) If eligibility for such a benefit arises by reason of the death of a
Participant covered by Section 4.1(b), the monthly amount of the
benefit, subject to the provisions of (c), (d) and (e) below, will be
equal to 50% of the amount determined in accordance with Section 3.3.
In addition, surviving spouses of Participants who retired on or after
July 31, 1974 but prior to August 31, 1989 will be entitled to receive
a supplement of $50 per month during the period in which the surviving
spouse's benefit is payable but not later than August 31, 1999.
c) In the case of a Participant who dies after 60/15 retirement and prior
to age 62 and who had elected to defer the commencement of regular
pension until after attainment of age 62, the regular pension payable
to the Participant will, for purposes of applying the provisions of
(b) above, be deemed to
<PAGE>
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be the amount determined in accordance with Section 3.3 which would
have been payable if, under the provisions of this Plan, he had been
permitted to and had elected to receive regular pension commencing
with the first month for which the surviving spouse's benefit is
payable.
d) Commencing with the first surviving spouse's benefit payable after the
surviving spouse attains the age at which widow's or widower's
benefits are first provided under a law referred to in Section 1.18,
the amount of the surviving spouse's benefit otherwise payable for any
month will be reduced by 50% of the amount of the widow's or widower's
benefit to which the surviving spouse is, or upon application would
be, entitled for such month based on the law in effect at the time the
surviving spouse's benefit first becomes payable (without regard to
any offset or suspension imposed by such law). If the surviving
spouse is not eligible for such a widow's or widower's benefit for
such month, the amount of the reduction will be equal to 50% of
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the amount that could have become payable to the surviving spouse for
such month, based on the Participant's wages, if the surviving spouse
had been eligible and had applied for such a benefit.
e) If the surviving spouse receives, or upon application would be
entitled to receive, any payment derived from rights acquired by the
Participant, which would if received by the Participant have been
subject to deduction under Section 3.9 from any regular pension
otherwise payable to the Participant (except any such payment received
by the surviving spouse by reason of an election by the Participant to
receive a reduced payment), the amount of such payment not
attributable to the contributions of the Participant will be deducted
from the surviving spouse's benefit otherwise determined under Article
IV.
f) Notwithstanding anything to the contrary set forth above, semi-annual
cash payments up to $500 will be made to surviving spouses receiving
surviving spouse's benefits as of February 1, 1994 pursuant
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to a prior version of this Plan in effect prior to July 31, 1974. The
semi-annual payments will commence as of February 28, 1994 and extend
until August 31, 1999 in the manner described in Exhibit C hereto.
Semi-annual cash payments up to $500 will also be made to spouses of
pre-1974 pensioners not otherwise eligible for surviving spouses
benefits. The semi-annual payments will commence as of February 28,
1994 and extend until August 31, 1999 in the manner described in
Exhibit D.
Section 4.4 COMMENCEMENT AND TERMINATION OF BENEFIT. The first
installment of any surviving spouse's benefit will be payable for the month
following the month in which the Participant dies, and the last installment will
be payable for the month in which the surviving spouse dies; provided, however,
that a surviving spouse's benefit will not be payable for any month for which a
special payment was payable to the Participant. In connection with an
application for a surviving spouse's benefit, the Company may require the
surviving spouse to grant any authorization necessary to receive rele-
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vant records from the agency administering the law referred to in Section
4.3(d).
Section 4.5 DETERMINATION OF STATUS AS SURVIVING SPOUSE. A person will be
considered a surviving spouse for the purpose of this Article IV only if:
a) immediately after a Participant's death, such person is a widow or
widower of such Participant within the provisions of the Social
Security Act, except that where such Act required reference to the law
of the District of Columbia, the applicable law will be that of the
State of Illinois; and
b) with respect to a Participant who dies after retirement, such person
was married to the Participant at the date of the Participant's
retirement.
Section 4.6 INFORMATION TO BE PROVIDED BY THE COMPANY. The Company will
make reasonable efforts, by appropriate means or methods, to inform the
surviving spouse of an eligible Participant of the existence of this benefit.
Section 4.7 SURVIVING SPOUSE OF PART-TIME PARTICIPANTS. In the case of a
surviving spouse of a deceased part-time
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Participant, notwithstanding the provisions of Section 4.2, the amounts set
forth in such Section 4.2 will be reduced on the same basis as is provided in
Section 3.7 for the reduction of the minimum pension of a part-time Participant,
whether or not the minimum pension was applicable to such deceased part-time
Participant.
ARTICLE V
DETERMINATION OF CONTINUOUS SERVICE
SECTION 5.1 CONTINUOUS SERVICE DEFINED. "Continuous service" means
service prior to retirement calculated from the Employee's last hiring date
(this means in the case of a break in continuous service, continuous service
will be calculated from the date of reemployment following the last unremoved
break in continuous service) in accordance with the following provisions;
provided, however, that the last hiring date prior to the original effective
date of this Plan will be based on the practices in effect at the time the break
occurred:
a) There will be no deduction for any time lost which does not constitute
a break in continuous service, except that in determining length of
continuous service for pension purposes:
<PAGE>
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1) that portion of any absence which continues beyond 3 years from
commencement of absence due to a layoff or beyond 2 years from an
absence due to physical disability will not be creditable as
continuous service; provided, however, that absence in excess of
2 years due to a compensable disability incurred during the
course of employment will be creditable as continuous service, if
the Employee is returned to work within 30 days after final
payment of statutory compensation for such disability or after
the end of the period used in calculating lump sum payment, and
2) the period between a break in service and the date of
reemployment which results in the removal of a break in
accordance with (c) below will not be creditable as continuous
service.
b) Continuous service will be broken by:
1) quit;
<PAGE>
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2) discharge, provided that if the Employee is rehired within 6
months, the break in continuous service will be removed,
3) termination (if and when termination occurs pursuant to the Basic
Agreement) due to permanent shutdown of a plant, department or
subdivision thereof;
4) absence which continues for more than 3 years or absence due to
disability which continues for more than 2 years, except that (i)
absence in excess of 2 years due to compensable disability
incurred during the course of employment will not break
continuous service, provided the Employee is returned to work
within 30 days after final payment of statutory compensation for
such disability or after the end of the period used in
calculating a lump sum payment; and (ii) if an Employee is absent
on account of layoff in excess of 3 years or absence due to
disability in excess of 2 years returns to work with the Company
within the
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period during which he retains his accumulated continuous service
in accordance with the seniority provisions of the Basic
Agreement, the break in continuous service will be removed;
provided, however, that continuous service will not be considered to
be broken by absence of any Employee who subsequent to May 1, 1940
entered the military, naval or merchant marine service of the United
States, and who has reemployment rights under the law and complies
with requirements of law as to reemployment and is reemployed.
c) Except as otherwise provided in (b)(2) and (b)(4)(ii) above, an
Employee who on or after January 1, 1976 incurs a break in continuous
service prior to becoming eligible for an immediate or deferred vested
pension, and who is reemployed by the Company will, upon completion of
1 year of continuous service following such reemployment, have such
break in continuous service removed if the period of continuous
service accrued prior to
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the break is in excess of the period between the break and the date of
reemployment.
Notwithstanding anything to the contrary contained in the
foregoing, an Employee who on or after January 1, 1985 incurs a break
in continuous service prior to becoming eligible for an immediate or
deferred vested pension, and who is reemployed by the Company shall,
upon completion of 1 year of continuous service following such
reemployment, have such break in continuous service removed if the
period between the break and the date of reemployment is less than 5
years.
d) Notwithstanding (c) above, an Employee who on or after January 1, 1976
incurs a break in service by reason of quit or discharge prior to
becoming eligible for an immediate or deferred vested pension and who
is reemployed by the Company within 1 year from such quit or discharge
shall, except as otherwise provided in (b)(4) above, be deemed to have
had such break in service removed solely for purposes of determining
eligibility for a pension
<PAGE>
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pursuant to Section 2.1 or an unreduced pension commencing at age 65
pursuant to Section 2.8.
e) For purposes of eligibility and vesting only, continuous service will
include employment with other operations of the Company and with a
member of a controlled group or an unincorporated trade or business
which is under common control with the Company as determined in
accordance with Section 414(c) of the Code and the regulations issued
thereunder. A "controlled group of corporations" means a controlled
group of corporations as defined in Section 1563(a) of the Code,
determined without regard to Sections 1563(a)(4) and (e)(3)(c) of the
Code.
SECTION 5.2 ELAPSED TIME. Notwithstanding any other provisions of this
article, this article will be interpreted and applied in conformity with the
Internal Revenue Service regulations set forth in Section 1.410(a)-7 entitled
"elapsed time." Accordingly, in fulfillment of such purpose, the following
subparagraphs impose supplementary requirements
<PAGE>
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which will be followed in crediting Employees with continuous service.
a) Each Employee will be credited with a period of service (equivalent to
years of continuous service) commencing no later than the Employee's
employment commencement date and ending no earlier than the Employee's
severance from service date. Severance from service date will be the
earlier of the date on which an Employee quits, is discharged (subject
to restoration of service within 6 months if rehired as set forth in
Section 5.1) or dies, or the second anniversary of the first date of
absence for any other reason (subject to the 2-year period and the
further extensions for disability and uniformed government service in
Section 5.1(b)(4) above and for child care leave in Section 5.1(b)(5)
above).
b) Continuous service will be credited as required by the service
spanning rules. If an Employee severs from service by reason of quit,
discharge or retirement and the Employee then performs an hour
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of service within the meaning of 29 C.F.R. Section 2530.200b-2(a)(1)
within 12 months of the severance from service date, the Employee will
be credited with service for the period of severance for purposes of
participation and vesting. Notwithstanding the foregoing sentence, if
an Employee severs from service by reason of quit, discharge or
retirement during an absence from service of 12 months or less for any
reason OTHER THAN quit, discharge, retirement or death and then
performs an hour of service (as defined above) within 12 months of the
date on which the Employee was first absent from service, the Employee
will be credited with service for the period of severance for purposes
of participation and vesting.
c) An Employee will satisfy the requirement for years of continuous
service under this Plan as of the date the Employee has completed a
period of service equal to such requirement. An Employee who
completes 1 year of continuous service as required in Section 1.14 for
participation on the first anni-
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versary of his employment commencement date will have satisfied the
service requirement for participation as of such date.
d) A 1-year period of severance for purposes of applying Article V hereof
is a 12 consecutive month period beginning on the Employee's severance
from service date during which the Employee does not perform an hour
of service (as defined above). Such term is used interchangeably with
"1 year break in service."
ARTICLE VI
REEMPLOYMENT AFTER ATTAINMENT OF PENSION ELIGIBILITY
SECTION 6.1 APPLICABILITY OF OTHER SECTIONS. Except as otherwise provided
in this Article VI, the provisions of all other sections of this Plan will be
applicable to any Participant who is reemployed by the Company after having been
retired and having received a pension or after having attained eligibility for a
deferred pension under this document or a prior version of this Plan.
SECTION 6.2 EFFECT ON PENSION. Any Participant who is receiving a pension
under this document or a prior version of
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this Plan will upon reemployment by the Company have his pension discontinued.
SECTION 6.3 CONTINUOUS SERVICE OF REEMPLOYED PARTICIPANT.
a) Any Participant who has been retired and has received a pension or who
is eligible for a deferred vested retirement pension under this or a
prior version of the Plan and who will be reemployed by the Company
will be credited with his continuous service as of the date of his
prior retirement plus his continuous service accruing after
reemployment for the purposes of calculating any subsequent pension
benefits to which he may become entitled; provided, however, nothing
in this paragraph will affect the calculation of continuous service as
provided in Section 5.1(b)(4).
b) If any Participant is reemployed more than 3 years after the
Participant retired on or after September 1, 1993 or more than 3 years
after he incurred a break in continuous service with eligibility for
deferred vested pension and such
<PAGE>
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Participant again retires or incurs a break in continuous service
after such reemployment, then the amount of pension payable with
respect to the period of continuous service accrued before the most
recent prior retirement or prior break in continuous service shall be
determined pursuant to the Basic Agreement in effect at the time of
such prior retirement or prior break in service.
c) If a Participant who received a lump sum payment in accordance with
Section 3.14 is reemployed by the Company, the continuous service with
respect to which he received such lump sum payment is to be used in
calculating any subsequent pension benefit to which he may become
entitled only if, within 5 years of such reemployment, or if sooner
within a period of 5 consecutive 1-year breaks in continuous service,
the Participant repays an amount equal to the lump sum payment
(reduced by an amount determined by multiplying the regular pension
which had been settled by such lump sum payment by the number of
months between occurrence of the break in con-
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tinuous service and reemployment) plus interest accrued at the rate
established by law. At the time of reemployment, the Participant will
be informed of his right to make repayment under the conditions
described above.
SECTION 6.4 SPECIAL PENSION ELIGIBILITY AFTER REEMPLOYMENT.
Notwithstanding anything to the contrary contained in this Plan, any Participant
who has been rehired and is receiving a pension pursuant to the provisions of
this Plan for 70/80 retirement or similar provisions of a prior version of this
Plan and is subsequently reemployed by the Company will upon ceasing work after
reemployment and prior to age 62 by reason of a permanent shutdown of a plant,
department or subdivision thereof or by reason of layoff or physical disability
be eligible to retire and will upon his retirement be eligible for a pension
commencing with the month following the month in which retirement occurs
("reinstated 70/80 retirement pension"); provided, however, that such
Participant will not be eligible under the provisions of this Article VI to
retire during a period of absence from work due to a physical dis-
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ability until such disability continues for a period of 6 consecutive full
calendar months.
SECTION 6.5 SPECIAL RULES AS TO AMOUNT OF PENSION. Special payment will
not be made in any case where a special payment was made to the Participant for
a prior retirement under this document or any prior version of this Plan.
SECTION 6.6 AMOUNT OF REINSTATED 70/80 RETIREMENT PENSION. The amount of
regular pension for reinstated 70/80 retirement will be determined the same as a
regular pension for 70/80 retirement.
ARTICLE VII
APPEALS PROCEDURE
SECTION 7.1 DISPUTES AS TO ELIGIBILITY OR AMOUNT.
a) If any difference arises between the Company and any Participant who
is an Employee covered by the Basic Agreement and who is an applicant
for a pension, or to whom a pension is payable, as to such
Participant's right to a pension or the amount of his pension and
agreement cannot be reached between the Company and a representative
of the Union, such question will be referred to the
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Arbitrator established under the Basic Agreement, provided, however,
that the President of the Union (or his designee) has given written
approval of such referral. The Arbitrator will have authority only to
decide the questions pursuant to the provisions of this Plan
applicable to the question but it will not have authority in any way
to alter, add to or subtract from any of such provisions. The
decision of the Arbitrator on any such question will be binding on the
Company, the Union and the Participant. If any difference arises
between the Company and any person who is or claims to be a co-
pensioner or a surviving spouse of an Employee covered by the Basic Agreement,
as to such person's right to a benefit under this Plan or the amount of such
benefit, such difference will be resolved by the Company and a representative of
the Union. If such difference is not so resolved, it may, by agreement of the
Company and the Union, be referred to the Arbitrator described above, which will
have authority as described above with respect to such
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difference, and if it is so referred, the decision of the Arbitrator
will be binding on the Company, the Union and such person.
b) 1) If any difference arises between the Company and any Participant,
who is not an Employee covered by the Basic Agreement, who is an
applicant for a pension or to whom a pension is payable, as to
such Participant's right to a pension and agreement cannot be
reached between the Company and the Participant, the Participant
or his authorized representative will file a claim for a pension
in the manner and on the forms provided by the Committee. The
Committee or its authorized representatives will decide on the
merits after receipt of the claim and the Participant and his
authorized representative, if any, will be notified in writing of
the decision.
2) If a claim is wholly or partially denied, the notice of the
decision will be furnished within 60 days after receipt of the
claim by
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the Committee. Such notice will be written in a manner
calculated to be understood by the claimant and will include:
i) the specific reason or reasons for the denial;
ii) specific reference to the pertinent Plan provisions on which
the denial is based;
iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
iv) an explanation of the Plan's claim review procedure.
If notice of denial of a claim is not furnished within the 60
days referred to above after receipt of the claim by the
Committee and the claim has not been granted, the claim will be
deemed denied for purposes of proceeding to review as described
in paragraph (3) below.
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3) A claimant whose claim for benefits is denied in whole or in part
or his authorized representative may:
i) request a review upon written application to the Committee
within 60 days after receipt by the claimant of written
notice of the denial of his claim or within 120 days of
receipt of his claim by the Committee if there is no notice
of denial;
ii) review pertinent documents in the Company's offices; and
iii) submit positions on issues and comments in writing.
The Committee or its authorized representative will promptly
review each denial of a claim upon which an application for
review is submitted. Such review will be completed within 60
days after receipt of the request for review, unless special
circumstances require an extension of time for processing, in
which case a decision will be rendered as soon as
<PAGE>
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possible, but not later than 120 days after receipt of a timely
request for review. The decision on review will be in writing in
a manner calculated to be understood by the claimant, and
specific references to the pertinent plan provisions on which the
decision is based.
SECTION 7.2 DISPUTES AS TO PERMANENT INCAPACITY. If any difference arises
between the Company and any Participant as to whether such Participant is or
continues to be permanently incapacitated within the meaning of Section 2.5,
such difference will be resolved as follows:
a) the Participant will be examined by a physician appointed for the
purpose by the Company and by a physician appointed for the purpose by
a duly authorized representative of the Union if the Participant is an
Employee in the bargaining unit represented by the Union. Otherwise,
a Participant may select a physician to examine him after he has been
examined by a physician appointed by the Company;
<PAGE>
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b) if they disagree concerning whether the Participant is permanently
incapacitated, the question will be submitted to a third physician
selected by such two physicians. The medical opinion of the third
physician, after examination of the Participant and consultation with
the other two physicians, will decide such question;
c) the fees and expenses of the third physician will be shared equally by
the Company and the Union, or the Participant if he is not an employee
in the bargaining unit represented by the Union.
ARTICLE VIII
TRUST AND FINANCING
SECTION 8.1 THE TRUST. For purposes of supplying the benefits herein
provided, the Company is utilizing the Trust identified in Section 1.20.
Contributions of the Company are deposited in the Trust Fund administered by the
Trustee identified in Section 1.21. Such Trustee and any successor trustee
appointed by the Board of Directors will have the rights, powers and duties as
set forth in the Trust, as amended from time to time.
<PAGE>
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SECTION 8.2 CONTRIBUTIONS. Contributions of the Company to the Trust
Fund will be made in such amounts and at such times as the Company will
determine. The Company intends to contribute annually at least such amounts as
are actuarially determined to be required to fund the Plan as prescribed by
Section 412 of the Code. Such contributions will be made in accordance with a
funding policy and method to be established by the Company consistent with the
objectives of the Plan and in conformity with ERISA.
ARTICLE IX
ADMINISTRATION
SECTION 9.1 FIDUCIARIES. The various responsibilities assigned by the
Company to Fiduciaries pursuant to this Plan are allocated to each Fiduciary
separately and no responsibility pursuant to this Plan or ERISA will be shared
with another Fiduciary unless the Plan specifically provides for sharing. The
Company will have the sole responsibility for making contributions to provide
benefits under the Plan and will have the sole authority to appoint and remove
the Trustee and the members of the Committee and to amend or terminate the Plan.
The Committee will have the sole responsibility for the
<PAGE>
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administration of this Plan. The Trustee will have the sole responsibility for
the administration of the Trust and the management of assets held in the Trust
Fund in accordance with the terms of the Trust except as to assets for which
another investment manager is appointed. Each Fiduciary may rely upon any
direction, information or action of another Fiduciary furnished or taken
pursuant to this Plan as being proper without further inquiry. Each Fiduciary
will be responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under this Plan and will not be responsible for
any act or failure to act of another Fiduciary.
SECTION 9.2 APPOINTMENT OF COMMITTEE. This Plan will be administered by
an administrative committee (the "Committee") consisting of 6 persons who will
be appointed by the Board of Directors of the Company. The Board of Directors
will have full power to determine the period during which any Committee member
will serve and in its discretion may remove any member of the Committee at any
time without assigning any reason for such removal. The members of the
Committee may be Participants. Any member of the Committee will automatically
cease to be a member of the Committee on termination of his employ-
<PAGE>
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ment. An officer of the Company will certify to the Trustee the names of the
members of the Committee and thereafter any change in its membership.
SECTION 9.3 QUORUM. The action of a majority of the members of the
Committee at the time acting hereunder, and any instrument executed by a
majority of such members of the Committee, will be considered the action or
instrument of the Committee. Action may be taken by the Committee at a meeting
or in writing without a meeting.
No member of the Committee, however, will vote or decide upon any matter
relating solely to himself or to any of his rights or benefits under the Plan.
The Committee may authorize any one or more of its members to execute any
document or documents on behalf of the Committee, in which event the Committee
will notify the Trustee in writing of such action and of the name or names of
its members so designated. The Trustee thereafter may accept and rely upon any
document executed by such member or members as representing action by the
Committee, until the Committee files with the Trustee a written revocation of
such designation.
<PAGE>
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SECTION 9.4 POWERS AND DUTIES. The Committee will be charged with the
administration of this Plan and its duties will include the interpretation of
the provisions of the Plan, the adoption of any rules and regulations which may
become necessary or desirable in the operation of the Plan, the determination of
how and when benefits should be paid, the keeping of individual accounts of each
Participant in the Plan, the making of such determinations and the taking of
such actions as are expressly authorized or directed in the Plan, and the taking
of such other actions as may be required for the proper administration of the
Plan in accordance with the terms hereof.
The Plan will be administered in accordance with ERISA and in conformity
with regulations and rulings issued pursuant to such laws. Within the scope of
authority conferred upon it by this Plan and consistent with the provisions of
ERISA, the Committee will make all decisions as to the facts bearing upon the
right of any person to benefits and the application of any term of the Plan or
any rule or regulation of the Committee to any case.
<PAGE>
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The Committee may employ such accountants, counsel, specialists, and other
persons as it deems necessary or desirable in connection with the administration
of the Plan. Such persons may be acting in a similar capacity for, or may be
employees of, the Company. To the extent permitted by ERISA, the Committee will
be entitled to rely upon, and will be fully protected in any action taken by it
in good faith reliance upon and in accordance with, any opinions or reports
furnished to it by any such accountant, counsel, or other specialist.
SECTION 9.5 IMMUNITY OF COMMITTEE. To the extent permitted by ERISA, each
member of the Committee, whether or not then in office, will be held harmless
and indemnified by the Company against all claims and liabilities and all
expenses reasonably incurred or imposed upon him in connection with or resulting
from any action, suit or proceeding, or settlement or compromise thereof
approved by the Company, to which he may be made a party by reason of any action
or alleged action, either of omission or commission, performed by him while
acting as a member of the Committee, except in relation to matters as to which
recovery shall be had against
<PAGE>
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him by reason of a final adjudication in such action, suit or proceeding finding
him guilty of willful misconduct or lack of good faith. Plan assets will not be
used as a source for any compensation paid to members of the Committee by reason
of their service on the Committee. All reasonable expenses of administering the
Plan will be paid from the Trust Fund unless paid by the Company. Members will
not be required individually to furnish bonds or other security for faithful
performance of their duties. The Company will furnish bonding as required by
ERISA.
SECTION 9.6 CLAIMS AND REVIEW PROCEDURES. Differences between the Company
and any Participant shall be resolved pursuant to the provisions of Article VII.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 PERMANENCY OF THE PLAN. This Plan is intended to be permanent;
however by a resolution of the Board of Directors or a writing executed by any
two officers of the Company, this Plan may be terminated, at any time, with
respect to all or a portion of the covered Participants. In that event the
Company shall cause the Trust Fund to be
<PAGE>
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liquidated as provided in ERISA. In the event that the Company shall cease to
exist, the Plan will be terminated unless it is adopted by a successor employer.
Upon the termination or partial termination of the Plan the rights of all
affected Employees to benefits accrued to the date of such termination or
partial termination, to the extent funded as of such date, are nonforfeitable.
In the event of termination of the Plan, the Committee will direct the Trustee
to make provision for the expenses of the Plan and the Trust Fund and then to
allocate the assets in the Trust Fund (to the extent such assets are sufficient)
in accordance with Section 4044 of ERISA. Any assets remaining after the
provision for expenses and allocations required by ERISA will be returned to the
Company.
It is the express intention of the Plan that the foregoing allocation of
assets upon termination be accomplished in accordance with the provisions of
Section 4044 of ERISA and that the provisions of ERISA be controlling in the
event of any conflict or inconsistency between this Plan and the provisions of
ERISA.
<PAGE>
- 126 -
To the extent that no discrimination in value results, any distribution
after termination of the Plan may be made, in whole or in part, in cash, in
securities or other assets in kind, or in nontransferable annuity contracts, as
the Committee in its discretion may determine. In making such distribution, any
and all determinations, divisions, appraisals, apportionments, and allotments so
made will be final and conclusive and not subject to question by any person.
SECTION 10.2 AMENDMENT OF PLAN. This Plan may be amended, retroactively
or otherwise, at any time and from time to time by resolution of the Board of
Directors or by an instrument in writing executed by any two officers of the
Company, provided, however, that:
a) no amendment may be made prior to the satisfaction of all expenses of
the Plan and expenses of the Trust attributable to this Plan and of
all liabilities with respect to Participants, co-pensioners, or
surviving spouses which would permit any part of the Trust Fund
attributable to the Plan to be used for or diverted to any purpose
other than for the
<PAGE>
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exclusive benefit of such persons and the payment of administration
expenses of the Plan and of the Trust attributable to this Plan; and
b) no amendment will deprive any person of nonforfeitable rights to
benefits accrued to the date of such amendment. If any amendment is
made which affects the vesting schedule of benefits under the Plan,
each Participant who has 5 or more years of service may elect, within
a reasonable period after the adoption of the amendment, to have his
nonforfeitable percentage computed under the Plan without regard to
such amendment. The period during which the election may be made will
commence with the date the amendment is adopted and will end on the
later of:
1) 60 days after the amendment is adopted;
2) 60 days after the amendment is effective; or
3) 60 days after the Participant is issued written notice of the
amendment by the Committee.
<PAGE>
- 128 -
SECTION 10.3 MERGER OR CONSOLIDATION OF PLAN. This Plan may not be merged
or consolidated with, nor its assets or liabilities transferred to, another plan
unless provisions are made so that each Participant would immediately thereafter
be entitled to receive a benefit at least as great as the benefit he would have
been entitled to receive from this Plan immediately before the transaction,
assuming for purposes of this test that this Plan had terminated immediately
before and the successor plan had terminated immediately after such transaction.
SECTION 10.4 NO INTEREST IN TRUST FUND. No Participant prior to his
retirement under conditions of eligibility for pension benefits will have any
right or interest in or to any portion of any funds which may be paid into any
pension Trust or Trusts heretofore or hereafter established for the purpose of
paying pensions and no Participant or co-pensioner will have any right to
pension benefits except to the extent provided in this Plan. Employment rights
will not be affected by reason of this Plan.
SECTION 10.5 NO CONTRACT OF EMPLOYMENT. Nothing contained in this Plan
may be construed as a contract of employ-
<PAGE>
- 129 -
ment between the Company and any Employee, or as a right of any Employee to be
continued in the employment of the Company, or as a limitation of the right of
the Company to discharge any of its Employees, with or without cause.
SECTION 10.6 NO DIVERSION OF TRUST FUND. It will be impossible at any
time prior to the satisfaction of all liabilities with respect to Participants,
their co-pensioners, or surviving spouses for any part of the Trust Fund to be
(within the taxable year or thereafter) used for, or diverted to, purposes other
than for the exclusive benefit of Participants, their co-pensioners, or
surviving spouses. All forfeitures arising under the Plan will be applied to
reduce the Company's contributions. No such forfeitures will be applied to
increase the benefits any Participant, co-pensioner, or surviving spouse would
otherwise receive under the Plan.
SECTION 10.7 ALIENATION OF BENEFITS PROHIBITED. No benefit payable under
this Plan will be subject to alienation, sale, transfer, assignment, pledge,
attachment, garnishment, execution, or encumbrance of any kind, and any attempt
to accomplish the same will be void.
<PAGE>
<PAGE>
- 130 -
If the Committee finds that any person (Participant, co-pensioner or
surviving spouse) to whom any benefit payment is due or will become due has
become physically or mentally unable to handle his own affairs, or is a minor,
the Committee in its sole discretion may direct that any benefit due him, unless
claim has been made therefor by a duly appointed legal representative, be paid
to his spouse, a child, a parent or other blood relative or a person with whom
he resides, and such payment will be a complete discharge of all liability
under this Plan.
Notwithstanding anything to the contrary contained herein, the Company will
comply with any Qualified Domestic Relations Order, as such term is defined in
the Code, that creates a right in any person with respect to the benefit payable
to a Participant under the Plan provided that the Order states: (i) the name
and last known mailing address of the Participant or former Participant and each
person to whom payment is to be made; (ii) the amount of payment to be made
under the Order, or either the percentage of the Participant's benefit to be
paid or a formula for calculating such percentage; (iii) the number of payments
to be made or the period of
<PAGE>
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payment under the Order; and (iv) the name of the plan to which the Order
applies. An order of a court will not be considered a Qualified Domestic
Relations Order and will not be given effect if it purports to require that this
Plan pay any type or form of benefit or any option not otherwise provided under
the Plan, or any increased benefit, taking into account the actuarial equivalent
values of benefits payable under the Plan, or if it orders payments which are
already required by a prior Order to be paid to a different person.
SECTION 10.8 WRITTEN COMMUNICATIONS. Any notice, request, instruction,
or other communication to be given or made hereunder will be in writing and
either personally delivered or mailed fully postpaid and properly addressed to
such address at the last address for notice shown on the Committee's records.
SECTION 10.9 NAME AND ADDRESS CHANGES. Each person entitled to a benefit
hereunder will at all times be responsible for notifying the Committee of any
change in his name or address. If any benefit check (which was mailed to the
last address of the payee shown on the Committee's records) is
<PAGE>
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returned unclaimed, further payments will be discontinued until the Committee
directs otherwise.
SECTION 10.10 IDENTITY OF PAYEE. If at any time any doubt exists as to
the identity of any person entitled to payment of any benefit hereunder or as to
the amount or time of any such payment, the Committee will direct that such sum
be held in the Trust until a further order of the Committee or a final order of
a court of competent jurisdiction in accordance with any lawful procedure.
SECTION 10.11 EVIDENCE CONCLUSIVE. The Company, the Committee, and any
person or persons involved in the administration of the Plan will be entitled to
rely upon any certification, statement, or representation made or evidence
furnished by any person with respect to his age or other facts required to be
determined under any of the provisions of the Plan, and will not be liable on
account of the payment of any monies or the doing of any act or failure to act
in reliance thereon. Nothing herein contained will be construed to prevent the
Company or the Committee from contesting any such certification, statement,
representation, or evidence or to relieve any person from the duty of submitting
satisfactory
<PAGE>
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proof of his age or such other fact. Notwithstanding the foregoing, the Company
shall have the right to correct any error when it becomes known and to make any
adjustment in future pension payments under this Plan to recoup any overpayments
previously made due to such error. This provision shall not prevent the Company
from taking any other action available to it to recover amounts erroneously paid
under the Plan.
SECTION 10.12 INDIVIDUAL LIABILITY. To the extent permitted by law, it is
declared to be the express purpose and intention of the Plan that no liability
whatever will attach to or be incurred by the stockholders, officers, Committee
members, employees or directors of the Company under or by reason of any of the
terms or conditions of this Plan.
SECTION 10.13 DEDUCTIONS FOR INSURANCE PREMIUMS. Upon authorization by a
Participant, on a form approved by the Company, the amount of premium payable by
him for coverage through a Health Maintenance Organization ("HMO") or for
medical benefits coverage, as provided under an insurance agreement between the
Company and the Union, or the amount of any overpayments made to the Participant
by the Company or its
<PAGE>
- 134 -
insurer in the course of paying any insurance benefits, supplemental
unemployment benefits or extended vacation benefits provided by any agreement
between the Company and the Union, will be deducted from any pension payable
under this Plan to the extent permitted by law.
SECTION 10.14 NUMBER AND GENDER. Words in the singular set forth in this
Plan will include, and be read as being in, the feminine gender also. Words in
the masculine gender set forth in this Plan will be read and construed as being
in the plural wherever the context requires.
ARTICLE
HOSPITAL-MEDICAL BENEFITS FOR
ELIGIBLE PENSIONERS AND SURVIVING SPOUSES
SECTION 11.1 ALLOCATION OF FUNDS TO SEPARATE ACCOUNT. The Plan provides
for the payment of benefits for sickness, hospitalization, and medical expenses
("Section 401(h) benefits") of Participants who have retired, and the spouses
and eligible dependents of such Participants ("medical expense beneficiaries").
The Committee will cause to be allocated to a separate account, which will be
maintained by the Trustee for the purposes set forth in this Article XI (but
which need not be invested separately from other funds held by the
<PAGE>
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Trustee under the Plan for retirement benefits), a portion of the Trust Fund not
to exceed the amount of accrued liability for Section 401(h) benefits as
determined by an "enrolled actuary" (within the meaning of ERISA). Such
allocated portion of the Trust Fund will be used to provide funds for payment of
the accrued liability, in whole or in part, for Section 401(h) benefits of
medical expense beneficiaries but in no event will the amounts so transferred at
any time reduce the Trust Fund (remaining after setting aside such separate
account) below an amount which is 110% of a sum required to fully fund all
accrued retirement benefits under the Plan. The Committee may provide for
further allocations to such separate account, subject to the same conditions, as
of a convenient date in each year following the initial allocation.
Contributions to fund Section 401(h) benefits hereunder may be made by the
Company from time to time, provided that such contributions meet the
requirements of Section 11.5.
SECTION 11.2 METHOD OF ALLOCATION. The portion or portions of the Trust
Fund that may be allocated to a separate account each year as provided in
Section 11.1 will not exceed such amount as an enrolled actuary (using such
factors as
<PAGE>
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expected claims, earnings and mortality assumptions) determines to be necessary
to provide for the payment of Section 401(h) benefits of medical beneficiaries
during such year and, in addition, the Committee may allocate such amounts as
may be required to provide funds to pay existing determined accrued liabilities
for such benefits, in whole or in part.
SECTION 11.3 BENEFITS PAYABLE. The Section 401(h) benefits (and the
amounts thereof) which are to be paid pursuant to this Article XI are specified
in the Program of Hospital-Medical Benefits for Eligible Pensioners and
Surviving Spouses of Acme Steel Company Riverdale Plant effective January 1,
1981, as the same may be amended and/or supplemented from time to time (or any
similar program which supersedes such Program, as so amended and/or
supplemented). Nothing herein will be construed as guaranteeing that any
medical benefits will continue to be provided hereunder or under such Program in
the future or under the same terms and conditions as such medical benefits
currently are provided under the Program, and the Company has reserved the right
to amend the Program as provided for therein, including the right to amend the
coverages thereunder, the eligibility therefor
<PAGE>
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and the manner in which the cost thereof is shared by the Company, the
Participants and their dependents.
SECTION 11.4 DEFINITIONS. For purposes of this Article XI the following
terms have the following meanings:
a) "Dependents" means any of the following individuals:
1) the spouse of a pensioner;
2) unmarried children under 19 years of age, meeting any of the
following categories:
i) a blood descendent of the first degree;
ii) a legally adopted child (including a child living with the
adopting parents during a period of probation);
iii) a stepchild residing in the pensioner's household; or
iv) a child permanently residing in the household of which the
pensioner is the head and is actually being supported solely
by such pensioner, provided the pensioner is related to the
child by
<PAGE>
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blood or marriage or is the child's legal guardian;
3) children after attainment of age 19 but not beyond attainment of
age 25, if, in addition to otherwise meeting the definition of
dependent child as contained in (2) above, such child is a full-
time student; or
4) children after attainment of age 19, if, in addition to otherwise
meeting the definition of dependent children as contained in (2)
above, such child is incapable of self-support because of a
disabling illness or injury that commenced prior to age 19.
b) "Medical expense" means expenses for medical care as defined in
Section 213(d)(1) of the Code.
SECTION 11.5 ADDITIONAL REQUIREMENTS. The following requirements shall
apply to the separate account established to provide for the payment of Section
401(h) benefits of medical expense beneficiaries:
a) Contributions to fund Section 401(h) benefits hereunder may be made by
the Company from time to
<PAGE>
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time, provided that (i) such contributions are reasonable and
ascertainable, and (ii) the aggregate of contributions (made after the
date on which the Plan first includes Section 401(h) benefits) to
provide Section 401(h) benefits provided for under the Plan will not
exceed 25% of the aggregate contributions to the Plan (made after such
date) other than contributions to fund past service credits. At the
time the Company makes a contribution to the Plan, it will designate
that portion of such contribution allocable to the funding of medical
benefits. Any benefits provided directly by the Company will be
considered as provided under the Plan and as contributions to the Plan
to provide medical benefits hereunder except to the extent such
amounts may be considered as interest-free loans by the Company to the
Plan in accordance with Prohibited Transaction Class Exemption 80-26
(which Exemption would permit the Plan to repay the Company such
amounts paid on behalf of the Plan as interest-free loans).
<PAGE>
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b) It shall be impossible, at any time prior to the satisfaction of all
liabilities under the Plan to provide Section 401(h) benefits of
medical expense beneficiaries, for any part of the corpus or income of
such separate account to be (within the taxable year or thereafter)
used for, or diverted to, any purpose other than the providing of such
benefits and the payment of expenses attributable to the
administration of such benefits.
c) Upon the satisfaction of all liabilities under the Plan to provide
Section 401(h) benefits, any amounts remaining in such separate
account will revert to the Company. Notwithstanding the foregoing, it
is intended that no amount transferred to the separate account
hereunder to provide medical benefits will revert to the Company
(subject to the permitted repayment of any amounts which are
considered as interest-free loans under Prohibited Transaction
Exemption 80-26). Accordingly, if amounts are transferred to the
separate account pursuant to Section 11.1 in excess of the medical
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benefits currently payable from such account, as long as any such
transferred amounts are held in such separate account the medical
benefit liabilities under the Plan and such separate account may not
be terminated until all such transferred amounts have been distributed
to provide medical benefits.
During such periods of time that the separate account contains
both transferred amounts under Section 11.1 and contributions under
Section 11.5(1), all payments from the separate account will be
considered as distribution of amounts transferred under Section 11.1
and earnings thereon before any such distributions are considered as
distributions of contributions made under Section 11.5(1).
d) At no time will the value of the assets of such separate account
exceed 25% of the value of the
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aggregate assets held in the Trust Fund established for the Plan.
<PAGE>
EXHIBIT A
TABLES OF PERCENTAGES
This Table of Percentages will be used in calculating the amounts payable
if one of the following options is applicable: the Pre-Pension Spouse Coverage
(50%), the Automatic 50% Spouse Option, the 50% Co-Pensioner Option, or the 100%
Co-Pensioner Option.
Participant's Age
<TABLE>
<CAPTION>
Difference between
Participant's Age
and Spouse's or
Co-Pensioner's Age 50% Options
51 52 55 58 61 64
Participant and to to to to and
Older Under 54 57 60 63 Over
<S> <C> <C> <C> <C> <C> <C>
20 or more years 71% 72% 73% 73% 74% 74%
17, 18 or 19 years 71% 72% 73% 74% 75% 75%
14, 15 or 16 years 72% 73% 74% 75% 76% 76%
11, 12 or 13 years 73% 74% 75% 77% 77% 78%
3, 9 or 10 years 74% 75% 77% 78% 79% 80%
5, 6 or 7 years 75% 76% 78% 79% 81% 82%
2, 3 or 4 years 76% 77% 79% 81% 82% 83%
less than 2 years 77% 79% 81% 83% 84% 85%
Participant
Younger
less than 2 years 77% 79% 81% 83% 84% 85%
2, 3 or 4 years 79% 80% 82% 84% 86% 87%
5, 6 or 7 years 80% 82% 84% 86% 88% 89%
8, 9 or 10 years 82% 84% 86% 88% 90% 91%
</TABLE>
<PAGE>
Participant's Age
<TABLE>
<CAPTION>
Difference between
Participant's Age
and Spouse's or
Co-Pensioner's Age 50% Options
<S> <C> <C> <C> <C> <C> <C>
11, 12 or 13 years 84% 85% 88% 90% 92% 93%
14, 15 or 16 years 86% 87% 89% 91% 93% 94%
17, 18 or 19 years 87% 89% 91% 93% 95% 96%
20 or more years 89% 91% 93% 94% 96% 96%
</TABLE>
<PAGE>
Participant's Age
<TABLE>
<CAPTION>
Difference between
Participant's Age
and Spouse's or
Co-Pensioner's Age 100% Options
51 52 55 58 61 64
Participant and to to to to and
Older Under 54 57 60 63 Over
<S> <C> <C> <C> <C> <C> <C>
20 or more years 56% 57% 58% 58% 58% 58%
17, 18 or 19 years 56% 58% 59% 60% 60% 60%
14, 15 or 16 years 57% 59% 60% 61% 62% 62%
11, 12 or 13 years 58% 60% 62% 63% 64% 64%
3, 9 or 10 years 59% 61% 63% 65% 66% 66%
5, 6 or 7 years 60% 62% 65% 67% 68% 69%
2, 3 or 4 years 62% 64% 67% 69% 71% 72%
less than 2 years 64% 66% 69% 71% 73% 75%
Participant
Younger
less than 2 years 64% 66% 69% 71% 73% 75%
2, 3 or 4 years 66% 68% 71% 74% 76% 78%
5, 6 or 7 years 68% 70% 73% 76% 79% 81%
8, 9 or 10 years 70% 73% 76% 79% 82% 84%
11, 12 or 13 years 73% 75% 79% 82% 85% 87%
14, 15 or 16 years 75% 78% 81% 84% 87% 90%
17, 18 or 19 years 78% 81% 84% 87% 90% 92%
20 or more years 80% 83% 87% 89% 92% 93%
</TABLE>
NOTES: Participant's age and spouse's or co-pensioner's age rounded to
the nearest whole year; e.g., age 51 years, six months becomes
52. Age differential is net difference between participant's and
spouse's or co-pensioner's ages as rounded.
If the named co-pensioner is any person other than the
pensioner's spouse, it may, in compliance with Internal Revenue
Service regulations, be necessary to modify the amount payable to
the pensioner and co-pensioner so as to provide that the present
<PAGE>
value of the benefit payable to the pensioner is more than 50% of
the present value of the pension that would have been payable to
the pensioner had he not elected a survivor option.
<PAGE>
EXHIBIT B
SPECIAL RULES REGARDING ALLOWED SERVICE
Any Participant covered by the September 1, 1993 Pension Agreement between
Acme Steel Company and the United Steelworkers of America who retires on or
after September 1, 1993, and who incurred 1 or more breaks in continuous service
prior to such date will, to the extent and under the conditions specifically set
forth below, be credited, for pension purposes only, with service (hereinafter
referred to as allowed service) for a period of employment with the Company
prior to such break.
A. Allowed service will be credited in accordance with C, D, E or F below only
upon retirement or death of the employee.
B. Allowed service will be credited in accordance with C, D, E or F below:
1. To determine the amount of (as distinct from eligibility for) any
benefit provided pursuant to the Pension Agreement, and
2. To determine eligibility for only
(a) Normal Retirement provided the Participant has attained age 65
and the sum of the Participant's allowed and continuous service
is 15 or more years;
(b) 62/15 Retirement;
(c) Permanent Incapacity Retirement;
(d) 70/80 Retirement;
(e) Deferred Vested Pension, provided the Participant has attained
age 40 and the sum of the Participant's allowed and continuous
service is 15 or more years if the final break in continuous
service occurred for reasons other than quit or discharged; or
(f) Surviving Spouse's Benefit.
<PAGE>
C. For the purposes of A and B above, allowed service will be credited for a
period of employment prior to a break in continuous service, excluding any
period between the last date worked and the date such a break occurs, if
the Participant either:
1. Had 1 or more years of continuous service prior to such break and
either:
(a) incurred such break for any reason other than discharge and has
30 or more years of continuous service since his last hiring
date; or
(b) incurred such break by reason of a quit and was reemployed within
6 months after such break; or
(c) incurred such break by reason of a quit to return to school and
worked as required for the Company during such summer vacation
from school and was available for work immediately upon
graduation; or
(d) incurred such break by reason of a quit and has 15 or more years
of continuous service since his last hiring date, and the length
of continuous service prior to such break was at least 2 times
the length of the period between such break and his last hiring
date; or
2. Incurred such break in continuous service by reason of absence due to
layoff or disability and:
(a) had 2 or more years of continuous service prior to the
commencement of the absence that resulted in such break; and
(b) the length of continuous service prior to such break was at least
2 times the length of the period between such break and his last
hiring date; and
<PAGE>
(c) had 15 or more years of continuous service since his last hiring
date; or
3. Incurred a break in continuous service by reason of payment of
severance allowance and the length of continuous service on which such
severance allowance was computed was at least 2 times the length of
the period between such break and his last hiring date.
D. For the purposes of A and B above, allowed service will be credited for
continuous service accrued prior to a break in such service by reason of
absence due to layoff or disability if the Participant incurred such break
prior to January 1, 1960 and the period of such absence but in no case more
than 5 years.
E. For the purposes of A and B above, if a Participant who worked at least 1
day in 1993 prior to September 1 had a break in continuous service due to
layoff which continued in excess of 2 years but such break was removed due
to the Participant's recall to work with the Company under a prior Pension
Agreement with the period during which he retains his accumulated
continuous service in accordance with the seniority provisions of the Basic
Agreement (including any service accumulation under the Basic Agreement
exclusively for purposes of recall), the period from the break in service
until the earlier of (i) the date the Participant returned to work or (ii)
5 years from the date last worked will be credited as allowed service.
F. If the Participant had 2 or more breaks in continuous service, only the
longest single period which meets the criteria for allowed service set
forth in C, D, or E above will be credited as allowed service.
G. In the case of a Participant whose pension is determined in accordance with
Sections 3.3(a) or (f) of the Plan the amount determined under that
provision will be increased by an amount equal to the Participant's
Enriched Benefit
<PAGE>
Unit multiplied by each year (and fractions thereof calculated to the
nearest month) of allowed service.
H. The increased amount determined under G above will be used in the
determination of regular pension in accordance with Section 3.3 of the
Plan.
In view of the expanded provisions contained in the January 1, 1976 Pension
Agreement for removing breaks in continuous service, the foregoing is limited to
breaks in continuous service that occurred prior to January 1, 1976 except with
respect to E above which also includes breaks in continuous service that
occurred on or after January 1, 1976.
<PAGE>
EXHIBIT C
PAYMENTS TO PRE-1974 SURVIVING SPOUSES
The Company will make a cash payment to certain surviving spouses as
described below:
1. For purposes of this Exhibit C, the term "Covered Person" shall mean a
person eligible for a Surviving Spouse Benefit pursuant to a Pension Agreement
in effect prior to July 31, 1974.
2. The total cash payment of a Covered Person shall be up to $6,000.
3. The cash payment provided for under this Exhibit C shall be made to
Covered Persons whose identity and location are known or made known to the
Company in 12 equal installments due and payable as follows:
First Installment - February 28, 1994
Second Installment - August 31, 1994
Third Installment - February 28, 1995
Fourth Installment - August 31, 1995
Fifth Installment - February 28, 1996
Sixth Installment - August 31, 1996
Seventh Installment - February 28, 1997
Eighth Installment - August 31, 1997
Ninth Installment - February 28, 1998
Tenth Installment - August 31, 1998
Eleventh Installment - February 28, 1999
Twelfth Installment - August 31, 1999
No payment shall be made to a Covered Person if the pensioner is not deceased as
of the payment date. Moreover, if the pensioner died within the 6-month period
preceding a payment date, the payment for such payment date will be prorated
based upon the month in which death occurred in such 6-month period (I.E., if
death occurred in January 1994, the February 28, 1994 payment shall be one-sixth
of the full amount; if death occurred in June 1994, the August 31, 1994 payment
shall be one-third of the full amount; etc.).
<PAGE>
4. Notwithstanding anything to the contrary stated herein, no installment
payment shall be made hereunder with respect to a Covered Person who dies prior
to the date such payment is due and payable.
<PAGE>
EXHIBIT D
PAYMENTS TO CERTAIN SURVIVING SPOUSES
The Company will make a cash payment to certain surviving spouses as
described below:
1. For purposes of this Exhibit D, the term "Covered Person" shall mean a
person who would qualify as a surviving spouse, as described in Sections 4.1 and
4.5 of the Plan effective September 1, 1993, with respect to a pensioner who
retired prior to August 1, 1974 on other than a deferred vested pension, and who
is deceased or dies on or before August 31, 1999; provided, however, that such
person is not otherwise eligible to receive a Surviving Spouse's Benefit
pursuant to the applicable terms of the Plan.
2. The total cash payment of a Covered Person shall be up to $6,000.
3. The cash payment provided for under this Exhibit D shall be made to
Covered Persons whose identity and location are known or made known to the
Company in 12 equal installments due and payable as follows:
First Installment - February 28, 1994
Second Installment - August 31, 1994
Third Installment - February 28, 1995
Fourth Installment - August 31, 1995
Fifth Installment - February 28, 1996
Sixth Installment - August 31, 1996
Seventh Installment - February 28, 1997
Eighth Installment - August 31, 1997
Ninth Installment - February 28, 1998
Tenth Installment - August 31, 1998
Eleventh Installment - February 28, 1999
Twelfth Installment - August 31, 1999
No payment shall be made to a Covered Person if the pensioner is not deceased as
of the payment date. Moreover, if the pensioner died within the 6-month period
preceding a payment date, the payment for such payment date will be prorated
based upon the month in which death occurred in such 6-month period (I.E., if
death occurred in January 1994, the February 28, 1994 payment shall be one-sixth
of the full amount; if death
<PAGE>
occurred in June 1994, the August 31, 1994 payment shall be one-third of the
full amount; etc.).
4. Notwithstanding anything to the contrary stated herein, no installment
payment shall be made hereunder with respect to a Covered Person who dies prior
to the date such payment is due and payable.
5. The Company shall make a good faith effort to identify and determine
the current address of all Covered Persons who may be entitled to payments
hereunder. Nothing herein, however, shall require the Company to incur any
costs or expenses which are unreasonable in connection with its efforts to so
identify and locate such individuals. If the Company becomes aware of the
identity and location of any Covered Person, the Company shall promptly make
such installment payments to such person if then living; provided, however, that
the Company shall have no obligation hereunder with respect to any payment due
hereunder if the Company, after making a good faith effort to do so, is unable
to determine the identity and current address of such person prior to the
termination of the Basic Labor Agreement.
6. Application for this payment shall be made on a form specified by the
Company. The surviving spouse must also provide certified copies of the
participant's birth certificate, the spouse's birth certificate, marriage
license, and a copy of a letter from the Social Security Administration showing
eligibility for widow or widower's benefits. The Company may request other
reasonable proofs in lieu of or in addition to the aforementioned items in order
to determine eligibility for benefits.
<PAGE>
EXHIBIT E
Special Rules with Respect to
RULE-OF-65 RETIREMENT
PREAMBLE
The Employment and Income Security Program was established by the Company
and the Union in recognition of their desire to provide increased economic
protection for long-service employees who are involuntarily displaced from their
jobs. The parties agree that the method of achieving this objective is to
facilitate the placement of such employees in suitable long-term jobs and, when
such jobs are not available, to reduce the adverse economic consequences to such
employees by providing eligible employees with extended SUB and rule-of-65
pensions as outlined herein.
Through the Employment and Income Security Program, the parties
specifically provide that employees who have at least 20 years of continuous
service as of their last day worked and who are laid off and are not placed in
suitable long-term jobs may receive additional income protection in the form of
extended SUB and insurance benefits. The parties also provide that employees
who have at least 20 years of continuous service as of their last day worked and
who are disabled may receive additional insurance protection in the form of
extended S&A and insurance benefits. In addition, the parties provide eligible
employees who are not offered suitable long-term employment with a pension under
rule-of-65 retirement plus a monthly supplement.
Pursuant thereto the parties have provided the rules set forth in this
Exhibit E in a manner which will best enhance the employment and income security
of eligible employees. Except as expressly provided herein, the application of
these rules shall not interfere with, limit or in any way adversely affect the
rights or obligations of any employee or the Company under any other existing
agreement.
I. Definition of Suitable Long-Term Employment
A. A job offered by the Company will constitute an offer of suitable
long-term employment (hereinafter "SLTE") if:
<PAGE>
1. The employee is physically qualified to perform the job, and
2. The employee has the ability and skills required to perform the
job or has the ability to absorb such training for the job as is
to be offered and as is necessary to enable the employee to
perform the job satisfactorily, and
3. The job offered is not a temporary job or a job known to be of
limited duration, and
4. The job offered is not in a salaried or plant protection
bargaining unit unless the employee has had significant work
experience with the Company of a technical, plant protection or
clerical nature during the 5-year period preceding his last day
worked, and
5. Subject to paragraph B below, the job offered is in a bargaining
unit represented by the Union, and
6. Except as may be provided pursuant to paragraph B below, the job
offered is at the employee's home plant, including a job which
the employee is not required to accept under applicable seniority
agreements or practices, provided there is no employee with a
greater right to such job under applicable seniority agreements
or practices who desires assignment to such job. Where an
applicable seniority agreement or practice permits an employee to
elect layoff in lieu of assignment to the job offered, such fact
shall not preclude the job offered from being SLTE.
B. 1. The parties recognize that situations may arise in the future
when the Company will not be able to offer SLTE to employees in
accordance with paragraph A above. In such instance, the Company
and the Union will discuss the terms and conditions for a
procedure for providing offers of SLTE at other employment
locations or in other employee groups in a manner consistent with
<PAGE>
understandings and procedures then prevailing in agreements between the United
Steelworkers of America and the Coordinating Committee Steel Companies.
2. In the event that the Company and the Union cannot reach
agreement concerning such matters, the dispute shall be submitted
for resolution to the arbitrator selected in accordance with the
procedure set forth in the Basic Agreement at the request of
either the Company or the International Union.
In resolving any such dispute, the arbitrator may take into
consideration such factors as:
a. The nature of the operations and jobs involved;
b. The prospects for long-term employment;
c. The problems that employees are likely to encounter if they
were to accept employment;
d. The cost to the Company if it cannot make offers of SLTE at
the employment locations in question;
e. The existence of other employment alternatives.
In resolving such dispute, the arbitrator may take into account
the distance between the employee's home plant and a proposed
employment location but the fact that such distance may be
greater or lesser than the distances between employment locations
identified in similar arrangement agreed to by the United
Steelworkers with any of the Coordinating Committee Steel
Companies shall not be considered by the arbitrator as being
determinative of the issue. Finally, the proposals made by each
party with respect to any matter coming before the arbitrator and
the discussions had with respect thereto shall not be used, or
referred to, in any way during
<PAGE>
or in connection with the arbitration of any dispute under this
provision.
C. The Company may offer SLTE to an employee who is eligible or could
become eligible for 70/80 retirement and who had at least 20 years of
continuous service as of his last day worked. The employee may elect
to accept or refuse such offer. If he accepts such offer, he will be
treated the same as if he had been otherwise eligible for a rule-of-65
retirement, except that any elections provided would be for a 70/80
retirement rather than a rule-of-65 retirement if he has at the time
of retirement attained the age and service which would qualify him for
a 70/80 retirement. If he refuses such offer, the refusal will have
no effect upon his eligibility or potential eligibility for a 70/80
retirement.
II. Offer and Acceptance of SLTE
A. The Company may offer SLTE to an employee who is otherwise eligible or
could become eligible for a rule-of-65 retirement at any time prior to
the date on which the employee incurs a break in continuous service.
B. A refusal by an employee who is otherwise eligible or could become
eligible for a rule-of-65 retirement to accept an offer of SLTE will
result in his ineligibility for rule-of-65 retirement in connection
with his last separation from active employment prior to such refusal,
except as follows:
An employee may refuse an offer of SLTE at his home plant during his
grace period if the employee has a right under an applicable local
seniority agreement or practice established prior to January 1, 1978
which permits the employee to elect layoff in lieu of assignment to
the job offered. The employee's grace period shall be the period of
weeks following the employee's last day worked that is equal to the
number of credit units in excess of 52 credited to him under the SUB
Plan as of his last day worked.
C. In order to assist the employee in understanding the implications of
his decision to accept or
<PAGE>
reject an offer of SLTE, the Company will provide an employee receiving
such an offer with a written explanation of his rights and obligations
in connection with such offer, including the number of days in which
the employee must respond to such offer pursuant to paragraph D below.
A copy of this written explanation shall be furnished to the
appropriate Union representative.
At the request of the employee or the appropriate Union
representative, the appropriate Union representative may be present at
and participate in any discussion relating to such offer; provided,
however, that this provision shall not extend the time periods
provided in paragraph D below.
D. An employee who is offered SLTE will be required to respond by
accepting or rejecting such offer within 3 days following the receipt
by the employee of such offer; provided, however, that where a longer
period has been established by local practice for responding to offers
of work, such acceptance or rejection shall be made within the shorter
of the period established by such local practice or 7 calendar days
following receipt by the employee of the offer.
III. Additional SUB Credit Units
If an employee who would be eligible for a rule-of-65 retirement except for
the fact that the Company has not yet determined whether he will be offered
SLTE exhausts his SUB credit units, the Company shall grant him additional
credit units to provide SUB Weekly Benefits for which he may otherwise be
eligible for whatever period of time that it may require to offer him SLTE
or to determine not to offer him SLTE, and the Company shall continue his
insurance coverage, other than S&A coverage, for the same period.
<PAGE>
EXHIBIT F
COVERAGE OF PLANT PROTECTION OFFICERS
The Company and the United Plant Guard Workers of America and its Local 227
(referred to in this Exhibit F as the "Union") have reached the following
agreement.
The same Pension Plan and Insurance Program, as they may from time to time
be amended, that are in effect for production and maintenance employees
represented by the Union Steelworkers of America at the Company's Plant in
Chicago, Illinois (subject to all the terms and conditions of such Plan and
Program, including the same effective dates) shall be in effect for all
employees in the collective bargaining unit defined in the Agreement dated
November 1, 1993, between the Company and the Union.
<PAGE>
EXHIBIT G
MODEL AMENDMENT REQUIRED
BY
IRC SECTION 401(A)(17)
PART I
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 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 by the Commissioner for increases in the cost of
living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. 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.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee'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.
PART II
<PAGE>
Unless otherwise provided under the plan, each section 401(a)(17)
employee's accrued benefit under this plan will be the greater of the
accrued benefit determined for the employee under 1 or 2 below:
1. the employee'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 employee's
total years of service taken into account under the plan for
the purposes of benefit accruals, or
2. the sum of:
(a) the employee's accrued benefit as of the last day of
the last plan year beginning before January 1, 1994, frozen in
accordance with section 1.401(a)(4)-13 of the regulations, and
(b) the employee's accrued benefit determined under the
benefit formula applicable for the plan year beginning on or
after January 1, 1994, as applied to the employee's years of
service credited to the employee for plan years beginning on or
after January 1, 1994, for purposes of benefit accruals.
A section 401(a)(17) employee means an employee whose current accrued
benefit as of a date on or after the first day of the first plan year
beginning on or after January 1, 1994, is based on 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.
PART III
If this plan satisfies the requirements of section 1.401(a)(4)-13(d)
of the regulations for a fresh-start as of the last day of the last plan
year beginning before January 1, 1994, then, notwithstanding any other
provisions of the plan, any section 401(a)(17) employee's accrued benefit,
frozen in accordance with section 1.401(a)(14-13 of the regulations as of a
fresh-start
<PAGE>
date, is adjusted to reflect increases in the employee's
compensation after the fresh-start date. However, this adjustment may be
made only if the adjustment will not cause the plan to fail to satisfy the
consistency requirement of section 1.401(a)(4)-13(c), as modified by
section 1.401(a)(17)-1(e) of the proposed regulations.
In determining a section 401(a)(17) employee's accrued benefit in any
plan year beginning on or after January 1, 1994, the portion of the
employee's frozen accrued benefit attributable to plan years beginning
before January 1, 1994, will be determined in accordance with Method A for
statutory section 401(a)(17) employees and Method B for section 401(a)(17)
employees other than statutory section 401(a)(17) employees.
A statutory section 401(a)(17) employee means an employee whose
current accrued benefit as of a date on or after January 1, 1994, is based
on compensation for a year beginning prior to January 1, 1989, that
exceeded $200,000.
A section 401(A)(17) employee means an employee whose current accrued
benefit as of a date on or after January 1, 1994, is based on compensation
for a year beginning prior to January 1, 1994, that exceeded $150,000.
Method A (statutory section 401(a)(17) employees):
Step 1: Determine each statutory section 401(a)(17) employee's accrued
benefit as of the last day of the last plan year beginning before
January 1, 1989, frozen in accordance with section 1.401(a)(4)-13
of the regulations.
Step 2: Adjust the amount in step 1 up through the last day of the last
plan year beginning before the first plan year beginning on or
after January 1, 1994, under the method provided under the plan
for increasing the amount in step 1 to take into account
increases in compensation in plan years beginning on or after
January 1, 1989. However, if the plan does not provide for such
increases, the amount in step 2 shall be equal to the amount in
step 1.
<PAGE>
Step 3: Determine the statutory section 401(a)(17) employee's accrued
benefit as of the last day of the last plan year beginning before
January 1, 1994, frozen in accordance with section 1.401(a)(4)-13
of the regulations.
Step 4: Subtract the amount determined in step 2 from the amount
determined in step 3.
Step 5: Adjust the amount in step 4 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
statutory section 401(a)(17) employee's average compensation
determined for the current year (as limited by section
401(a)(17)), using the same definition and compensation formula
in effect as of the last day of the last plan year beginning
before January 1, 1994. The denominator of the fraction is the
employee's average compensation for the last day of the last plan
year beginning before January 1, 1994, using the definition and
compensation formula in effect as of the last day of the last
plan year beginning before January 1, 1994.
Step 6: Adjust the amount in step 1 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
statutory section 401(a)(17) employee's average compensation for
the current year (as limited by section 401(a)(17)), using the
same definition of compensation and compensation formula in
effect as of the last day of the last plan year beginning before
January 1, 1989. The denominator of the fraction is the
employee's average compensation for the last day of the last plan
year beginning before January 1, 1989, using the definition and
compensation formula in effect as of the last day of the last
plan year beginning before January 1, 1989.
Step 7: Add the amounts determined in step 5, and the greater of steps 6
or 2.
Method B (section 401(a)(17) employees other
<PAGE>
than statutory section 401(a)(17) employees):
Step 1: Determine the accrued benefit of each section 401(a)(17) employee
other than statutory section 401(a)(17) employees as of the last
day of the plan year beginning before January 1, 1994, frozen in
accordance with section 1.401(a)(4)-13 of the regulations.
Step 2: Adjust the amount in step 1 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
average compensation of the section 401(a)(17) employee who is
not a statutory section 401(a)(17) employee determined for the
current year (as limited by section 401(a)(17), using the same
definition and compensation formula in effect as of the last day
of the last plan year beginning before January 1, 1994. The
denominator of the fraction is the employee's average
compensation for the last day of the last plan year beginning
before January 1, 1994, using the definition and compensation
formula in effect as of the last day of the last plan year
beginning before January 1, 1994.
<PAGE>
EXHIBIT 10.31
APPENDIX C TO THE CONSOLIDATED PENSION PLAN
FOR ACME STEEL COMPANY SALARIED AND HOURLY EMPLOYEES
EFFECTIVE DECEMBER 31, 1993
<PAGE>
NOTE: The name of the Plan was changed as of July 31, 1994 to Consolidated
Pension Plan for Acme Salaried and Hourly Employees.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Average Annual Earnings . . . . . . . . . . . . . . . . . . 2
Section 1.2 Average Monthly Earnings . . . . . . . . . . . . . . . . . 2
Section 1.3 Basic Agreement . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.4 Board of Directors . . . . . . . . . . . . . . . . . . . . 5
Section 1.5 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.6 Committee . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.7 Company . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.8 Continuous Service . . . . . . . . . . . . . . . . . . . . 5
Section 1.9 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.10 Effective Date . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.11 Eligible for Public Pension . . . . . . . . . . . . . . . . 8
Section 1.12 Employee . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.14 Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.15 Participant . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.16 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.17 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.18 Public Pension . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.19 Retirement . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.20 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.21 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.22 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.23 Union . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II
ELIGIBILITY FOR PENSION . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.1 Normal Retirement . . . . . . . . . . . . . . . . . . . . . 13
Section 2.2 62/15 Retirement . . . . . . . . . . . . . . . . . . . . . 13
Section 2.3 30 Year Retirement . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 60/15 Retirement . . . . . . . . . . . . . . . . . . . . . 13
Section 2.5 Permanent Incapacity Retirement . . . . . . . . . . . . . . 14
Section 2.6 70/80 Retirement . . . . . . . . . . . . . . . . . . . . . 15
Section 2.7 Rule of 65 Retirement . . . . . . . . . . . . . . . . . . . 16
<PAGE>
- ii -
Section 2.8 Deferred Vested Pension . . . . . . . . . . . . . . . . . . 18
Section 2.9 Sickness or Accident Benefits . . . . . . . . . . . . . . . 18
ARTICLE III
AMOUNT OF PENSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.1 Types of Pension Payments . . . . . . . . . . . . . . . . . 19
Section 3.2 Special Payment . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.3 Regular Pension . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.4 Increased Pension - Permanent
Incapacity or 70/80 Retirement Pension . . . . . . . . . . 32
Section 3.5 Increased Pension - Rule of 65
Retirement Pension . . . . . . . . . . . . . . . . . . . . 32
Section 3.6 Increased Pension - 62/15 or 30
Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.7 Regular Pension - Part-time
Participants . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.8 Deduction for Public Pension . . . . . . . . . . . . . . . 36
Section 3.9 Deduction for Other Pension . . . . . . . . . . . . . . . . 38
Section 3.10 Deduction for Severance Allowance . . . . . . . . . . . . . 40
Section 3.11 Deduction for Disability Payments . . . . . . . . . . . . . 42
Section 3.12 Pension Application . . . . . . . . . . . . . . . . . . . . 44
Section 3.13 Commencement and Termination
of Regular Pension . . . . . . . . . . . . . . . . . . . . 45
Section 3.14 Lump Sum Payment . . . . . . . . . . . . . . . . . . . . . 47
Section 3.15 Pre-Pension Spouse Coverage . . . . . . . . . . . . . . . . 48
Section 3.16 Pre-Retirement Survivor
Annuity Coverage . . . . . . . . . . . . . . . . . . . . . 52
Section 3.17 Automatic 50% Spouse Option . . . . . . . . . . . . . . . . 65
Section 3.18 Co-Pensioner Options . . . . . . . . . . . . . . . . . . . 72
Section 3.19 Minimum Distributions . . . . . . . . . . . . . . . . . . . 81
Section 3.20 Limitation on Benefits . . . . . . . . . . . . . . . . . . 85
Section 3.21 Five-Year Term Certain Payments . . . . . . . . . . . . . . 89
ARTICLE IV
SURVIVING SPOUSE'S BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 4.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 4.2 Amount of Benefit . . . . . . . . . . . . . . . . . . . . . 93
Section 4.3 Calculation of Benefit . . . . . . . . . . . . . . . . . . 93
<PAGE>
- iii -
Section 4.4 Commencement and Termination of
Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 4.5 Determination of Status as
Surviving Spouse . . . . . . . . . . . . . . . . . . . . . 98
Section 4.6 Information to be Provided
by the Company . . . . . . . . . . . . . . . . . . . . . . 98
Section 4.7 Surviving Spouse of Part-Time
Participants . . . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE V
DETERMINATION OF CONTINUOUS SERVICE . . . . . . . . . . . . . . . . . . . . . 99
Section 5.1 Continuous Service Defined . . . . . . . . . . . . . . . . 99
Section 5.2 Elapsed Time . . . . . . . . . . . . . . . . . . . . . . 104
ARTICLE VI
REEMPLOYMENT AFTER ATTAINMENT OF PENSION
ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 6.1 Applicability of Other Sections . . . . . . . . . . . . . 107
Section 6.2 Effect on Pension . . . . . . . . . . . . . . . . . . . . 107
Section 6.3 Continuous Service of Reemployed
Participant . . . . . . . . . . . . . . . . . . . . . . . 108
Section 6.4 Special Pension Eligibility after
Reemployment . . . . . . . . . . . . . . . . . . . . . . 110
Section 6.5 Special Rules as to Amount
of Pension . . . . . . . . . . . . . . . . . . . . . . . 111
Section 6.6 Amount of Reinstated 70/80
Retirement Pension . . . . . . . . . . . . . . . . . . . 111
ARTICLE VII
APPEALS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 7.1 Disputes as to Eligibility
or Amount . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 7.2 Disputes as to Permanent
Incapacity . . . . . . . . . . . . . . . . . . . . . . . 116
ARTICLE VIII
TRUST AND FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
<PAGE>
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Section 8.1 The Trust . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 8.2 Contributions . . . . . . . . . . . . . . . . . . . . . . 118
ARTICLE IX
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Section 9.1 Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . 118
Section 9.2 Appointment of Committee . . . . . . . . . . . . . . . . 119
Section 9.3 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section 9.4 Powers and Duties . . . . . . . . . . . . . . . . . . . . 121
Section 9.5 Immunity of Committee . . . . . . . . . . . . . . . . . . 122
Section 9.6 Claims and Review Procedures . . . . . . . . . . . . . . 123
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 10.1 Permanency of the Plan . . . . . . . . . . . . . . . . . 123
Section 10.2 Amendment of Plan . . . . . . . . . . . . . . . . . . . 125
Section 10.3 Merger or Consolidation of Plan . . . . . . . . . . . . 127
Section 10.4 No Interest in Trust Fund . . . . . . . . . . . . . . . 127
Section 10.5 No Contract of Employment . . . . . . . . . . . . . . . 127
Section 10.6 No Diversion of Trust Fund . . . . . . . . . . . . . . . 128
Section 10.7 Alienation of Benefits Prohibited . . . . . . . . . . . 128
Section 10.8 Written Communications . . . . . . . . . . . . . . . . . 130
Section 10.9 Name and Address Changes . . . . . . . . . . . . . . . . 130
Section 10.10 Identity of Payee . . . . . . . . . . . . . . . . . . . 131
Section 10.11 Evidence Conclusive . . . . . . . . . . . . . . . . . . 131
Section 10.12 Individual Liability . . . . . . . . . . . . . . . . . . 132
Section 10.13 Deductions for Insurance Premiums . . . . . . . . . . . 132
Section 10.14 Number and Gender . . . . . . . . . . . . . . . . . . . 133
ARTICLE XI
HOSPITAL-MEDICAL BENEFITS FOR
ELIGIBLE PENSIONERS AND SURVIVING SPOUSES . . . . . . . . . . . . . . . . . 133
Section 11.1 Allocation of Funds to
Separate Account . . . . . . . . . . . . . . . . . . . . 133
Section 11.2 Method of Allocation . . . . . . . . . . . . . . . . . . 134
<PAGE>
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Section 11.3 Benefits Payable . . . . . . . . . . . . . . . . . . . . 135
Section 11.4 Definitions . . . . . . . . . . . . . . . . . . . . . . 136
Section 11.5 Additional Requirements . . . . . . . . . . . . . . . . 137
EXHIBIT A
Tables of Percentages
EXHIBIT B
Special Rules Regarding Allowed Service
EXHIBIT C
Payments to Pre-1974 Surviving Spouses
EXHIBIT D
Payments to Certain Surviving Spouses
EXHIBIT E
Special Rules with Respect toRule-of-65 Retirement
EXHIBIT F
Coverage of Plant Protection Officers
EXHIBIT G
MODEL AMENDMENT REQUIRED
BY IRC SECTION 401(a)(17)
<PAGE>
APPENDIX C TO THE CONSOLIDATED PENSION PLAN
FOR ACME STEEL COMPANY SALARIED AND HOURLY EMPLOYEES
EFFECTIVE DECEMBER 31, 1993
The Acme Steel Company Chicago Plant Hourly Employees' Pension Plan,
originally effective January 1, 1966 and amended and restated from time to
time thereafter, and amended and restated effective September 1, 1993,
is hereby merged into the Consolidated Pension Plan for Acme Steel
Company Salaried and Hourly Employees effective December 31, 1993 as
Appendix C. The Plan is intended to meet the requirements for
income tax qualification as a defined benefit pension plan under Section
401(a) and related provisions of the Internal Revenue Code of 1986, as
amended. Appendix C as presently constituted shall govern the benefits
to be provided to hourly employees at the Company's Chicago Plant who
retire or terminate employment on or after December 31, 1993.
Benefits of such employees who retired or terminated employment
prior to December 31, 1993 shall be governed by the terms of the Acme
Steel Company Chicago Plant Hourly Employees Pension Plan in effect on
the date of their retirement or termination of employment, subject to any
changes in benefits made applicable to them after such date.
<PAGE>
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ARTICLE I
DEFINITIONS
SECTION 1.1 AVERAGE ANNUAL EARNINGS. The term "Average Annual Earnings"
means the average of the gross earnings (as the term "earnings" is
defined in Section 1.9(b) and as modified by Sections 1.9(c) and (d)) of a
Participant for the years 1989, 1990, 1991 and 1992.
SECTION 1.2 AVERAGE MONTHLY EARNINGS. The term "Average Monthly Earnings"
means the average of the monthly earnings (as the term "earnings" is defined in
Section 1.9(a) and as modified by Sections 1.9(c) and (d)) of a Participant for
services rendered which are paid by the Company during the last 120 full
calendar months of continuous service prior to retirement determined as follows:
a) The Participant's earnings will be calculated for each of the
calculation years during the last 120 full calendar months of
continuous service prior to retirement, I.E., the first calculation
year will be the first 12 out of the last 120 full calendar months of
continuous service prior to retirement, the second calculation year
will be the second 12
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out of such 120 months and so forth through the tenth calculation
year which will be the last 12 out of such 120 months.
b) There will then be selected from such 10 calculation years a
"calculation period" which will be the 5 consecutive calculation years
in which the Participant's aggregated earnings were the highest.
c) Earnings during the calculation period will be divided by 60, except
that if during the calculation period the Participant has been absent
from work without pay because of disability or layoff, the divisor of
60 will be reduced by the greater of the aggregate of the full
calendar months of such absence:
1) in excess of 3 in each separate period, or
2) in excess of 6;
provided, however that in the case of permanent incapacity retirement
before making the foregoing reduction, if the calculation period is
the last 5 calculation years prior to retirement, there will be
deducted each full calendar month that the
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Participant has been absent without pay because of total disability
during the last 6 calendar months of such period. Months deducted
under the preceding sentence will not be counted as months of absence
under 1) or 2) above.
SECTION 1.3 BASIC AGREEMENT. The term "Basic Agreement" means the labor
agreement between the Company and the Union covering rates of pay, hours of
work, and other basic terms and conditions of employment at the Company's
Chicago, Illinois operations, which is in effect from time to time
simultaneously with this Plan, and when used with respect to an Employee
represented by the United Steelworkers of America means the Basic Agreement
applicable to him. The term "Basic Agreement" also means the labor agreement
between the Company and the United Plant Guard Workers of America covering rates
of pay, hours of work, and other basic terms and conditions of employment at the
Company's Chicago, Illinois operations, which is in effect from time to time,
and when used with respect to an Employee represented by the United Plant Guard
Workers of America means the Basic Agreement applicable to him.
<PAGE>
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SECTION 1.4 BOARD OF DIRECTORS. The term "Board of Directors" means the
board of directors of the Company.
SECTION 1.5 CODE. The term "Code" means the Internal Revenue Code of
1986, as amended.
SECTION 1.6 COMMITTEE. The term "Committee" means the committee appointed
to administer the Plan as provided in Article IX hereof.
SECTION 1.7 COMPANY. The term "Company" means Acme Steel Company, a
Delaware corporation, or the successor or successors thereto.
SECTION 1.8 CONTINUOUS SERVICE. The term "continuous service" means
service that continues in the manner described in Article V.
SECTION 1.9 EARNINGS. (a) The term "earnings" for the purpose of the
term "average monthly earnings" in Section 1.2 and as used in Sections 3.3(a)
and (b) means the Participant's earnings (which includes the amount resulting
from a Cost-of-Living Adjustment provision only to the extent of the first Cost-
of-Living Adjustment which was included in the base hourly rates subsequent to
April 30, 1974), plus any elective deferrals of a Participant which are
contributed to a plan
<PAGE>
- 6 -
maintained by the Company which meets the requirements of Section 401(k) of the
Code, and less any inflation recognition payments, Profit-Sharing payments,
signing and lump sum payments (other than lump sum wage grievance
settlements), suggestion awards, severance pay, tuition reimbursement and
premium reimbursement payments.
(b) The term "earnings" for the purpose of the term "annual gross
earnings" in Sections 3.3(a), (b) and (d) means a Participant's earnings
calculated in accordance with subSection (a) above, including all amounts
resulting from a Cost-of-Living Adjustment provision both prior to and after
April 30, 1974.
(c) If a Participant has served as a member of the Grievance Committee,
Safety Committee, or Job Classification Committee (not to exceed the number
specified in the Basic Agreement at any time at the plant) as identified in the
Basic Agreement, or as a President, Vice President, Recording Secretary,
Financial Secretary and/or Treasurer of a local of the Union, or shall have been
absent from work because of leave of absence granted upon the request of the
Union to any Participant who shall be appointed or elected to any other
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office in the Union at the plant and for that reason shall have been absent
from work in accordance with the terms of the Basic Agreement during that
period, his earnings for each month in which he so served, for purposes of
computing his "average monthly earnings" in (a) above and his "annual gross
earnings" in (b) above will be adjusted so as to be fairly representative of
his normal earnings had he not been so absent.
(d) For purposes of this Plan, earnings taken into account during any plan
year commencing prior to January 1, 1994 will not exceed $200,000 or such amount
as may be determined by the Secretary of the Treasury for such plan year. For
any plan year commencing on or after January 1, 1994, earnings taken into
account during the plan year will not exceed $150,000 (as provided in Exhibit G)
or such amount as may be determined by the Secretary of the Treasury for such
plan year. This limitation on earnings that may be considered for Plan purposes
will be applied by taking into account the earnings paid by the Company to all
members of the Participant's family to the extent required by Section 401(a)(17)
and Section 414(q) of the Code. If the limitation
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is exceeded, the limitation will be prorated among the affected individuals
in proportion to each such individual's earnings prior to the application of
this limitation.
SECTION 1.10 EFFECTIVE DATE. The term "Effective Date" means September 1,
1993, although the Plan was originally effective January 1, 1966 and has been
amended and restated from time to time thereafter.
SECTION 1.11 ELIGIBLE FOR PUBLIC PENSION. The phrase "Eligible for Public
Pension" is used with respect to a Participant when he is eligible to receive,
or would upon application be eligible to receive, a Public Pension or would be
so eligible except for an offset or suspension imposed by law.
SECTION 1.12 EMPLOYEE. The term "Employee" means any employee who, from
time to time during the period in which this Plan is effective, is covered by
the Basic Agreement and, in addition, all other persons on the payroll of the
Company's Chicago, Illinois operations who are paid wages based on an hourly
rate, excluding any person paid on a salaried basis.
The term "Employee" does not include leased employees, provided that leased
employees do not constitute 20% or more
<PAGE>
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of the Company's non-highly compensated employees within the meaning of Section
414(q) of the Code; however, leased employees will be taken into account in
determining whether the Plan meets applicable coverage and nondiscrimination
tests under the Code.
SECTION 1.13 ERISA. The term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
SECTION 1.14 FIDUCIARY. The term "Fiduciary" includes the Company, the
Trustee and the Committee, and the use of the term is intended to be consistent
with the definition of "fiduciary" in ERISA and in regulations and official
governmental interpretations issued pursuant to ERISA.
SECTION 1.15 PARTICIPANT. The term "Participant" means any Employee who
has had at least one year of continuous service and has attained age 21 and
who,from time to time during the period in which this Plan is effective, is
accruing continuous service; and, where so indicated, the term "Participant"
also meansany person who is no longer accruing continuous service but who had
attained pension eligibility under this Plan at the date he or she ceased to
accrue continuous service, including a person who is retired and is
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receiving or is entitled to receive pension benefits under this Plan. The term
"Participant" also refers to any former hourly employee of Interlake, Inc. at
its Chicago, Illinois operation who was entitled to pension benefits under this
Plan prior to May 29, 1986, but does not include any former hourly employees of
Interlake, Inc. at its Toledo, Ohio or Beverly, Ohio operations.
SECTION 1.16 PLAN. The term "Plan" means this Acme Steel Company Chicago
Plant Hourly Employees' Pension Plan, as amended from time to time.
SECTION 1.17 PLAN YEAR. The term "Plan Year" means the calendar year,
January 1 through December 31 of each year.
SECTION 1.18 PUBLIC PENSION. The term "Public Pension" means a benefit in
the nature of an annuity, pension or payment of similar kind (i) under Title II
of the Social Security Act or its successor (the "Social Security Act") or (ii)
under the Railroad Retirement Act or its successor, or under a provision of law
hereafter established, if for such benefit the Company has contributed directly
or indirectly by tax or otherwise with respect to employment of the
Participant.
<PAGE>
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SECTION 1.19 RETIREMENT. The term "Retirement" means, and for purposes of
this Plan retirement shall be considered to occur:
a) in the case of a Participant who applies for a pension prior to a
break in continuous service, on the date he specifies as the date he
wishes to retire, which will be a date on or after the latest of:
1) the date of his request for retirement;
2) the date of his attainment of eligibility for a pension under
this Plan; or
3) the last day for which he earned wages from the Company,
but not later than the last day of his continuous service; or
b) in the case of a Participant who applies for a pension after a break
in continuous service, on the last day of his continuous service,
provided that on such last day he was eligible for an immediate or
deferred pension under this Plan.
<PAGE>
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SECTION 1.20 TRUST. The term "Trust" means the trust agreement pursuant to
which the assets utilized to finance the benefits payable under this Plan
areheld and administered.
Section 1.21 TRUSTEE. The term "Trustee" means the corporation or
individuals or any successor trustee duly appointed by the Board of Directors to
administer the Trust Fund in accordance with the Trust.
SECTION 1.22 TRUST FUND. The term "Trust Fund" means all property held by
the Trustee which the Company deposits pursuant to the Trust to finance the
payment of benefits and defray administrative expenses and includes the income
earned on such property.
SECTION 1.23 UNION. The term "Union" means the United Steelworkers of
America with respect to Employees in the bargaining unit represented by the
United Steelworkers of America or the United Plant Guard Workers of America with
respect to Employees in the bargaining unit represented by the United Plant
Guard Workers of America.
<PAGE>
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ARTICLE II
ELIGIBILITY FOR PENSION
SECTION 2.1 NORMAL RETIREMENT. Any Participant who has completed at least
5 years of continuous service and who has attained age 65 will be eligible to
retire and will, upon his retirement, be eligible for a normal retirement
pension.
SECTION 2.2 62/15 RETIREMENT. Any Participant who has not attained age 65
but who has completed at least 15 years of continuous service and has attained
age 62 will be eligible to retire and will, upon his retirement, be eligible for
a 62/15 retirement pension.
SECTION 2.3 30 YEAR RETIREMENT. Any Participant who has not attained age
62 but who has completed at least 30 years of continuous service will be
eligible to retire and will, upon his retirement, be eligible to receive a 30-
year retirement pension.
SECTION 2.4 60/15 RETIREMENT. Any Participant who has completed at least
15 but less than 30 years of continuous service and who has attained age 60 but
not age 62 will be eligible to retire and will, upon his retirement, be eligible
to receive a 60/15 retirement pension.
<PAGE>
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Section 2.5 PERMANENT INCAPACITY RETIREMENT. Any Participant who has
completed at least 15 years of continuous service and who has become permanently
incapacitated will be eligible to retire and will, upon his retirement, be
eligible to receive a permanent incapacity retirement pension. For purposes of
this Plan, a Participant will be considered to be "permanently incapacitated"
only (i) if he has been totally disabled by bodily injury or disease so as to be
prevented thereby from engaging in any employment of the type covered by the
Basic Agreement, and (ii) after such total disability has continued for a period
of 5 consecutive months and, in the opinion of a qualified physician, it will be
permanent and continuous during the remainder of his life. Incapacity
contracted, suffered or incurred while the Participant was engaged in, or
resulted from his having engaged in, a criminal enterprise, or resulting from
future service in the armed forces and which prevents him from returning to
employment with the Company for which he receives a military pension, will not
entitle a Participant to a pension under this paragraph. Such pension shall be
discontinued if the Participant ceases to be permanently incapacitated prior to
age 62. The
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Plan Administrator may require verification of the permanency of incapacity by
medical examination prior to age 62 at any reasonable time.
SECTION 2.6 70/80 RETIREMENT. Any Participant who has not attained age 62
but who has completed at least 15 years of continuous service and either (i) has
attained age 55 and whose combined age and years of continuous service equal 70
or more, or (ii) whose combined age and years of continuous service equal 80 or
more and:
a) whose continuous service is broken by reason of a permanent shutdown
of a plant, department or subdivision thereof or by reason of a layoff
or physical disability, or
b) whose continuous service is not broken and who is absent from work by
reason of:
1) a layoff resulting from his election to be placed on layoff
status pursuant to the provisions of the Basic Agreement
applicable in the event of a permanent shutdown, or
2) a physical disability or a layoff other than a layoff resulting
from an election referred to
<PAGE>
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above and whose return to active employment is declared unlikely
by the Company, or
c) whose continuous service is not broken and who, while on layoff status
by reason of his election to be placed on such status pursuant to the
provisions of the Basic Agreement applicable in the event of a
permanent shutdown, accepts a job with the Company and, prior to the
expiration of 90 consecutive calendar days from the first day worked
on such job, elects to retire,
will be eligible to retire and will, upon his retirement, be eligible for a
70/80 retirement pension.
Section 2.7 RULE OF 65 RETIREMENT. Any Participant (i) who has completed
at least 20 years of continuous service as of his last day worked, (ii) who has
not attained age 55, and (iii) whose combined age and years of continuous
service equal 65 or more but less than 80, and
a) whose continuous service is broken by reason of a layoff or
disability, or
b) whose continuous service is not broken and who is absent from work by
reason of a layoff resulting
<PAGE>
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from his election to be placed on layoff status pursuant to the
provisions of the Basic Agreement applicable in the event of a
permanent shutdown, or
c) whose continuous service is not broken and who is absent from work by
reason of a physical disability or a layoff other than a layoff
resulting from an election referred to above and whose return to
active employment is declared unlikely by the Company,
and who has not been offered suitable long-term employment, as defined in
Exhibit E hereto, will be eligible to retire and will, upon his retirement, be
eligible to receive a Rule of 65 retirement pension; provided, however, that
ifat the time of application for retirement the Company has not yet determined
whether the Participant will be offered suitable long-term employment, the
Participant will not be eligible to retire until the earlier of the date on
which the Company advises the Participant that he will not be offered suitable
long-term employment or the date on which the Participant incurs a break in
continuous service.
<PAGE>
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SECTION 2.8 DEFERRED VESTED PENSION. Any Participant not eligible to
receive a pension under any other provision of this Article II whose continuous
service is broken for any reason and who, at the time of such break in
continuous service, has completed at least 5 years of continuous service will be
eligible for a deferred vested retirement pension, subject to the provisions
relating to application set forth in Section 3.12 and commencement of pension
set forth in subsections (d) and (e) of Section 3.13. At the time of such break
in continuous service, the Company will furnish the Participant with an
appropriate written notice of the eligibility requirements and his relevant
employment data.
Section 2.9 SICKNESS OR ACCIDENT BENEFITS. Notwithstanding anything to the
contrary contained in this Plan, no pension (including any special payment) will
be payable for any month with respect to which the Participant claims and is
eligible for sickness or accident benefits for Employees provided under a
Company program or similar benefits provided under law.
<PAGE>
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ARTICLE III
AMOUNT OF PENSION
Section 3.1 TYPES OF PENSION PAYMENTS. A pension granted pursuant to
Article II will consist of:
a) a special initial pension amount ("special payment"), except in the
case of any Participant eligible for a permanent incapacity retirement
pension or a deferred vested retirement pension (or as provided in
Section 6.5), and
b) a regular pension amount ("regular pension"), payable in monthly
installments except as otherwise provided in Section 3.14,
provided in accordance with the provisions of this Article III.
Section 3.2 SPECIAL PAYMENT. The amount of a special payment for a
Participant who was entitled to receive a vacation in the year of retirement or
who would have been entitled to receive a vacation in the year of retirement
except for such retirement will be calculated as follows:
a) a Participant's "vacation pay" as defined below will be multiplied by
13 (14 in the case of a
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Participant eligible for more than 4 weeks of regular vacation in the
year of retirement);
b) the amount determined in a) above will be reduced by all vacation pay
the Participant received in such year.
The amount of the special payment for a Participant not in any event
entitled to vacation in the year of retirement will be calculated under the
formula established above as though the Participant had retired in the year in
which he was last entitled to a vacation.
The special payment will be payable for the first 3 full calendar months
following the month in which retirement occurs. Such special payment will be
made in a lump sum within the first full calendar month following the month in
which retirement occurs, or within the month following the month in which
retirement occurs, or within the month in which application for pension is made,
whichever is later.
With respect to any Participant on a leave of absence referred to in the
provision contained in Section 1.9(c), if any such Participant makes application
for pension in a year in which he is not in any event entitled to vacation, for
the
<PAGE>
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purpose of determining the amount of his special payment the vacation pay to
which he would have been entitled had he not been on leave of absence will be
used for determination of the rate to be used in calculating the special payment
and the amount deductible therefrom for vacation.
As used in this Plan, when used in connection with Employees covered by the
Basic Agreement, the word "vacation" means the vacation provided under the
vacation section of the Basic Agreement, "vacation pay" means the pay for a week
of vacation calculated as provided in the vacation Section of the Basic
Agreement. When used with respect to Employees not covered by the Basic
Agreement the words "vacation" and "vacation pay" will have their normal
meaning.
SECTION 3.3 REGULAR PENSION. A Participant's regular pension will be the
highest of the monthly amounts calculated in accordance with subsections (a),
(b), (c), and (d) below, adjusted in accordance with the provisions of Sections
3.4 through 3.11 and 3.15 and 3.16, if applicable:
a) "RETIREMENT DATE EBU": the monthly amount determined by multiplying
the Participant's number of years (and fractions thereof calculated to
the
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nearest month) of his continuous service by the Enriched Benefit Unit
("EBU") determined on the basis of the level of the Participant's
annual gross earnings (as the term "earnings" is defined in Section
1.9(b)) in 1986, 1987, or 1988, whichever is the highest, as follows:
<PAGE>
- 23 -
FOR RETIREMENTS ON OR AFTER SEPTEMBER 1, 1993
<TABLE>
<CAPTION>
Earnings in
Highest Year EBU per year
Level At least Less than of service
<S> <C> <C> <C>
1 $32,000 $32
2 $32,000 $36,000 $36
3 $36,000 $40,000 $40
4 $40,000 $44,000 $44
5 $44,000 $48,000 $48
6 $48,000 $52,000 $52
7 $52,000 - $56
</TABLE>
A participant who has no earnings in 1986, 1987, or 1988 will be
treated as entitled to a Level 1 EBU. Notwithstanding the foregoing,
Participant's EBU attributable to his years of continuous service as
of December 31, 1992 shall not be less than the monthly amount equal
to a Participant's average monthly earnings (as the term is defined in
Section 1.2) multiplied by:
(i) for a Participant with more than 30 years of continuous service as of
December 31, 1992, 33% plus a percentage determined by
<PAGE>
- 24 -
multiplying 1.2% by the number of years (and fractions thereof
calculated to the nearest month) of his continuous service as of
December 31, 1992 in excess of 30 years, or
(ii) for a Participant with 30 or less years of continuous service as of
December 31, 1992, 1.1% multiplied by the number of years (and
fractions thereof calculated to the nearest month) of his continuous
service as of December 31, 1992,
plus an additional amount determined by multiplying the amount
determined in accordance with (i) or (ii) above, whichever is
applicable, by 5%.
For purposes of this subparagraph, a Participant's average monthly
earnings shall be determined in accordance with Section 1.9(a) but by assuming
that the Participant's retirement occurred on December 31, 1992 and by taking
into account only earnings through such date. A Participant's earnings shall
include a cost-of-living adjustment add-on of $2.36 for each hour paid during
the five
<PAGE>
- 25 -
consecutive calculation years considered in the computation of his
average monthly earnings.
b) "1989 EBU": the monthly amount determined by multiplying the
Participant's number of years (and fractions thereof calculated to the
nearest month) of his continuous service prior to August 31, 1989, by
the Participant's EBU determined on the basis of the level of the
Participant's annual gross earnings (as the term "earnings" is defined
in Section 1.9(b)) in 1986, 1987, or 1988, whichever is the highest,
as follows:
FOR RETIREMENTS OCCURRING BETWEEN
AUGUST 31, 1989 AND AUGUST 31, 1993
<TABLE>
<CAPTION>
Earnings In
Highest Year EBU per year
Level At Least Less Than of service
<S> <C> <C> <C>
1 $28,000 $28
2 $28,000 $32,000 $32
3 $32,000 $36,000 $36
4 $36,000 $40,000 $40
5 $40,000 $44,000 $44
6 $44,000 - $48
</TABLE>
<PAGE>
- 26 -
A participant who has no gross earnings in 1986, 1987, or 1988 will be
treated as entitled to a Level 1 EBU.
Notwithstanding the foregoing, a Participant's EBU attributable to his
years of continuous service as of August 31, 1989 shall not be less than
the monthly amount equal to the Participant's average monthly earnings (as
that term is defined in Section 1.2) multiplied by:
(i) for a Participant with more than 30 years of continuous service as of
August 31, 1989, 33% plus a percentage determined by multiplying 1.2%
by the number of years (and fractions thereof calculated to the
nearest month) of his continuous service as of August 31, 1989 in
excess of 30 years, or
(ii) for a Participant with 30 or less years of continuous service as of
August 31, 1989, 1.1% multiplied by the number of years (and fractions
thereof calculated to the nearest
<PAGE>
- 27 -
month) of his continuous service as of August 31, 1989,
plus an additional amount determined by multiplying the amount determined
in accordance with (a) or (b) above, whichever is applicable, by 5%.
For purposes of this subsection, a Participant's average monthly
earnings shall be determined in accordance with Section 1.9(a) but by
assuming that the Participant's retirement occurred on August 31, 1989,
and by taking into account only earnings through such date. A Participant's
earnings shall include a cost-of-living adjustment add-on of $2.36 for each
hour paid during the five consecutive calculation years considered in the
computation of his average monthly earnings.
c) "30-YEAR MINIMUM PENSION": For a Participant who retires on or after
September 1, 1993 with 30 or more years of continuous service, an
amount equal to $1,200 per month.
d) "1997 EBU": For a Participant who retires on or after January 1,
1997, a monthly amount determined
<PAGE>
- 28 -
by multiplying his years of continuous service by his EBU determined
under (a) above based on his single highest annual earnings (as the
term "earnings" is defined in Section 1.9(b)) for the years 1986,
1987 and 1988 or his average annual earnings (as that term is defined
in Section 1.1), whichever is greater.
For a 60/15 retirement the monthly amount determined above is applicable
only if regular pension commences after attainment of age 62 ("deferred 60/15
retirement pension"), and for any deferred vested pension the monthly amount
determined above is applicable only if:
a) with respect to a Participant who incurs a break in continuous service
after attaining age 40 and completing at least 15 years of continuous
service, regular pension commences after the Participant has attained
age 62; or
b) with respect to a Participant who incurs a break in continuous service
either prior to attaining age 40, or after attaining age 40 and before
completing at least 15 years of continuous service, regular
<PAGE>
- 29 -
pension commences after the Participant has attained age 65.
A Participant may in his application for 60/15 pension elect an immediate
pension, and a Participant who incurs a break in continuous service after
attaining age 40 and completing at least 15 years of continuous service who is
entitled to a deferred vested pension may, pursuant to Section 3.12, make
application for commencement of pension payments after attainment of age 60 and
prior to attainment of age 62, and in either such case the monthly amount
calculated above shall be reduced to the actuarial equivalent thereof using the
following percentages for each age of a Participant indicated below:
<TABLE>
<CAPTION>
AGE AT START
OF PENSION PERCENTAGE
------------ ----------
<S> <C>
60 83.72%
60-1/12 84.46%
60-2/12 85.09%
60-3/12 85.73%
60-4/12 86.36%
60-5/12 87.00%
60-6/12 87.64%
60-7/12 88.27%
60-8/12 88.91%
60-9/12 89.54%
60-10/12 90.18%
60-11/12 90.81%
</TABLE>
<PAGE>
- 30 -
<TABLE>
<CAPTION>
<S> <C>
61 91.45%
61-1/12 92.16%
61-2/12 92.87%
61-3/12 93.59%
61-4/12 94.30%
61-5/12 95.01%
61-6/12 95.72%
61-7/12 96.44%
61-8/12 97.15%
61-9/12 97.86%
61-10/12 98.57%
61-11/12 99.29%
62 100.00%
</TABLE>
The above percentages shall be applied on the basis of the Participant's age
to the nearest month.
A Participant who incurs a break in continuous service either prior to
attaining age 40, or after attaining age 40 and before completing at least 15
years of continuous service, and who is entitled to a deferred vested pension
may, pursuant to Section 3.12, make application for commencement of pension
payments after attainment of age 60 and prior to attainment of age 65, and in
such case the monthly amount calculated above shall be reduced to the actuarial
equivalent thereof using the following percentage for each age of a Participant
indicated below:
<PAGE>
- 31 -
<TABLE>
<CAPTION>
Age at Start of Age at Start of
Pension Percentage Pension Percentage
<S> <C> <C> <C>
60 63.10 62-7/12 79.51
60-1/12 63.58 62-8/12 80.11
60-2/12 64.06 62-9/12 80.71
60-3/12 64.54 62-10/12 81.32
60-4/12 65.02 62-11/12 81.93
60-5/12 65.50 63 82.53
60-6/12 65.98 63-1/12 83.21
60-7/12 66.45 63-2/12 83.89
60-8/12 66.93 63-3/12 84.58
60-9/12 67.41 63-4/12 85.26
60-10/12 67.89 63-5/12 85.94
60-11/12 68.37 63-6/12 86.62
61 68.85 63-7/12 87.30
61-1/12 69.38 63-8/12 87.99
61-2/12 69.92 63-9/12 88.67
61-3/12 70.45 63-10/12 89.35
61-4/12 70.99 63-11/12 90.03
61-5/12 71.53 64 90.72
61-6/12 72.06 64-1/12 91.49
61-7/12 72.60 64-2/12 92.26
61-8/12 73.14 64-3/12 93.04
61-9/12 73.67 64-4/12 93.81
61-10/12 74.21 64-5/12 94.58
61-11/12 74.75 64-6/12 95.36
</TABLE>
<PAGE>
- 32 -
<TABLE>
<CAPTION>
Age at Start Age at Start
of Pension Percentage of Pension Percentage
<S> <C> <C> <C>
62 75.28 64-7/12 96.13
62-1/12 75.89 64-8/12 96.91
62-2/12 76.49 64-9/12 97.68
62-3/12 77.10 64-10/12 98.45
62-4/12 77.70 64-11/12 99.23
62-5/12 78.30 65 100.00
62-6/12 78.91
</TABLE>
The preceding percentages shall be applied on the basis of the Participant's age
to the nearest month.
SECTION 3.4 INCREASED PENSION - PERMANENT INCAPACITY OR 70/80 RETIREMENT
PENSION. In the determination of the amount of any regular pension for
permanent incapacity or 70/80 retirement, the monthly amount determined
inaccordance with Section 3.3 will be increased by $400; provided, however, that
such increase will not be applicable with respect to such regular pension
payable for any month for which the Participant is eligible for Public Pension.
SECTION 3.5 INCREASED PENSION - RULE OF 65 RETIREMENT PENSION. In the
determination of the amount of any regular Rule of 65 retirement pension, the
monthly amount determined
<PAGE>
- 33 -
in accordance with Section 3.3 will be increased by $400; provided, however,
that such increase will not be applicable with respect to such regular pension
payable for any month for which the Participant is eligible for Public Pension;
and provided, further, that if the Participant has earned income after
retirement and prior to attainment of eligibility for Public Pension which
exceeds $8,880 during any calendar year ("excess earned income"), the increased
pension payable pursuant to this Section 3.5 ("increased pension") for any
calendar year will be reduced by $1 for each $2 of excess earned income. The
above $8,880 amount will be prorated for the year in which retirement occurs
and for the year in which the Participant becomes eligible for Public Pension.
For purposes of this section, earned income shall include wages, salaries,
tips, bonuses, commissions, and earnings resulting from self-employment. To
facilitate determination of his annual earned income, each Participant will at
the time of Rule of 65 retirement authorize the Social Security Administration
and/or the Railroad Retirement Board to release to the Company a record of his
creditable earnings for Social Security and/or Railroad Retirement Act purposes
and agree to
<PAGE>
34
give the Company by April 15th of each year a copy of his W-2 forms
and a statement of his annual earned income for the preceding year on a form
provided by the Company. If the Participant revokes the authorization to the
Social Security Administration and/or the Railroad Retirement Board or fails to
submit the required information to the Company by April 15th of each year, the
Participant will be presumed ineligible for increased pension for the preceding
year; provided, however, that such presumption of ineligibility will be
disregarded in the event that the Participant reinstates the required
authorization or submits the required information at a later date.
If it is determined above that the Participant was not eligible for all or part
of the increased pension which he received for the preceding year, payment
of increased pension will be suspended and not resumed until the month following
the month in which the Participant notifies the Company that he does not expect
his earned income for the current year to exceed $8,880. The amount of any
overpayment will be recouped by reducing or discontinuing payment of the
Participant's regular pension (and his increased pension, if he notifies the
<PAGE>
35
Company that he does not expect his earned income for the current year to exceed
$8,880) until the full amount of the overpayment has been recovered.
At the request of the Participant, the Company may reduce or discontinue
payment of increased pension for a period specified by the Participant. If it
is determined that the Participant did not receive all of the increased pension
to which he was entitled for a given year, the amount due shall be paid
promptly.
SECTION 3.6 INCREASED PENSION - 62/15 OR 30 YEAR. In the determination of
the amount of any regular 62/15 or 30 Year retirement pension, the monthly
amount determined in accordance with Section 3.3 will be increased by $300 for
Participants who retire on or after September 1, 1993 but prior to August 31,
1999; provided, however, that such increase will not be applicable with respect
to such regular pension payable for any month for which the Participant is
eligible for Public Pension, as a result of his death or disability, or after
which the Participant attains age 62. In no event will the Participant receive
less than 12 months of
<PAGE>
36
such supplement unless the Participant's death occurs
during the 12-month period.
SECTION 3.7 REGULAR PENSION - PART-TIME PARTICIPANTS. Notwithstanding
anything to the contrary contained in the foregoing provisions of this Article
III, the amount of the minimum pension otherwise applicable will, in the case of
any Participant the Company finds to be a part-time Participant, be reduced to
an amount equitably related to the hours worked by him in comparison to hours
worked by other Participants but not less than the amount which would have been
payable if he had retired under the Pension Agreement in effect immediately
prior to July 31, 1966. The Company will not find a Participant to be a part-
time Participant unless for the mutual convenience of the Participant and the
Company he was, in the 120 months preceding his retirement, regularly scheduled
to work fewer hours than the straight-time schedule of full-time Participants.
SECTION 3.8 DEDUCTION FOR PUBLIC PENSION. Deductions for Public Pension
will be made from the amount determined in accordance with Section 3.3 provided
that:
<PAGE>
37
(a) a regular pension will not be affected by Public Pension related to
the Social Security Act;
(b) for any month a Participant is eligible for Public Pension not related
to the Social Security Act, there will be a deduction for such Public
Pension from the amount determined in accordance with Section 3.3.
The amount of such deduction will be the amount of Public Pension paid
or payable to the Participant, or that would upon application become
payable to him for such month, without regard to any offset,suspension
or reduction imposed by law (including any reduction by reason of
commencement of such Public Pension prior to the age at which it is
first provided under law without such a reduction), except that for a
Participant whose original date of hire was prior to January 1, 1975
the amount of such deduction will be equal to 50% of the Tier II
benefit determined in accordance with the Railroad Retirement Act;
provided such deduction will be limited to the amount, to the extent
reasonably determinable, of such Public Pension
<PAGE>
-38-
attributable to employment by the Company; and provided, further, that
in the case of a Participant eligible for Public Pension under the
Railroad Retirement Act, the amount of such deduction will be based on
the provisions of such Act in effect as of the date the Participant
retires; and
(c) after deduction for Public Pension first becomes applicable, it shall
not be changed to reflect any increase of such Public Pension
resulting from either (i) an amendment of the law under which such
Public Pension is provided, if the effective date of such increase
occurs after the first month with respect to which a deduction for
such Public Pension became applicable, or (ii) subsequent employment
by other than the Company.
SECTION 3.9 DEDUCTION FOR OTHER PENSION. If any Participant entitled to
pension benefits pursuant to this Plan is or shall become, or upon application
would become, entitled to any other pension or payment in the nature of a
pension (other than a payment covered by Section 3.11, a benefit in the nature
of an annuity, pension or payment made pursuant to this
<PAGE>
-39-
Plan) from any source or fund to which the Company has directly or indirectly
contributed ("Other Pension"), then the amount determined in accordance with
Sections 3.3 through 3.6 otherwise payable to such Participant for any period
will be reduced by the amount of such Other Pension paid or payable to him or
that would upon application become payable to him for the corresponding period;
provided, however, that if such Participant has contributed to such source or
fund, then the amount by which such amount would otherwise be reduced in
accordance with the foregoing provisions of this section will be decreased by
the amount of that part of such Other Pension which shall be attributable to the
contributions made by the Participant to such source or fund; provided, further,
such deduction will be limited to the amount, to the extent reasonably
determinable, of such Other Pension attributable to employment with the Company
during a period in which the Participant has been credited with continuous
service for the purpose of calculating the amount of any regular pension under
this Plan. The term "Other Pension" includes any pension or payment under The
Interlake Companies, Inc. Merchant Iron Hourly Employees Pension Plan.
<PAGE>
-40-
SECTION 3.10 DEDUCTION FOR SEVERANCE ALLOWANCE. If any Participant is or
becomes entitled to or is paid any discharge, liquidation or dismissal or
severance allowance or payment of a similar kind ("severance allowance") by
reason of any plan or policy of the Company, or in respect of which it shall
have directly or indirectly contributed, or by reason of any law, then the total
amount of such severance allowance paid or payable to him shall, in accordance
with the standards set forth below, be deducted from the amount determined in
accordance with Sections 3.3 through 3.6 upon retirement; provided, however,
that (i) such severance allowance will not be deducted from or charged against
any deferred vested pension, and (ii) if such Participant has contributed to the
source or fund out of which such severance allowance is paid or becomes payable,
then the amount deducted from or charged against such amount in accordance with
the foregoing provisions of this section will be decreased by the amount of that
part of such severance allowance which is attributable to the contributions
which such Participant has made to such source or fund.
<PAGE>
-41-
If any Participant becomes entitled under the Basic Agreement or otherwise
to severance allowance which may be deducted from the amount determined in
accordance with Sections 3.3 through 3.6 as set forth above, he may waive
payment of the severance allowance and, for the purposes of the Basic Agreement,
be considered to have received it. Such waiver must be in writing on a form
provided by the Company. If the Participant waives such severance allowance,
the total amount of regular pension paid to or on behalf of him and his co-
pensioner (if any) will not be less than the amount of such severance allowance.
The following standards will apply to the deduction explained above. The
deduction will be made in full in each case in which the amount of pension
determined in accordance with Sections 3.3, through 3.6 after application of the
deduction, or the cost of such pension after the deduction, is equal to or
greater than the greatest amount or cost of any such pension which would be
payable to a Participant under age 40 who is eligible for a deferred vested
pension and who has the same years of service and compensation history as the
Participant in question. The deduction will not be made in
<PAGE>
-42-
any case in which the amount or cost of such pension after the deduction for
severance pay is less than the amount or cost of such deferred vested pension.
In all other cases, the deduction will be made but only to the extent that the
amount or cost of such pension after the deduction for severance pay is equal to
the amount or cost of such deferred vested pension. In any case in which there
is a difference between the amount and the cost of any such pension or a
difference between the amount or cost of any such deferred vested pension, the
determination required by this Section 3.10 shall be based on the factor that
produces the largest deduction. In determining the cost of any such pension and
such deferred vested pension for purposes of this Section 3.10, the assumptions
reported in the filing of the most recent Schedule B to Form 5500 shall govern.
SECTION 3.11 DEDUCTION FOR DISABILITY PAYMENTS. Any amount paid to or on
behalf of any Participant on account of injury or occupational disease incurred
in the course of his employment by the Company or any other employer causing
disability in the nature of a permanent disability, whether pursuant to Workers'
Compensation, Occupational Disease or
<PAGE>
-43-
similar statutory law (except fixed statutory payments for the loss of, or 100%
loss of use of, any bodily member or a benefit in the nature of an annuity,
pension or payment of similar kind by reason of any law), will be deducted from
or charged against the amount determined in accordance with Sections 3.3 through
3.6 provided, however, that any such deduction or charge will be adjusted to
take into account expenses such as reasonable attorneys' fees and medical
expenses incurred by the Participant in processing a claim for such payment, and
that any payments received by the Participant under such laws will not be
deducted from any such amount for permanent incapacity retirement payable prior
to age 65 or from the increase in pension provided in Section 3.4. If any
amount which is to be deducted from or charged against the amount determined in
accordance with Sections 3.3 through 3.6 pursuant to this section is determined
with respect to a period of time, such deduction or charge will be made only
with respect to the same period. If any such amount is not determined with
respect to a period of time, the Company will apportion the amount to a period
of time which approximates the period over which the local government
organization having
<PAGE>
-44-
authority over workers' compensation and occupational disability claims might
award a disability payment for similar conditions.
This offset will be waived, however, for Participants who have retired or
who will retire prior to September 1, 1999 and who are having or would have had
their pensions offset pursuant to this Section 3.11, and the waiver will be
effective during the term of the 1993 Basic Agreement effective with the first
regular pension check payable for the months following August 31, 1993.
SECTION 3.12 PENSION APPLICATION. Each application for a pension must be
in writing on a form provided by the Company. The Company may require any
applicant for a pension to furnish to it such information as may reasonably be
required.
A Participant may make application for pension at any time prior or
subsequent to his retirement; however, a Participant may make application for a
deferred vested pension not earlier than 90 days prior to the first day of the
month for which the first installment of pension is payable as provided in
subsections (d) and (e) of Section 3.13.
<PAGE>
-45-
SECTION 3.13 COMMENCEMENT AND TERMINATION OF REGULAR PENSION.
a) In the case of a Participant who is eligible for any type of pension
other than permanent incapacity retirement pension, 60/15 retirement
pension, or deferred vested retirement pension, the first installment
of any regular pension will be payable for the first full calendar
month following the 3 calendar months for which the special payment is
made.
b) In the case of a Participant who is eligible for permanent incapacity
retirement pension, the first installment of any regular pension will
be payable for the first full calendar month following the month in
which retirement occurs.
c) In the case of a Participant who is eligible for a 60/15 retirement
pension, the first installment of any regular pension will be payable
for the fourth calendar month following the month in which the
Participant attains age 62 unless the Participant elects earlier
commencement in accordance with
<PAGE>
-46-
Section 3.3, in which case the first installment of regular pension
will be payable for the first full calendar month following the 3
calendar months for which the special payment is made.
d) In the case of a Participant who is eligible for a deferred vested
retirement pension and who incurs a break in continuous service after
attaining age 40 and completing at least 15 years of continuous
service, the first installment of regular pension will be payable for
the calendar month next following the Participant's 62nd birthday
unless the Participant elects earlier commencement in accordance with
Section 3.3, in which case the first installment of regular pension
will be payable for the later of (i) the calendar month specified by
the Participant in his application for pension, provided such month is
subsequent to the month in which he attains age 60, or (ii) the
calendar month in which application for pension is made.
<PAGE>
-47-
e) In the case of a Participant who is eligible for a deferred vested
retirement pension and who incurs a break in continuous service either
prior to attaining age 40, or after attaining age 40 and before
completing at least 15 years of continuous service, the first
installment of regular pension will be payable for the calendar month
next following the Participant's 65th birthday unless the Participant
elects earlier commencement in accordance with Section 3.3, in which
case the first installment of regular pension will be payable for the
later of (i) the calendar month specified by the Participant in his
application for pension, provided such month is subsequent to the
month in which he attains age 60, or (ii) the calendar month in which
application for pension is made.
f) The last installment of any regular pension will be payable for the
month in which the death of the Participant occurs.
SECTION 3.14 LUMP SUM PAYMENT. The Company shall make a lump sum payment
which will be the equivalent actuarial
<PAGE>
-48-
value of the regular pension otherwise payable if such equivalent actuarial
value is not more than $3,500. In determining such equivalent actuarial value,
mortality will be based on UP-1984 unisex table with no adjustment. Interest
will be at the rate set by the Pension Benefit Guaranty Corporation for
immediate annuities as of the first day of the month in which the amount of a
lump sum payment is to be determined.
SECTION 3.15 PRE-PENSION SPOUSE COVERAGE. Any Participant who is accruing
continuous service, who has a spouse and:
a) who has attained age 55 and has completed at least 15 years of
continuous service, or
b) who has attained age 60 and has completed at least 5 years of
continuous service,
may, as provided below, obtain Pre-Pension Spouse Coverage which would provide a
lifetime monthly payment for the Participant's spouse following the
Participant's death. Any monthly payment resulting from such coverage will be
in addition to any surviving spouse's benefit provided under Article IV.
<PAGE>
-49-
Any Participant who is accruing continuous service, who has a spouse and
who, prior to August 23, 1984, attained age 65 and completed at least 5 years of
continuous service is automatically deemed to have elected the Pre-Pension
Spouse Coverage unless the Participant revokes the coverage in writing.
The effective date of Pre-Pension Spouse Coverage for those Participants
who are not automatically covered will be the date 2 years following the date
the Participant elects such coverage or the date the Participant attains the
required age and service, whichever is later. Notwithstanding anything to the
contrary contained in the foregoing, if a Participant dies as a result of an
accident which occurs after having attained the required age and service and
after he has elected Pre-Pension Spouse Coverage but prior to the date that such
coverage becomes effective, such coverage will be deemed to have become
effective as of the date such Participant elected such coverage.
The Participant who will be automatically covered will be notified at least
180 days prior to attainment of the required age and service with such coverage
becoming effective as of
<PAGE>
-50-
the date the Participant attains the required age and service unless the
Participant revokes such coverage.
A Participant may terminate Pre-Pension Spouse Coverage at any time with
such termination to be effective as of the date the form prescribed for this
purpose is filed with the Company. Such coverage will automatically terminate
as of the earliest of:
a) the date the Participant is divorced from his spouse;
b) the date the spouse dies;
c) the date preceding the Participant's retirement; or
d) the date the Participant incurs a break in continuous service.
The effective date of Pre-Pension Spouse Coverage for a Participant who is
reemployed following retirement or a break in continuous service, which
terminated such coverage as outlined above, will be the date of reemployment;
provided, however, that the Participant may within 30 days after such
reemployment revoke such coverage effective as of the date of reemployment.
<PAGE>
-51-
If a Participant elects or is automatically covered by Pre-Pension Spouse
Coverage, the amount determined in accordance with Section 3.3 will be reduced
by an amount equal to the product of: 7/10 of 1% of such amount, multiplied by
the number of years (and fractions thereof) that such coverage was in effect.
If a Participant dies while the Pre-Pension Spouse Coverage is in effect,
the surviving spouse will receive 50% of an amount equal to the product of:
a) the amount determined in accordance with Section 3.3 as though the
Participant had retired on the date of his death and, in the case of a
Participant who died prior to attainment of age 65, as though he had
been age 65 on the date of his death, reduced as determined above,
multiplied by
b) the applicable percentage obtained from Exhibit A, based on the ages
of the Participant and his spouse as of the Participant's date of
death.
The first installment of the amount payable to the Participant's spouse
pursuant to this section will be payable for the month following the month in
which the Participant's
<PAGE>
-52-
death occurs and the last installment will be payable for the month in which the
spouse's death occurs.
Satisfactory proof of marriage of the Participant and his spouse and of the
age of the Participant's spouse will be required prior to the payment of monthly
installments under this coverage. Satisfactory proof of divorce or of the death
of the Participant's spouse will be required for automatic termination of Pre-
Pension Spouse Coverage as provided above.
In the event a Participant who has elected Pre-Pension Spouse Coverage dies
as the result of an accident prior to the date Pre-Pension Spouse Coverage
becomes effective and such Participant has not revoked the coverage provided
under Section 3.16, the Pre-Pension Spouse Coverage will be paid in lieu of any
benefit under Section 3.16.
SECTION 3.16 PRE-RETIREMENT SURVIVOR ANNUITY COVERAGE.
a) ELIGIBILITY. Survivor Annuity Coverage is automatically applicable to
any Participant, as described below, who has been married for at least
1 year and who has not, with the concurrence of his spouse, revoked
such coverage; provided, however that Survivor Annuity Coverage is not
applicable to
<PAGE>
- 53 -
a Participant who has elected and is covered by the Pre-
Pension Spouse Benefit provisions of Section 3.15 as long as such
coverage is in effect:
1) any Participant who is accruing continuous service and who has
completed at least 5 years of continuous service;
2) any Participant who incurs a break in continuous service after
age 60 with eligibility for a 60/15 or deferred vested retirement
pension and who does not elect immediate commencement of pension;
and
3) any Participant who incurs a break in continuous service prior to
age 60 with eligibility for only a deferred vested retirement
pension.
b) COMMENCEMENT AND TERMINATION OF SURVIVOR ANNUITY. The surviving
spouse, as defined under Section 3.15, of a Participant who dies while
Survivor Annuity Coverage is in effect will be eligible for a monthly
payment:
<PAGE>
- 54 -
1) commencing with the month following the month in which the
Participant's death occurs, in the case of a Participant who dies
while accruing continuous service and after the Participant (i)
has attained age 60, or (ii) has completed 30 years of continuous
service; or
2) commencing with the later of (i) the month following the month in
which the Participant's 60th birthday would have occurred, or
(ii) the month following the month in which the Participant's
death occurs, in the case of a Participant not covered under
subsection (b)(1) above.
The last installment of the Survivor Annuity will be payable for the
month in which the spouse's death occurs.
c) AMOUNT OF SURVIVOR ANNUITY. The amount of the Survivor Annuity will
be determined as follows:
<PAGE>
- 55 -
1) in the case of a Participant who dies while accruing continuous
service, the Survivor Annuity will be equal to:
i) the amount determined in accordance with Section 3.3 as
though the Participant had been age 65 and had retired on
the date of his death, with such result multiplied by;
ii) the applicable percentage obtained from subsection (4)
below, based on the difference between the ages of the
Participant and his spouse as of the date of the
Participant's death, reduced by;
iii) the Surviving Spouse's benefit payable, if any, pursuant to
Article IV;
2) in the case of a Participant who had retired on a 60/15 or
deferred vested retirement pension after attainment of age 60 and
who had elected to defer commencement of pension payments and who
dies prior to commencement of
<PAGE>
- 56 -
such payments, the Survivor Annuity will be equal to:
i) the amount determined in accordance with Sections 3.3 as
though the Participant had elected to have pension payments
commence with the first of the month following the date of
death, with such result multiplied by;
ii) the applicable percentage obtained from subsection (4)
below, based on the difference between the ages of the
Participant and his spouse as of the date of the
Participant's death, reduced by;
iii) the Surviving Spouse's benefit payable, if any, pursuant to
Article IV.
3) in the case of a Participant eligible for a deferred vested
pension who dies prior to attainment of age 60, the Survivor
Annuity will be equal to:
i) the amount determined in accordance with Section 3.3 as
though the Participant
<PAGE>
- 57 -
survived until age 60 and elected to have pension payments
commence as of the first of the month following attainment
of age 60, with such result multiplied by;
ii) the applicable percentage obtained from subsection (4)
below, based on the difference between the ages of the
Participant and his spouse as of the date of the
Participant's death, reduced by;
iii) the Surviving Spouse's benefit payable, if any, pursuant to
Article IV.
4) the following table is to be used in subsections (c)(1), (2) and
(3) above:
<TABLE>
<CAPTION>
Participant's Age at Death
Difference Between --------------------------
Ages of Participant Prior to 64 and
and spouse 61 61 to 63 over
------------------- -------- -------- ------
Participant Older:
-----------------
<S> <C> <C> <C>
20 or more years 36.5% 37.0% 37.0%
17, 18 or 19 years 37.0% 37.5% 37.5%
14, 15 or 16 years 37.5% 38.0% 38.0%
11, 12 or 13 years 38.5% 38.5% 39.0%
8, 9 or 10 years 39.0% 39.5% 40.0%
5, 6 or 7 years 39.5% 40.5% 40.5%
2, 3 or 4 years 40.5% 41.0% 41.5%
Less than 2 years 41.5% 42.0% 42.5%
</TABLE>
<PAGE>
- 58 -
<TABLE>
<CAPTION>
Participant Younger:
-------------------
<S> <C> <C> <C>
Less than 2 years 41.5% 42.0% 42.5%
2, 3 or 4 years 42.0% 43.0% 44.0%
5, 6 or 7 years 43.0% 44.0% 44.5%
8, 9 or 10 years 44.0% 45.0% 45.5%
11, 12 or 13 years 45.0% 46.0% 46.5%
14, 15 or 16 years 45.5% 46.5% 47.0%
17, 18 or 19 years 46.5% 47.5% 48.0%
20 or more years 47.0% 48.0% 48.0%
</TABLE>
d) NOTIFICATION, REVOCATION, ELECTION AND TERMINATION.
1) At least 180 days prior to the month in which the Participant
will complete 5 years of continuous service, each eligible
Participant who is accruing continuous service will be advised
regarding Survivor Annuity Coverage, the benefits provided and
the effect, or cost, of such Coverage on the regular pension
provided pursuant to this Article III. Such information will
also be furnished within a period beginning on the first day of
the plan year in which the Participant attains age 32 and ending
with the close of the plan year in which the Participant attains
age 34 and will include a written explanation of:
<PAGE>
- 59 -
i) the Participant's right to waive such Coverage and the
effect of such waiver;
ii) the rights of the Participant's spouse with respect to such
waiver; and
iii) the Participant's right to revoke such waiver and the effect
of such revocation.
The period for furnishing information will also include a
reasonable period after an employee becomes a Participant
following the period described in the preceding sentence and a
reasonable period after a Participant terminates employment
before he attains age 35.
2) A Participant covered by Section 3.15 who has a spouse will be
advised upon termination of employment regarding Survivor Annuity
Coverage, the benefits provided, and the effect, or cost, of such
Coverage on the pension provided pursuant to this Article III.
There shall be no charge for coverage after retirement or the
break in continuous service
<PAGE>
- 60 -
if a Participant, with the concurrence of his spouse, files a
valid revocation within 90 days of the date he is notified
regarding such Coverage.
3) A Participant, with the concurrence of his spouse, may revoke
Survivor Annuity Coverage after completion of 5 years of
continuous service.
4) Revocation of Survivor Annuity Coverage by a Participant must be
consented to by the Participant's spouse. The revocation must
designate a beneficiary or beneficiaries or a form of benefit
payment which may not be changed without the spouse's consent,
except that the spouse's consent may expressly permit future
changes in the designation of beneficiary or form of benefit
payment without further consent of the spouse. To be effective,
a spouse's consent must be given in writing and must be witnessed
by a representative of the Company or a notary
<PAGE>
- 61 -
public. Such revocation will be effective the date the form is
received by the Company.
5) Survivor Annuity Coverage will automatically terminate as of the
earliest of:
i) the date the Participant is divorced from his spouse;
ii) the date the spouse dies;
iii) except in the case of a Participant covered by Section 3.15,
the date of the Participant's retirement;
iv) in the case of a Participant covered by Section 3.15, the
last day of the month preceding the first month for which
pension is paid;
v) the day following the date the Participant dies.
6) A Participant will automatically be covered by Survivor Annuity
Coverage as of the later of (i) the date that is one year after
the date the Participant and his spouse are first married, or
(ii) the date the Participant
<PAGE>
- 62 -
completes 5 years of service unless the Participant and the
spouse revoke such coverage. Any revocation of the Survivor
Annuity Coverage by a Participant prior to the Plan Year in which
the Participant attains age 35 will cease to be effective on the
first day of the Plan Year in which he attains age 35. A new
waiver of consent shall be required in order to continue
revocation of the Survivor Annuity Coverage.
7) Subject to requirements as to a spouse's consent to future
changes as provided above, a Participant who revokes Survivor
Annuity Coverage may subsequently elect such coverage at any time
by submitting the prescribed form, together with copies of the
Participant's marriage certificate and birth certificates for the
Participant and spouse, to the Company. Such election will not
be effective until the form and documents required are received
by the Company.
<PAGE>
- 63 -
8) A Participant who returns to the employ of the Company after
having been retired and having received a pension or after
incurring a break in continuous service with eligibility for a
60/15 or deferred vested retirement pension, will automatically
be provided Survivor Annuity Coverage effective with his first
day of reemployment unless the Participant, with the concurrence
of his spouse, revokes such coverage within 90 days of the date
of reemployment.
9) Satisfactory proof of marriage of the Participant and his spouse
and the age of the Participant's spouse will be required prior to
the payment of monthly installments under Survivor Annuity
Coverage.
10) The surviving spouse for the purpose of this Section 3.16 will be
that person to whom the Participant was married as of the date of
the Participant's death, but only if the Participant and spouse
were married throughout the 1
<PAGE>
- 64 -
year period immediately preceding the date of death.
11) Notwithstanding anything to the contrary contained in this
Agreement, spousal consent will not be required to revoke the
coverage provided under this Section 3.16 if it is established to
the satisfaction of the Company that the signature of the spouse
cannot be obtained because there is no spouse, because the spouse
cannot be located or because of such other circumstances as the
Secretary of the Treasury may by regulations prescribe.
e) EMPLOYEE COST FOR SURVIVOR ANNUITY COVERAGE. No charge or deduction
shall be made to the amount of regular pension determined in
accordance with Section 3.3 to be payable to any Participant who has
Pre-Retirement Survivor Annuity Coverage in effect in order to take
into account the actuarial cost of such coverage.
<PAGE>
- 65 -
f) Notwithstanding anything to the contrary contained herein, in the
event a Participant has elected Pre-Pension Spouse Coverage and has
not revoked Survivor Annuity Coverage and dies accidentally after
having met the age and service requirements for Pre-Pension Spouse
Coverage, and before the effective date of Pre-Pension Spouse
Coverage, the Survivor Annuity Benefit will not be payable.
SECTION 3.17 AUTOMATIC 50% SPOUSE OPTION. Unless a Participant who has a
spouse at the time pension payments commence revokes the Automatic 50% Spouse
Option within the period established below, he will receive a "net reduced
pension" during his lifetime and after the death of the Participant his spouse
will receive a lifetime payment equal to one-half of his "reduced pension."
For the purpose of this Section 3.17, "reduced pension" means an amount
equal to the product of:
a) the amount determined in accordance with Sections 3.3 reduced in
accordance with Sections 3.15 and 3.16, if applicable, and subject to
the deductions
<PAGE>
- 66 -
provided pursuant to Sections 3.8 and 3.9, if applicable, multiplied
by:
b) the applicable percentage obtained from Exhibit A, based on the ages
of the Participant and his spouse at the date pension payments
commence;
and "net reduced pension" means the reduced pension increased in accordance with
the provisions of Sections 3.4, 3.5 and 3.6, if applicable, and decreased in
accordance with the provisions of Section 3.10 and 3.11, if applicable.
A Participant may revoke the Automatic 50% Spouse Option by written notice
duly filed with the Company at any time within the 90-day period prior to the
date pension payments commence, or within 90 days following the date on which
the Company provides written notice to the Participant regarding the Automatic
50% Spouse Option, or, if the Participant has not been given specific
information regarding the terms and conditions of such Option and the financial
effect upon his pension of electing such Option and within 60 days of receiving
the notice regarding the Option makes a written request for such specific
information, within 90 days
<PAGE>
- 67 -
following the date on which the Company provides such information, whichever is
later, and
a) receive the regular pension otherwise payable under this Plan during
his lifetime, or
b) elect a Co-Pension Option in accordance with the provisions set forth
in Section 3.18.
Such written notice from the Company will include an explanation of the
terms and conditions of the Automatic 50% Spouse Option and the effect of an
election not to take it.
Any monthly payment resulting from the Automatic 50% Spouse Option will be
in addition to any surviving spouse's benefit provided under Article IV.
In the case of a Participant who has not revoked the Automatic 50% Spouse
Option, the first installment of net reduced pension will be payable for the
month in which he is first entitled under Section 3.13 to receive regular
pension. The last installment of such net reduced pension will be payable for
the month in which the Participant's death occurs; provided, however, that any
monthly installments payable to such Participant and remaining unpaid at the
time of his death will be paid to his spouse, if then surviving. The first
<PAGE>
- 68 -
monthly payment to the Participant's spouse will be payable for the month
following the month in which the Participant's death occurs, but not for any
month prior to the month for which the Participant would have first been
entitled to receive a net reduced pension, and the last monthly payment to such
spouse shall be payable for the month in which such spouse dies.
Any revocation of the Automatic 50% Spouse Option will be executed on the
form prescribed for this purpose by the Company and will be deemed to be duly
filed when it has been received by the Company. The revocation must designate a
beneficiary or beneficiaries or a form of benefit payment which may not be
changed without the spouse's consent, given in the manner provided below, except
that the spouse's consent may expressly permit future changes in the designation
of beneficiary or form of benefit payment without further consent of the spouse.
Subject to requirements as to spouse's consent to future changes as provided
above, a Participant may cancel a revocation of the Automatic 50% Spouse Option
at any time during the period in which he may revoke such Option.
<PAGE>
- 69 -
Satisfactory proof of marriage of the Participant and his spouse and of the
age of the Participant's spouse will be required prior to the payment of monthly
installments under this coverage.
If any Participant dies prior to commencement of pension payments, the
Participant's spouse will not be entitled to any payments pursuant to this
Section 3.17.
If a Participant does not revoke the Automatic 50% Spouse Option within the
period established above and his spouse dies after the end of such period, but
prior to the death of such Participant, such Participant will continue to
receive net reduced pension installments.
If a Participant does not revoke the Automatic 50% Spouse Option and his
spouse dies within the period established above, the Participant will be treated
as if he had revoked such option.
Notwithstanding anything to the contrary contained in this Section 3.17,
if, after the retirement of a Participant who has not revoked the Automatic 50%
Spouse Option, the amount of regular pension which would have been payable to
him under this Plan had he revoked such option is subject to any
<PAGE>
- 70 -
further deduction, change, offset or correction, then the amount payable under
such option to such Participant and/or his spouse will be adjusted to reflect
any such further deduction, change, offset or correction.
Notwithstanding anything to the contrary in this Section 3.17, in the case
of a Participant who retires under a 60/15 retirement and who elects to defer
the commencement of pension payments until after attainment of age 62, and who
does not revoke the Automatic 50% Spouse Option as provided above, such
Participant will receive a net reduced pension commencing with the fourth
calendar month following the month in which the Participant attains age 62. If
the Participant dies prior to attainment of age 62, the amount payable to the
Participant's spouse shall be equal to one-half the reduced pension which would
have been payable to the Participant, had he been permitted to and had he
elected to receive a net reduced pension commencing on the date of death, based
on the ages of the Participant and his spouse as of the date of the
Participant's death. If the spouse of any Participant who has not revoked the
Automatic 50% Spouse Option dies prior to commencement of regular pension, the
Participant will still
<PAGE>
- 71 -
receive the net reduced pension commencing with the fourth calendar month
following the month in which the Participant attains age 62 as provided above.
For the purpose of this Section 3.17, in the case of a Participant who
retires on other than a deferred vested pension, pension payments will be deemed
to commence as of the date of retirement and, in the case of a Participant
eligible for a deferred vested pension, pension payments will be deemed to
commence as of the first of the month for which regular pension is first payable
under the provisions of Section 3.13.
Notwithstanding anything to the contrary contained in this Section 3.17, a
Participant may revoke the Automatic 50% Spouse Option only with the written
consent of his spouse. Revocation of this option may be effected by filing the
prescribed form with the Company. To be valid, the form must be signed by the
Participant and his spouse in the presence of a representative of the Company or
in the presence of a notary public and the form notarized. This notarized form
will be effective only when the form is filed with the Company. Within a
reasonable time prior to retirement the Company will furnish a written
explanation of:
<PAGE>
- 72 -
a) the terms and conditions of the Automatic 50% Spouse Option;
b) the Participant's right to waive such Option and the effect of such
waiver;
c) the rights of the Participant's spouse with respect to such waiver;
and
d) the Participant's right to rescind such waiver and the effect of such
rescission.
Notwithstanding anything contained in the previous paragraph, spousal
consent will not be required to revoke the coverage under this Section 3.17 if
it is established to the satisfaction of the Company that the signature of the
spouse cannot be obtained because there is no spouse, because the spouse cannot
be located or because of such other circumstances as the Secretary of the
Treasury may by regulations prescribe.
SECTION 3.18 CO-PENSIONER OPTIONS. Any Participant may, under the
conditions set forth below by written notice duly filed with the Company:
a) elect to convert the regular pension otherwise payable to him under
this Plan upon retirement into
<PAGE>
- 73 -
a "net reduced pension," in accordance with the 100% Co-Pensioner
Option or the 50% Co-Pensioner Option described below; or
b) revoke any such election previously made, in which event he shall be
treated as if he had not made such election; or
c) change any such election from one to the other of such options and/or
change the person previously named as his co-pensioner.
A "100% Co-Pensioner Option" is a "net reduced pension" payable to the
Participant during his life, with the provision that after his death, an amount
equal to the "reduced pension" will be paid to such person, to be known as his
"Co-pensioner" as he has nominated by written designation duly filed with the
Company. A "50% Co-Pensioner Option" is a "net reduced pension" payable to the
Participant during his life, with the provision that after his death, an amount
equal to one-half of the "reduced pension" will be paid to such person, to be
known as his "co-pensioner," as he has nominated by written designation duly
filed with the Company.
<PAGE>
- 74 -
For the purpose of this Section 3.18, "reduced pension" means an amount
equal to the product of:
a) the amount determined in accordance with Section 3.3 reduced in
accordance with Section 3.15, if applicable, and subject to the
deductions provided pursuant to Sections 3.8 and 3.9, if applicable,
multiplied by;
b) the applicable percentage obtained from Exhibit A, based on the ages
of the Participant and his co-pensioner at the date pension payments
commence as described below;
and "net reduced pension" means the reduced pension increased in accordance with
the provisions of Sections 3.4 through 3.6, if applicable, and decreased in
accordance with the provisions of Sections 3.10 and 3.11, if applicable.
Notwithstanding anything to the contrary in (a) and (b) above, if the
Participant has elected either of the Co-Pensioner Options and if, upon
retirement or attainment of age 65, whichever is later, the Participant has a
spouse who can become eligible for a surviving spouse's benefit:
<PAGE>
- 75 -
a) The Participant will receive a pension equal to the sum of:
1) 50% of an amount equal to the monthly amount determined in
accordance with Section 3.3 reduced in accordance with Section
3.15, if applicable, and subject to Sections 3.8 and 3.9, if
applicable, and
2) 50% of his reduced pension,
increased in accordance with the provisions of Sections 3.4 through
3.6, if applicable, and decreased in accordance with the provisions of
Sections 3.10 and 3.11, if applicable.
b) The Participant's co-pensioner will, following the Participant's
death, receive an amount equal to 50% of the Participant's reducedan
amount equal to 25% of the Participant's reduced pension if the
Participant had elected a 50% Co-Pensioner Option.
c) For the purposes of determining the appropriate reduced pension, if
the Participant's co-pensioner
<PAGE>
- 76 -
is other than the Participant's spouse, it will be presumed that the
Participant does not have a spouse unless he furnishes proof to the
contrary in the form of a marriage certificate or other evidence
satisfactory to the Company.
d) Any Participant may in accordance with the provisions of (a) above
elect an option, revoke an option election or change an option
election and/or co-pensioner at any time prior to the date on which
the Company provides written notice to the Participant regarding the
Co-Pensioner Options, or, if the Participant has not been given
specific information regarding the terms and conditions of such
options and the financial effect upon his pension of electing such
options, and within 60 days of receiving the notice regarding the
options, makes a request for such specific information, and, within 90
days following the date on which the Company provides such
information, whichever is later; provided, however, that with respect
to a Participant who has a spouse at the time pension payments com-
<PAGE>
- 77 -
mence, the election of either Co-Pensioner Option will be null and
void unless the Participant and his spouse revoke the Automatic 50%
Spouse Option provided under Section 3.17.
e) Any Participant who had elected Option 1 under a prior version of this
Plan will be deemed to have elected the 100% Co-Pensioner Option under
this Plan, and any Participant who had elected Option 2 under a prior
version of this Plan will be deemed to have elected the 50% Co-
Pensioner Option under this Plan; provided, however, that any such
election will be null and void if the Participant does not revoke the
Automatic 50% Spouse Option provided under Section 3.17.
f) In the case of a Participant who has elected one of the options
specified, the first installment of net reduced pension will be
payable for the month for which he is first entitled under Section
3.13 to receive a regular pension; and the last installment of such
net reduced pension to the Participant will be payable for the month
in which his death occurs;
<PAGE>
- 78 -
provided, however, that any monthly installments payable to such
Participant and remaining unpaid at the time of his death may be paid
to his co-pensioner, if then surviving. The first monthly payment to
his co-pensioner will be payable for the month following the month in
which such Participant's death occurs, but not for any month prior to
the month for which the Participant would have first been entitled to
receive a net reduced pension, and the last monthly payment that will
be payable to such co-pensioner will be payable for the month in which
such co-pensioner dies.
g) Any election or revocation of an option, or change of an option
election and/or co-pensioner pursuant to this Section 3.18 will be
executed on a form prescribed for such purpose by the Company and will
be deemed to be duly filed when it has been received by the Company.
h) Satisfactory proof of age of the named co-pensioner will be required
prior to payment of pension installments under an elected option. No
consent
<PAGE>
- 79 -
will be required of the person designated as co-pensioner in any
election under either Co-Pensioner Option in order to revoke such
election or to change the co-pensioner and/or the option elected.
i) If any Participant has elected an option under this Section 3.18 and
dies prior to his retirement, such election will cease to be of any
effect, and the co-pensioner will not be entitled to any payments by
reason of the election of such option.
j) If any Participant has elected an option under this Section 3.18 and
his co-pensioner dies after such Participant has commenced receiving
pension payments or after the expiration of the 90-day period
described in (d) above, but prior to the death of such Participant,
such Participant will continue to receive net reduced pension
installments in accordance with such option.
k) If any Participant has elected an option under this Section 3.18 and
his co-pensioner dies before the later of:
<PAGE>
- 80 -
i) the commencement of pension payments to the Participant, or
ii) the 90-day period described in (d) above, then the Participant
will be treated the same as if he had not made such election.
l) Notwithstanding anything to the contrary contained in this Section
3.18, if, after the retirement of a Participant who has elected either
Co-Pensioner Option, the amount of regular pension which would have
been payable to him under this Plan had he not elected an option is
subject to any further deduction, change, offset or correction, then
the amount payable under an elected option to such Participant and/or
his co-pensioner will be adjusted to reflect any such further
deduction, change, offset or correction.
m) Notwithstanding anything to the contrary contained in this Section
3.18, in the event that the amount payable to a co-pensioner is
determined as though the Participant did not have a spouse who could
become eligible for a surviving spouse's benefit,
<PAGE>
- 81 -
because such Participant who had a spouse at retirement failed to
notify the Company that he had such a spouse, the amount otherwise
payable to the co-pensioner for any month will be reduced by the
amount of any surviving spouse's benefit provided for the same month
pursuant to Article IV of this Plan.
n) For the purpose of this Section 3.18, in the case of a Participant
who retires on other than a deferred vested pension or a deferred
60/15 pension, pension payments shall be deemed to commence as of the
date of retirement and, in the case of a Participant who retires on a
deferred vested pension or a deferred 60/15 pension, pension payments
shall be deemed to commence as of the first of the month for which
regular pension is first payable under the provisions of Section 3.13.
SECTION 3.19 MINIMUM DISTRIBUTIONS. Notwithstanding any other provision
of this Plan, the entire interest of a Participant will be distributed in
conformity to Section 401(a)(9) of the Code. The entire interest of each
Participant, if
<PAGE>
- 82 -
living, which is payable as a lump sum will be distributed not later than April
1 of the calendar year following the calendar year in which the Participant
attains age 70-1/2. If distribution to a Participant who attains age 70-1/2 is
to be in periodic payments, distribution shall begin no later than such April 1
and shall be made in accordance with regulations --
a) over the life of the Participant;
b) over the lives of such participant and a designated beneficiary;
c) over a period certain not extending beyond the life expectancy of such
Participant, or
d) over a period certain not extending beyond the life expectancies of
such Participant and a designated beneficiary.
Any additional benefits that accrue after the April 1 described above shall
begin being distributed as of the January 1 following the calendar year in which
the additional benefits accrue.
If such periodic distribution has begun and the Participant dies before his
entire interest has been distributed to
<PAGE>
- 83 -
him, the remaining portion of such interest will be distributed at least as
rapidly as under the method of periodic distribution in force as of the date of
the Participant's death. If the Participant's spouse is not the designated
beneficiary, the method of distribution selected must assure that at least 50%
of the amount available for distribution is paid within the life expectancy of
the Participant.
If a Participant dies before periodic distribution of his interest has
begun, the entire interest will be distributed within 5 years after the death of
such Participant, unless (a) or (b) apply:
a) if, however, any portion of the Participant's interest is payable to
(or for the benefit of) a designated beneficiary, such portion may be
distributed in substantially equal installments (in accordance with
regulations) over the life of such designated beneficiary (or over a
period not exceeding beyond the life expectancy of such beneficiary).
Such distributions are required to begin no later than 1 year after
the date of the
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Participant's death or such later date as regulations prescribe; or
b) If such designated beneficiary is the surviving spouse of the
Participant, distribution is not required to begin until the date on
which the Participant would have attained age 70-1/2. If the spouse
dies before distribution begins, subsequent distributions will be made
as if the Participant had died on the date of the spouse's death.
For the purposes of applying the provisions of Section 401(a)(9) of the
Code, the life expectancy of a Participant and the Participant's spouse (other
than in the case of a life annuity) may be redetermined, but not more frequently
than annually. In the case of any other designated beneficiary, such life
expectancy will be calculated once at the time benefit payments commence and
will not be recalculated (unless such calculation is discovered to be
erroneous).
Any amount paid to a child of a Participant will be treated as if it had
been paid to the Participant's surviving spouse if such amount will become
payable to such surviving
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spouse when such child reaches majority (or upon another event permitted under
regulations).
SECTION 3.20 LIMITATION ON BENEFITS.
a) Subject to the adjustments in (b) and (c) below, the maximum annual
pension payable in the form of a life annuity to an eligible Employee
under this Plan will not exceed the lesser of $90,000 (or such amount
as the Internal Revenue Service permits in annual adjustments based on
the cost of living), or 100% of the eligible Employee's average
compensation for the 3 consecutive calendar years during which
heparticipated in the Plan and had the greatest aggregate compensation
from the Company. For a Participant who has less than 10 years
ofparticipation, this limitation will be multiplied by a fraction
inwhich the numerator is the number of
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years (or part thereof) of continuous service and the denominator is
10. The foregoing fractional limitations will be applied separately
to each change in the benefit structure of the Plan in accordance with
regulations of the Secretary of the Treasury.
For purposes of coordinating the application of this section with
the requirements of Section 415 of the Code, the "limitation year"
will be the calendar year. Compensation will be determined by
reference to Section 1.415-2(d) of the treasury regulations and will
include amounts actually paid or includable in gross income in each
calendar year.
b) In the case of a Participant whose pension becomes payable before the
Social Security retirement age, the $90,000 limitation on the maximum
pension will be reduced to the actuarial equivalent of an annual
pension in the amount of $90,000 beginning at the Social Security
retirement age. For purposes of this paragraph, the Social Security
retirement age
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will be used as the retirement age for the Participant under Section
216(1) of the Social Security Act, except that such section will be
applied without regard to the age increase factor and as if the early
retirement age were 62. The reduction will be made in such manner as
the Secretary may prescribe which is consistent with the reduction for
old age insurance benefits commencing before the Social Security
retirement age. The interest rate used in making these adjustments
will be the rate used in calculating the Participant's pension or 5%,
if greater.
c) If a Participant's pension becomes payable after the Social Security
retirement age, the $90,000 limitation will be increased to the
actuarial equivalent of a pension in the amount of $90,000 beginning
at the Social Security retirement age. The interest rate utilized in
such adjustment will be 5%.
d) In the event the eligible Employee's pension is payable in any form
other than a life annuity, the
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limitation prescribed will be actuarially adjusted in accordance with
Internal Revenue Service regulations issued pursuant to the provisions
of Section 415(b) of the Code; provided, however, that for purposes of
this paragraph, the portion of any joint and survivor annuity which
constitutes a qualified joint and survivor annuity, and any ancillary
benefits not directly related to retirement income benefits, will not
be taken into account.
e) The limitation herein will not apply to any eligible Employee who has
not at any time participated in any defined contribution plan
maintained by the Company if his total annual pension computed in
accordance with this section is not in excess of $10,000 in any year.
f) The limitations with respect to any Employee who at any time has
participated in any other defined benefit plan or in a defined
contribution plan maintained by the Company or by a corporation which
is a member of a controlled group of corporations
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(within the meaning of Section 1563(a), determined without regard to
Sections 1563(a)(4) and (e)(3)(C), and Section 415(h) of the Code) of
which the Company is a member will apply as if the total benefits
payable under all defined benefit plans in which the Employee has been
a Participant were payable from one plan, and as if the total annual
additions made to all defined contribution plans in which the Employee
has been a Participant, were made to one plan.
SECTION 3.21 FIVE-YEAR TERM CERTAIN PAYMENTS.
(a) Notwithstanding anything herein to the contrary, any Participant who
retires on other than a deferred vested pension on or after September
1, 1993 will be entitled to receive the benefits described in
subsection (b) below for a minimum of 60 months following the date of
retirement.
(b) For any month which is prior to both the end of the 60-month period
defined in subsection (a) above and the month following the month in
which the Participant's death occurs, the monthly payment
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otherwise payable to the Participant under this Plan for such month
shall be increased to the extent necessary so that the total amount
payable to the Participant under this Plan for such month shall not be
less than the Participant's regular pension, as determined in
accordance with Section 3.3, after taking into account the adjustments
required by other provisions of this article.
For any month which is both (i) prior to the end of the 60-month
period defined in subsection (a) above, and (ii) after the month in
which the Participant's death occurs, the Participant's surviving
spouse shall be entitled to a monthly payment under this Section 3.21
equal to the difference between the monthly payment the Participant
would have been entitled to for such month if he had been living, as
determined in accordance with Section 3.3 after taking into account
the adjustments required by other provisions of this article and the
total of all amounts otherwise payable for such months under this Plan
on behalf
<PAGE>
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of the Participant to his surviving spouse or co-pensioner.
(c) In the event that there is no surviving spouse, such benefit will be
paid to the person designated by the Participant as his designated
beneficiary, and if there is no surviving beneficiary, such benefit
will be paid to the estate of the Participant. Any Participant may,
in accordance with the provisions of subsection (b) above and on a
form prescribed for such purposes by the Company (i) designate a
beneficiary to receive the payments under subsection (b) above (A) in
the event of the waiver of the Automatic 50% Spouse Option and the Co-
Pensioner Option, or (B) in the event that his spouse or co-pensioner
shall predecease him, or (ii) change such a beneficiary designation at
any time prior to his death. Such beneficiary designation shall be
deemed to be effective when it shall have been received by the
Company.
(d) In the event that a Participant who is eligible to retire (on other
than a deferred vested pension)
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and who has made application for retirement during any calendar month
and, has not revoked such application dies in the month in which his
retirement would otherwise have occurred, the benefits provided under
this Section 3.21 will be paid as if the Participant had survived
until such requested retirement date.
ARTICLE IV
SURVIVING SPOUSE'S BENEFIT
SECTION 4.1 ELIGIBILITY. With respect to any Participant who completed at
least 15 years of continuous service and who dies and either:
a) at a time (i) when he is accruing continuous service, or (ii) before
application for pension and after a break in continuous service which
occurred under conditions of eligibility for retirement on immediate
pension, or
b) after retirement on other than a deferred vested pension,
<PAGE>
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his surviving spouse, as determined pursuant to Section 4.5, will be eligible
for a monthly benefit ("surviving spouse's benefit") as set forth below.
SECTION 4.2 AMOUNT OF BENEFIT. Unless the provisions of Section 4.3
result in a higher amount, the amount of any surviving spouse's benefit payable
will be $200.00 for any month before the month in which the surviving spouse
attains the age at which widow's or widower's benefits are first provided under
a law referred to in Section 1.18 and $150.00 for any month thereafter.
SECTION 4.3 CALCULATION OF BENEFIT. Unless the provisions of Section 4.2
result in a higher amount, the amount of any surviving spouse's benefit payable
will be determined in accordance with the following:
a) If eligibility for such a benefit arises by reason of the death of a
Participant covered by Section 4.1(a), the monthly amount of the
benefit, subject to the provisions of (d) and (e) below, will be equal
to 50% of the amount determined in accordance with Section 3.3 as
though the Participant had retired on the date of his death and, in
the case
<PAGE>
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of a Participant who died prior to attainment of age 62, as though he
had been age 62 on the date of his death.
b) If eligibility for such a benefit arises by reason of the death of a
Participant covered by Section 4.1(b), the monthly amount of the
benefit, subject to the provisions of (c), (d) and (e) below, equal to
50% of the amount determined in accordance with Section 3.3. In
addition, surviving spouses of Participants who retired on or after
July 31, 1974 but prior to August 31, 1989 will be entitled to receive
a supplement of $50 per month during the period in which the surviving
spouse's benefit is payable but not later than August 31, 1999.
c) In the case of a Participant who dies after 60/15 retirement and prior
to age 62 and who had elected to defer the commencement of regular
pension until after attainment of age 62, the regular pension payable
to the Participant will, for purposes of applying the provisions
of(b)above, be deemed to
<PAGE>
- 95 -
be the amount determined in accordance with Section 3.3 which would
have been payable if, under the provisions of this Plan, he had been
permitted to and had elected to receive regular pension commencing
with the first month for which the surviving spouse's benefit is
payable.
d) Commencing with the first surviving spouse's benefit payable after the
surviving spouse attains the age at which widow's or widower's
benefits are first provided under a law referred to in Section 1.18,
the amount of the surviving spouse's benefit otherwise payable for any
month will be reduced by 50% of the amount of the widow's or widower's
benefit to which the surviving spouse is, or upon application would
be, entitled for such month based on the law in effect at the time the
surviving spouse's benefit first becomes payable (without regard to
any offset or suspension imposed by such law). If the surviving
spouse is not eligible for such a widow's or widower's benefit for
such month, the amount of the reduction will be equal to 50% of
<PAGE>
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the amount that could have become payable to the surviving spouse for
such month, based on the Participant's wages, if the surviving spouse
had been eligible and had applied for such a benefit.
e) If the surviving spouse receives, or upon application would be
entitled to receive, any payment derived from rights acquired by the
Participant, which would if received by the Participant have been
subject to deduction under Section 3.9 from any regular pension
otherwise payable to the Participant (except any such payment received
by the surviving spouse by reason of an election by the Participant to
receive a reduced payment), the amount of such payment not
attributable to the contributions of the Participant will be deducted
from the surviving spouse's benefit otherwise determined under Article
IV.
f) Notwithstanding anything to the contrary set forth above, semi-annual
cash payments up to $500 will be made to surviving spouses receiving
surviving spouse's benefits as of February 1, 1994 pursuant
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to a prior version of this Plan in effect prior to July 31, 1974. The
semi-annual payments will commence as of February 28, 1994 and extend
until August 31, 1999 in the manner described in Exhibit C hereto.
Semi-annual cash payments up to $500 will also be made to spouses of
pre-1974 pensioners not otherwise eligible for surviving spouses
benefits. The semi-annual payments will commence as of February 28,
1994 and extend until August 31, 1999 in the manner described in
Exhibit D.
SECTION 4.4 COMMENCEMENT AND TERMINATION OF BENEFIT. The first
installment of any surviving spouse's benefit will be payable for the month
following the month in which the Participant dies, and the last installment will
be payable for the month in which the surviving spouse dies; provided, however,
that a surviving spouse's benefit will not be payable for any month for which a
special payment was payable to the Participant. In connection with an
application for a surviving spouse's benefit, the Company may require the
surviving spouse to grant any authorization necessary to receive rele-
<PAGE>
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vant records from the agency administering the law referred to in Section
4.3(d).
SECTION 4.5 DETERMINATION OF STATUS AS SURVIVING SPOUSE. A person will be
considered a surviving spouse for the purpose of this Article IV only if:
a) immediately after a Participant's death, such person is a widow or
widower of such Participant within the provisions of the Social
Security Act, except that where such Act required reference to the law
of the District of Columbia, the applicable law will be that of the
State of Illinois; and
b) with respect to a Participant who dies after retirement, such person
was married to the Participant at the date of the Participant's
retirement.
SECTION 4.6 INFORMATION TO BE PROVIDED BY THE COMPANY. The Company will
make reasonable efforts, by appropriate means or methods, to inform the
surviving spouse of an eligible Participant of the existence of this benefit.
SECTION 4.7 SURVIVING SPOUSE OF PART-TIME PARTICIPANTS. In the case of a
surviving spouse of a deceased part-time
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- 99 -
Participant, notwithstanding the provisions of Section 4.2, the amounts set
forth in such Section 4.2 will be reduced on the same basis as is provided in
Section 3.7 for the reduction of the minimum pension of a part-time
Participant, whether or not the minimum pension was applicable to such deceased
part-time Participant.
ARTICLE V
DETERMINATION OF CONTINUOUS SERVICE
SECTION 5.1 CONTINUOUS SERVICE DEFINED. "Continuous service" means
service prior to retirement calculated from the Employee's last hiring date
(this means in the case of a break in continuous service, continuous service
will be calculated from the date of reemployment following the last unremoved
break in continuous service) in accordance with the following provisions;
provided, however, that the last hiring date prior to the original effective
date of this Plan will be based on the practices in effect at the time the break
occurred:
a) There will be no deduction for any time lost which does not
constitute a break in continuous service, except that in
determining length of continuous service for pension purposes:
<PAGE>
- 100 -
1) that portion of any absence which continues beyond 3 years from
commencement of absence due to a layoff or beyond 2 years from an
absence due to physical disability will not be creditable as
continuous service; provided, however, that absence in excess of
2 years due to a compensable disability incurred during the
course of employment will be creditable as continuous service, if
the Employee is returned to work within 30 days after final
payment of statutory compensation for such disability or after
the end of the period used in calculating lump sum payment, and
2) the period between a break in service and the date of
reemployment which results in the removal of a break in
accordance with (c) below will not be creditable as continuous
service.
b) Continuous service will be broken by:
1) quit;
<PAGE>
- 101 -
2) discharge, provided that if the Employee is rehired within 6
months, the break in continuous service will be removed,
3) termination (if and when termination occurs pursuant to the Basic
Agreement) due to permanent shutdown of a plant, department or
subdivision thereof;
4) absence which continues for more than 3 years or absence due to
disability which continues for more than 2 years, except that (i)
absence in excess of 2 years due to compensable disability
incurred during the course of employment will not break
continuous service, provided the Employee is returned to work
within 30 days after final payment of statutory compensation for
such disability or after the end of the period used in
calculating a lump sum payment; and (ii) if an Employee is absent
on account of layoff in excess of 3 years or absence due to
disability in excess of 2 years returns to work with the Company
within the
<PAGE>
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period during which he retains his accumulated
continuous service in accordance with the seniority provisions of
the Basic Agreement, the break in continuous service will be
removed;
provided, however, that continuous service will not be considered to
be broken by absence of any Employee who subsequent to May 1, 1940
entered the military, naval or merchant marine service of the United
States, and who has reemployment rights under the law and complies
with requirements of law as to reemployment and is reemployed.
c) Except as otherwise provided in (b)(2) and (b)(4)(ii) above, an
Employee who on or after January 1, 1976 incurs a break in continuous
service prior to becoming eligible for an immediate or deferred vested
pension, and who is reemployed by the Company will, upon completion of
1 year of continuous service following such reemployment, have such
break in continuous service removed if the period of continuous
service accrued prior to
<PAGE>
- 103 -
the break is in excess of the period between
the break and the date of reemployment.
Notwithstanding anything to the contrary contained in the
foregoing, an Employee who on or after January 1, 1985 incurs a break
in continuous service prior to becoming eligible for an immediate or
deferred vested pension, and who is reemployed by the Company shall,
upon completion of 1 year of continuous service following such
reemployment, have such break in continuous service removed if the
period between the break and the date of reemployment is less than 5
years.
d) Notwithstanding (c) above, an Employee who on or after January 1, 1976
incurs a break in service by reason of quit or discharge prior to
becoming eligible for an immediate or deferred vested pension and who
is reemployed by the Company within 1 year from such quit or discharge
shall, except as otherwise provided in (b)(4) above, be deemed to have
had such break in service removed solely for purposes of determining
eligibility for a pension
<PAGE>
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pursuant to Section 2.1 or an unreduced
pension commencing at age 65 pursuant to Section 2.8.
e) For purposes of eligibility and vesting only, continuous service will
include employment with other operations of the Company and with a
member of a controlled group or an unincorporated trade or business
which is under common control with the Company as determined in
accordance with Section 414(c) of the Code and the regulations issued
thereunder. A "controlled group of corporations" means a controlled
group of corporations as defined in Section 1563(a) of the Code,
determined without regard to Sections 1563(a)(4) and (e)(3)(c) of the
Code.
SECTION 5.2 ELAPSED TIME. Notwithstanding any other provisions of this
article, this article will be interpreted and applied in conformity with the
Internal Revenue Service regulations set forth in Section 1.410(a)-7 entitled
"elapsed time." Accordingly, in fulfillment of such purpose, the following
subparagraphs impose supplementary requirements
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which will be followed in crediting Employees with continuous service.
a) Each Employee will be credited with a period of service (equivalent to
years of continuous service) commencing no later than the Employee's
employment commencement date and ending no earlier than the Employee's
severance from service date. Severance from service date will be the
earlier of the date on which an Employee quits, is discharged (subject
to restoration of service within 6 months if rehired as set forth in
Section 5.1) or dies, or the second anniversary of the first date of
absence for any other reason (subject to the 2-year period and the
further extensions for disability and uniformed government service in
Section 5.1(b)(4) above and for child care leave in Section 5.1(b)(5)
above).
b) Continuous service will be credited as required by the service
spanning rules. If an Employee severs from service by reason of quit,
discharge or retirement and the Employee then performs an hour
<PAGE>
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of service within the meaning of 29 C.F.R. Section 2530.200b-2(a)(1)
within 12 months of the severance from service date, the Employee will
be credited with service for the period of severance for purposes of
participation and vesting. Notwithstanding the foregoing sentence, if
an Employee severs from service by reason of quit, discharge or
retirement during an absence from service of 12 months or less for any
reason OTHER THAN quit, discharge, retirement or death and then
performs an hour of service (as defined above) within 12 months of the
date on which the Employee was first absent from service, the Employee
will be credited with service for the period of severance for purposes
of participation and vesting.
c) An Employee will satisfy the requirement for years of continuous
service under this Plan as of the date the Employee has completed a
period of service equal to such requirement. An Employee who
completes 1 year of continuous service as required in Section 1.14 for
participation on the first anni-
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versary of his employment commencement
date will have satisfied the service requirement for participation as
of such date.
d) A 1-year period of severance for purposes of applying Article V hereof
is a 12 consecutive month period beginning on the Employee's severance
from service date during which the Employee does not perform an hour
of service (as defined above). Such term is used interchangeably with
"1 year break in service."
ARTICLE VI
REEMPLOYMENT AFTER ATTAINMENT OF PENSION ELIGIBILITY
SECTION 6.1 APPLICABILITY OF OTHER SECTIONS. Except as otherwise provided
in this Article VI, the provisions of all other sections of this Plan will be
applicable to any Participant who is reemployed by the Company after having been
retired and having received a pension or after having attained eligibility for a
deferred pension under this document or a prior version of this Plan.
SECTION 6.2 EFFECT ON PENSION. Any Participant who is receiving a pension
under this document or a prior version of
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this Plan will upon reemployment by
the Company have his pension discontinued.
SECTION 6.3 CONTINUOUS SERVICE OF REEMPLOYED PARTICIPANT.
a) Any Participant who has been retired and has received a pension or who
is eligible for a deferred vested retirement pension under this or a
prior version of the Plan and who will be reemployed by the Company
will be credited with his continuous service as of the date of his
prior retirement plus his continuous service accruing after
reemployment for the purposes of calculating any subsequent pension
benefits to which he may become entitled; provided, however, nothing
in this paragraph will affect the calculation of continuous service as
provided in Section 5.1(b)(4).
b) If any Participant is reemployed more than 3 years after the
Participant retired on or after September 1, 1993 or more than 3 years
after he incurred a break in continuous service with eligibility for
deferred vested pension and such
<PAGE>
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Participant again retires or incurs a break in continuous service
after such reemployment, then the amount of pension payable with
respect to the period of continuous service accrued before the most
recent prior retirement or prior break in continuous service shall be
determined pursuant to the Basic Agreement in effect at the time of
such prior retirement or prior break in service.
c) If a Participant who received a lump sum payment in accordance with
Section 3.14 is reemployed by the Company, the continuous service with
respect to which he received such lump sum payment is to be used in
calculating any subsequent pension benefit to which he may become
entitled only if, within 5 years of such reemployment, or if sooner
within a period of 5 consecutive 1-year breaks in continuous service,
the Participant repays an amount equal to the lump sum payment
(reduced by an amount determined by multiplying the regular pension
which had been settled by such lump sum payment by the number of
months between occurrence of the break in con-
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tinuous service and reemployment) plus interest accrued at the rate
established by law. At the time of reemployment, the Participant
will be informed of his right to make repayment under the conditions
described above.
SECTION 6.4 SPECIAL PENSION ELIGIBILITY AFTER REEMPLOYMENT.
Notwithstanding anything to the contrary contained in this Plan, any Participant
who has been rehired and is receiving a pension pursuant to the provisions of
this Plan for 70/80 retirement or similar provisions of a prior version of this
Plan and is subsequently reemployed by the Company will upon ceasing work after
reemployment and prior to age 62 by reason of a permanent shutdown of a plant,
department or subdivision thereof or by reason of layoff or physical disability
be eligible to retire and will upon his retirement be eligible for a pension
commencing with the month following the month in which retirement occurs
("reinstated 70/80 retirement pension"); provided, however, that such
Participant will not be eligible under the provisions of this Article VI to
retire during a period of absence from work due to a physical dis-
<PAGE>
- 111-
ability until such disability continues for a period of 6 consecutive full
calendar months.
SECTION 6.5 SPECIAL RULES AS TO AMOUNT OF PENSION. Special payment will
not be made in any case where a special payment was made to the Participant for
a prior retirement under this document or any prior version of this Plan.
SECTION 6.6 AMOUNT OF REINSTATED 70/80 RETIREMENT PENSION. The amount of
regular pension for reinstated 70/80 retirement will be determined the same as a
regular pension for 70/80 retirement.
ARTICLE VII
APPEALS PROCEDURE
SECTION 7.1 DISPUTES AS TO ELIGIBILITY OR AMOUNT.
a) If any difference arises between the Company and any Participant who
is an Employee covered by the Basic Agreement and who is an applicant
for a pension, or to whom a pension is payable, as to such
Participant's right to a pension or the amount of his pension and
agreement cannot be reached between the Company and a representative
of the Union, such question will be referred to the
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Arbitrator established under the Basic Agreement, provided, however,
that the President of the Union (or his designee) has given written
approval of such referral. The Arbitrator will have authority only to
decide the questions pursuant to the provisions of this Plan
applicable to the question but it will not have authority in any way
to alter, add to or subtract from any of such provisions. The
decision of the Arbitrator on any such question will be binding on the
Company, the Union and the Participant. If any difference arises
between the Company and any person who is or claims to be a
co-pensioner or a surviving spouse of an Employee covered by the Basic
Agreement, as to such person's right to a benefit under this Plan or
the amount of such benefit, such difference will be resolved by the
Company and a representative of the Union. If such difference is not
so resolved, it may, by agreement of the Company and the Union, be
referred to the Arbitrator described above, which will have authority
as described above with respect to such
<PAGE>
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difference, and if it is so referred, the decision of the Arbitrator
will be binding on the Company, the Union and such person.
b) 1) If any difference arises between the Company and any Participant,
who is not an Employee covered by the Basic Agreement, who is an
applicant for a pension or to whom a pension is payable, as to
such Participant's right to a pension and agreement cannot be
reached between the Company and the Participant, the Participant
or his authorized representative will file a claim for a pension
in the manner and on the forms provided by the Committee. The
Committee or its authorized representatives will decide on the
merits after receipt of the claim and the Participant and his
authorized representative, if any, will be notified in writing of
the decision.
2) If a claim is wholly or partially denied, the notice of the
decision will be furnished within 60 days after receipt of the
claim by
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the Committee. Such notice will be written in a manner
calculated to be understood by the claimant and will include:
i) the specific reason or reasons for the denial;
ii) specific reference to the pertinent Plan provisions on which
the denial is based;
iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
iv) an explanation of the Plan's claim review procedure.
If notice of denial of a claim is not furnished within the 60 days
referred to above after receipt of the claim by the Committee and
the claim has not been granted, the claim will be deemed denied
for purposes of proceeding to review as described in paragraph (3)
below.
<PAGE>
- 115 -
3) A claimant whose claim for benefits is denied in whole or in part
or his authorized representative may:
i) request a review upon written application to the Committee
within 60 days after receipt by the claimant of written
notice of the denial of his claim or within 120 days of
receipt of his claim by the Committee if there is no notice
of denial;
ii) review pertinent documents in the Company's offices; and
iii) submit positions on issues and comments in writing.
The Committee or its authorized representative will promptly
review each denial of a claim upon which an application for
review is submitted. Such review will be completed within 60
days after receipt of the request for review, unless special
circumstances require an extension of time for processing, in
which case a decision will be rendered as soon as
<PAGE>
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possible, but not later than 120 days after receipt of a timely
request for review. The decision on review will be in writing in
a manner calculated to be understood by the claimant, and
specific references to the pertinent plan provisions on which the
decision is based.
SECTION 7.2 DISPUTES AS TO PERMANENT INCAPACITY. If any difference arises
between the Company and any Participant as to whether such Participant is or
continues to be permanently incapacitated within the meaning of Section 2.5,
such difference will be resolved as follows:
a) the Participant will be examined by a physician appointed for the
purpose by the Company and by a physician appointed for the purpose by
a duly authorized representative of the Union if the Participant is an
Employee in the bargaining unit represented by the Union. Otherwise,
a Participant may select a physician to examine him after he has been
examined by a physician appointed by the Company;
<PAGE>
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b) if they disagree concerning whether the Participant is permanently
incapacitated, the question will be submitted to a third physician
selected by such two physicians. The medical opinion of the third
physician, after examination of the Participant and consultation with
the other two physicians, will decide such question;
c) the fees and expenses of the third physician will be shared equally by
the Company and the Union, or the Participant if he is not an employee
in the bargaining unit represented by the Union.
ARTICLE VIII
TRUST AND FINANCING
SECTION 8.1 THE TRUST. For purposes of supplying the benefits herein
provided, the Company is utilizing the Trust identified in Section 1.20.
Contributions of the Company are deposited in the Trust Fund administered by the
Trustee identified in Section 1.21. Such Trustee and any successor trustee
appointed by the Board of Directors will have the rights, powers and duties as
set forth in the Trust, as amended from time to time.
<PAGE>
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SECTION 8.2 CONTRIBUTIONS. Contributions of the Company to the Trust Fund
will be made in such amounts and at such times as the Company will determine.
The Company intends to contribute annually at least such amounts as are
actuarially determined to be required to fund the Plan as prescribed by Section
412 of the Code. Such contributions will be made in accordance with a funding
policy and method to be established by the Company consistent with the
objectives of the Plan and in conformity with ERISA.
ARTICLE IX
ADMINISTRATION
SECTION 9.1 FIDUCIARIES. The various responsibilities assigned by the
Company to Fiduciaries pursuant to this Plan are allocated to each Fiduciary
separately and no responsibility pursuant to this Plan or ERISA will be shared
with another Fiduciary unless the Plan specifically provides for sharing. The
Company will have the sole responsibility for making contributions to provide
benefits under the Plan and will have the sole authority to appoint and remove
the Trustee and the members of the Committee and to amend or terminate the Plan.
The Committee will have the sole responsibility for the administration of this
Plan. The Trustee will have the sole responsibility for the
<PAGE>
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administration of the Trust and the management of assets held in the Trust Fund
in accordance with the terms of the Trust except as to assets for which another
investment manager is appointed. Each Fiduciary may rely upon any direction,
information or action of another Fiduciary furnished or taken pursuant to this
Plan as being proper without further inquiry. Each Fiduciary will be
responsible for the proper exercise of its own powers, duties, responsibilities
and obligations under this Plan and will not be responsible for any act or
failure to act of another Fiduciary.
SECTION 9.2 APPOINTMENT OF COMMITTEE. This Plan will be administered by
an administrative committee (the "Committee") consisting of 6 persons who will
be appointed by the Board of Directors of the Company. The Board of Directors
will have full power to determine the period during which any Committee member
will serve and in its discretion may remove any member of the Committee at any
time without assigning any reason for such removal. The members of the
Committee may be Participants. Any member of the Committee will automatically
cease to be a member of the Committee on termination of his employ-
<PAGE>
- 120 -
ment. An officer of the Company will certify to the Trustee the names of the
members of the Committee and thereafter any change in its membership.
SECTION 9.3 QUORUM. The action of a majority of the members of the
Committee at the time acting hereunder, and any instrument executed by a
majority of such members of the Committee, will be considered the action or
instrument of the Committee. Action may be taken by the Committee at a meeting
or in writing without a meeting.
No member of the Committee, however, will vote or decide upon any matter
relating solely to himself or to any of his rights or benefits under the Plan.
The Committee may authorize any one or more of its members to execute any
document or documents on behalf of the Committee, in which event the Committee
will notify the Trustee in writing of such action and of the name or names of
its members so designated. The Trustee thereafter may accept and rely upon any
document executed by such member or members as representing action by the
Committee, until the Committee files with the Trustee a written revocation of
such designation.
<PAGE>
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SECTION 9.4 POWERS AND DUTIES. The Committee will be charged with the
administration of this Plan and its duties will include the interpretation of
the provisions of the Plan, the adoption of any rules and regulations which may
become necessary or desirable in the operation of the Plan, the determination of
how and when benefits should be paid, the keeping of individual accounts of each
Participant in the Plan, the making of such determinations and the taking of
such actions as are expressly authorized or directed in the Plan, and the taking
of such other actions as may be required for the proper administration of the
Plan in accordance with the terms hereof.
The Plan will be administered in accordance with ERISA and in conformity
with regulations and rulings issued pursuant to such laws. Within the scope of
authority conferred upon it by this Plan and consistent with the provisions of
ERISA, the Committee will make all decisions as to the facts bearing upon the
right of any person to benefits and the application of any term of the Plan or
any rule or regulation of the Committee to any case.
<PAGE>
- 122 -
The Committee may employ such accountants, counsel, specialists, and other
persons as it deems necessary or desirable in connection with the administration
of the Plan. Such persons may be acting in a similar capacity for, or may be
employees of, the Company. To the extent permitted by ERISA, the Committee will
be entitled to rely upon, and will be fully protected in any action taken by it
in good faith reliance upon and in accordance with, any opinions or reports
furnished to it by any such accountant, counsel, or other specialist.
SECTION 9.5 IMMUNITY OF COMMITTEE. To the extent permitted by ERISA, each
member of the Committee, whether or not then in office, will be held harmless
and indemnified by the Company against all claims and liabilities and all
expenses reasonably incurred or imposed upon him in connection with or resulting
from any action, suit or proceeding, or settlement or compromise thereof
approved by the Company, to which he may be made a party by reason of any action
or alleged action, either of omission or commission, performed by him while
acting as a member of the Committee, except in relation to matters as to which
recovery shall be had against
<PAGE>
- 123 -
him by reason of a final adjudication in such action, suit or proceeding finding
him guilty of willful misconduct or lack of good faith. Plan assets will not be
used as a source for any compensation paid to members of the Committee by reason
of their service on the Committee. All reasonable expenses of administering the
Plan will be paid from the Trust Fund unless paid by the Company. Members will
not be required individually to furnish bonds or other security for faithful
performance of their duties. The Company will furnish bonding as required by
ERISA.
SECTION 9.6 CLAIMS AND REVIEW PROCEDURES. Differences between the Company
and any Participant shall be resolved pursuant to the provisions of Article VII.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 PERMANENCY OF THE PLAN. This Plan is intended to be
permanent; however by a resolution of the Board of Directors or a writing
executed by any two officers of the Company, this Plan may be terminated, at any
time, with respect to all or a portion of the covered Participants. In that
event the Company shall cause the Trust Fund to be
<PAGE>
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liquidated as provided in ERISA. In the event that the Company shall cease to
exist, the Plan will be terminated unless it is adopted by a successor employer.
Upon the termination or partial termination of the Plan the rights of all
affected Employees to benefits accrued to the date of such termination or
partial termination, to the extent funded as of such date, are nonforfeitable.
In the event of termination of the Plan, the Committee will direct the Trustee
to make provision for the expenses of the Plan and the Trust Fund and then to
allocate the assets in the Trust Fund (to the extent such assets are sufficient)
in accordance with Section 4044 of ERISA. Any assets remaining after the
provision for expenses and allocations required by ERISA will be returned to the
Company.
It is the express intention of the Plan that the foregoing allocation of
assets upon termination be accomplished in accordance with the provisions of
Section 4044 of ERISA and that the provisions of ERISA be controlling in the
event of any conflict or inconsistency between this Plan and the provisions of
ERISA.
<PAGE>
- 125 -
To the extent that no discrimination in value results, any distribution
after termination of the Plan may be made, in whole or in part, in cash, in
securities or other assets in kind, or in nontransferable annuity contracts, as
the Committee in its discretion may determine. In making such distribution, any
and all determinations, divisions, appraisals, apportionments, and allotments so
made will be final and conclusive and not subject to question by any person.
SECTION 10.2 AMENDMENT OF PLAN. This Plan may be amended, retroactively
or otherwise, at any time and from time to time by resolution of the Board of
Directors or by an instrument in writing executed by any two officers of the
Company, provided, however, that:
a) no amendment may be made prior to the satisfaction of all expenses of
the Plan and expenses of the Trust attributable to this Plan and of
all liabilities with respect to Participants, co-pensioners, or
surviving spouses which would permit any part of the Trust Fund
attributable to the Plan to be used for or diverted to any purpose
other than for the
<PAGE>
- 126 -
exclusive benefit of such persons and the payment of administration
expenses of the Plan and of the Trust attributable to this Plan; and
b) no amendment will deprive any person of nonforfeitable rights to
benefits accrued to the date of such amendment. If any amendment is
made which affects the vesting schedule of benefits under the Plan,
each Participant who has 5 or more years of service may elect, within
a reasonable period after the adoption of the amendment, to have his
nonforfeitable percentage computed under the Plan without regard to
such amendment. The period during which the election may be made will
commence with the date the amendment is adopted and will end on the
later of:
1) 60 days after the amendment is adopted;
2) 60 days after the amendment is effective; or
3) 60 days after the Participant is issued written notice of the
amendment by the Committee.
<PAGE>
- 127 -
SECTION 10.3 MERGER OR CONSOLIDATION OF PLAN. This Plan may not be merged
or consolidated with, nor its assets or liabilities transferred to, another plan
unless provisions are made so that each Participant would immediately thereafter
be entitled to receive a benefit at least as great as the benefit he would have
been entitled to receive from this Plan immediately before the transaction,
assuming for purposes of this test that this Plan had terminated immediately
before and the successor plan had terminated immediately after such transaction.
SECTION 10.4 NO INTEREST IN TRUST FUND. No Participant prior to his
retirement under conditions of eligibility for pension benefits will have any
right or interest in or to any portion of any funds which may be paid into any
pension Trust or Trusts heretofore or hereafter established for the purpose of
paying pensions and no Participant or co-pensioner will have any right to
pension benefits except to the extent provided in this Plan. Employment rights
will not be affected by reason of this Plan.
SECTION 10.5 NO CONTRACT OF EMPLOYMENT. Nothing contained in this Plan
may be construed as a contract of employ-
<PAGE>
- 128 -
ment between the Company and any Employee, or as a right of any Employee to be
continued in the employment of the Company, or as a limitation of the right of
the Company to discharge any of its Employees, with or without cause.
SECTION 10.6 NO DIVERSION OF TRUST FUND. It will be impossible at anytime
prior to the satisfaction of all liabilities with respect to Participants, their
co-pensioners, or surviving spouses for any part of the Trust Fund to be (within
the taxable year or thereafter) used for, or diverted to, purposes other than
for the exclusive benefit of Participants, their co-pensioners, orsurviving
spouses. All forfeitures arising under the Plan will be applied to reduce the
Company's contributions. No such forfeitures will be applied to increase the
benefits any Participant, co-pensioner, or surviving spouse would otherwise
receive under the Plan.
SECTION 10.7 ALIENATION OF BENEFITS PROHIBITED. No benefit payable
underthis Plan will be subject to alienation, sale, transfer, assignment,
pledge, attachment, garnishment, execution, or encumbrance of any kind, and any
attempt to accomplish the same will be void.
<PAGE>
- 129 -
If the Committee finds that any person (Participant, co-pensioner
or surviving spouse) to whom any benefit payment is due or will become due has
become physically or mentally unable to handle his own affairs, or is a minor,
the Committee in its sole discretion may direct that any benefit due him, unless
claim has been made therefor by a duly appointed legal representative, be paid
to his spouse, a child, a parent or other blood relative or a person with whom
he resides, and such payment will be a complete discharge of all liability
under this Plan.
Not withstanding anything to the contrary contained herein, the Company
will comply with any Qualified Domestic Relations Order, as such term is defined
in the Code, that creates a right in any person with respect to the benefit
payable to a Participant under the Plan provided that the Order states: (i) the
name and last known mailing address of the Participant or former Participant and
each person to whom payment is to be made; (ii) the amount of payment to be made
under the Order, or either the percentage of the Participant's benefit to be
paid or a formula for calculating such percentage; (iii) the number of payments
to be made or the period of
<PAGE>
- 130 -
payment under the Order; and (iv) the name of the plan to which the Order
applies. An order of a court will not be considered a Qualified Domestic
Relations Order and will not be given effect if it purports to require that this
Plan pay any type or form of benefit or any option not otherwise provided under
the Plan, or any increased benefit, taking into account the actuarial equivalent
values of benefits payable under the Plan, or if it orders payments which are
already required by a prior Order to be paid to a different person.
SECTION 10.8 WRITTEN COMMUNICATIONS. Any notice, request, instruction, or
other communication to be given or made hereunder will be in writing and either
personally delivered or mailed fully postpaid and properly addressed to such
address at the last address for notice shown on the Committee's records.
SECTION 10.9 NAME AND ADDRESS CHANGES. Each person entitled to a benefit
hereunder will at all times be responsible for notifying the Committee of any
change in his name or address. If any benefit check (which was mailed to the
last address of the payee shown on the Committee's records) is
<PAGE>
- 131 -
returned unclaimed, further payments will be discontinued until the Committee
directs otherwise.
SECTION 10.10 IDENTITY OF PAYEE. If at any time any doubt exists as to
the identity of any person entitled to payment of any benefit hereunder or as to
the amount or time of any such payment, the Committee will direct that such sum
be held in the Trust until a further order of the Committee or a final order of
a court of competent jurisdiction in accordance with any lawful procedure.
SECTION 10.11 EVIDENCE CONCLUSIVE. The Company, the Committee, and any
person or persons involved in the administration of the Plan will be entitled to
rely upon any certification, statement, or representation made or evidence
furnished by any person with respect to his age or other facts required to be
determined under any of the provisions of the Plan, and will not be liable on
account of the payment of any monies or the doing of any act or failure to act
in reliance thereon. Nothing herein contained will be construed to prevent the
Company or the Committee from contesting any such certification, statement,
representation, or evidence or to relieve any person from the duty of submitting
satisfactory
<PAGE>
- 132 -
proof of his age or such other fact. Notwithstanding the foregoing, the Company
shall have the right to correct any error when it becomes known and to make any
adjustment in future pension payments under this Plan to recoup any overpayments
previously made due to such error. This provision shall not prevent the Company
from taking any other action available to it to recover amounts erroneously paid
under the Plan.
SECTION 10.12 INDIVIDUAL LIABILITY. To the extent permitted by law, it is
declared to be the express purpose and intention of the Plan that no liability
whatever will attach to or be incurred by the stockholders, officers, Committee
members, employees or directors of the Company under or by reason of any of the
terms or conditions of this Plan.
SECTION 10.13 DEDUCTIONS FOR INSURANCE PREMIUMS. Upon authorization by a
Participant, on a form approved by the Company, the amount of premium payable by
him for coverage through a Health Maintenance Organization ("HMO") or for
medical benefits coverage, as provided under an insurance agreement between the
Company and the Union, or the amount of any overpayments made to the Participant
by the Company or its
<PAGE>
- 133 -
insurer in the course of paying any insurance benefits, supplemental
unemployment benefits or extended vacation benefits provided by any agreement
between the Company and the Union, will be deducted from any pension payable
under this Plan to the extent permitted by law.
SECTION 10.14 NUMBER AND GENDER. Words in the singular set forth in this
Plan will include, and be read as being in, the feminine gender also. Words in
the masculine gender set forth in this Plan will be read and construed as being
in the plural wherever the context requires.
ARTICLE XI
HOSPITAL-MEDICAL BENEFITS FOR
ELIGIBLE PENSIONERS AND SURVIVING SPOUSES
SECTION 11.1 ALLOCATION OF FUNDS TO SEPARATE ACCOUNT. The Plan provides
for the payment of benefits for sickness, hospitalization, and medical
expenses ("Section 401(h) benefits") of Participants who have retired, and the
spouses and eligible dependents of such Participants ("medical expense
beneficiaries"). The Committee will cause to be allocated to a separate account,
which will be maintained by the Trustee for the purposes set forth in this
Article XI (but which need not be invested separately from other funds held by
the
<PAGE>
- 134 -
Trustee under the Plan for retirement benefits), a portion of the Trust Fund not
to exceed the amount of accrued liability for Section 401(h) benefits as
determined by an "enrolled actuary" (within the meaning of ERISA). Such
allocated portion of the Trust Fund will be used to provide funds for payment of
the accrued liability, in whole or in part, for Section 401(h) benefits of
medical expense beneficiaries but in no event will the amounts so transferred at
any time reduce the Trust Fund (remaining after setting aside such separate
account) below an amount which is 110% of a sum required to fully fund all
accrued retirement benefits under the Plan. The Committee may provide for
further allocations to such separate account, subject to the same conditions, as
of a convenient date in each year following the initial allocation.
Contributions to fund Section 401(h) benefits hereunder may be made by the
Company from time to time, provided that such contributions meet the
requirements of Section 11.5.
SECTION 11.2 METHOD OF ALLOCATION. The portion or portions of the Trust
Fund that may be allocated to a separate account each year as provided in
Section 11.1 will not exceed such amount as an enrolled actuary (using such
factors as
<PAGE>
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expected claims, earnings and mortality assumptions) determines to be necessary
to provide for the payment of Section 401(h) benefits of medical beneficiaries
during such year and, in addition, the Committee may allocate such amounts as
may be required to provide funds to pay existing determined accrued
liabilities for such benefits, in whole or in part.
SECTION 11.3 BENEFITS PAYABLE. The Section 401(h) benefits (and the
amounts thereof) which are to be paid pursuant to this Article XI are specified
in the Program of Hospital-Medical Benefits for Eligible Pensioners and
Surviving Spouses of Acme Steel Company Chicago Plant effective January 1, 1981,
as the same may be amended and/or supplemented from time to time (or any similar
program which supersedes such Program, as so amended and/or supplemented).
Nothing herein will be construed as guaranteeing that any medical benefits
will continue to be provided hereunder or under such Program in the future or
under the same terms and conditions as such medical benefits currently are
provided under the Program, and the Company has reserved the right to amend the
Program as provided for therein, including the right to amend the coverages
thereunder, the eligibility therefor
<PAGE>
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and the manner in which the cost thereof is shared by the Company, the
Participants and their dependents.
SECTION 11.4 DEFINITIONS. For purposes of this Article XI the following
terms have the following meanings:
a) "Dependents" means any of the following individuals:
1) the spouse of a pensioner;
2) unmarried children under 19 years of age, meeting any of the
following categories:
i) a blood descendent of the first degree;
ii) a legally adopted child (including a child living with the
adopting parents during a period of probation);
iii) a stepchild residing in the pensioner's household; or
iv) a child permanently residing in the household of which the
pensioner is the head and is actually being supported solely
by such pensioner, provided the pensioner is related to the
child by
<PAGE>
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blood or marriage or is the child's legal guardian;
3) children after attainment of age 19 but not beyond attainment of
age 25, if, in addition to otherwise meeting the definition of
dependent child as contained in (2) above, such child is a full-
time student; or
4) children after attainment of age 19, if, in addition to otherwise
meeting the definition of dependent children as contained in (2)
above, such child is incapable of self-support because of a
disabling illness or injury that commenced prior to age 19.
b) "Medical expense" means expenses for medical care as defined in
Section 213(d)(1) of the Code.
SECTION 11.5 ADDITIONAL REQUIREMENTS. The following requirements shall
apply to the separate account established to provide for the payment of Section
401(h) benefits of medical expense beneficiaries:
a) Contributions to fund Section 401(h) benefits hereunder may be made by
the Company from time to
<PAGE>
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time, provided that (i) such contributions are reasonable and
ascertainable, and (ii) the aggregate of contributions (made after the
date on which the Plan first includes Section 401(h) benefits) to
provide Section 401(h) benefits provided for under the Plan will not
exceed 25% of the aggregate contributions to the Plan (made after such
date) other than contributions to fund past service credits. At the
time the Company makes a contribution to the Plan, it will designate
that portion of such contribution allocable to the funding of medical
benefits. Any benefits provided directly by the Company will be
considered as provided under the Plan and as contributions to the Plan
to provide medical benefits hereunder except to the extent such
amounts may be considered as interest-free loans by the Company to the
Plan in accordance with Prohibited Transaction Class Exemption 80-26
(which Exemption would permit the Plan to repay the Company such
amounts paid on behalf of the Plan as interest-free loans).
<PAGE>
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b) It shall be impossible, at any time prior to the satisfaction of all
liabilities under the Plan to provide Section 401(h) benefits of
medical expense beneficiaries, for any part of the corpus or income of
such separate account to be (within the taxable year or thereafter)
used for, or diverted to, any purpose other than the providing of such
benefits and the payment of expenses attributable to the
administration of such benefits.
c) Upon the satisfaction of all liabilities under the Plan to provide
Section 401(h) benefits, any amounts remaining in such separate
account will revert to the Company. Notwithstanding the foregoing, it
is intended that no amount transferred to the separate account
hereunder to provide medical benefits will revert to the Company
(subject to the permitted repayment of any amounts which are
considered as interest-free loans under Prohibited Transaction
Exemption 80-26). Accordingly, if amounts are transferred to the
separate account pursuant to Section 11.1 in excess of the medical
<PAGE>
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benefits currently payable from such account, as long as any such
transferred amounts are held in such separate account the medical
benefit liabilities under the Plan and such separate account may not
be terminated until all such transferred amounts have been distributed
to provide medical benefits.
During such periods of time that the separate account contains
both transferred amounts under Section 11.1 and contributions under
Section 11.5(1), all payments from the separate account will be
considered as distribution of amounts transferred under Section 11.1
and earnings thereon before any such distributions are considered as
distributions of contributions made under Section 11.5(1).
d) At no time will the value of the assets of such separate account
exceed 25% of the value of the
<PAGE>
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aggregate assets held in the Trust Fund established for the Plan.
<PAGE>
EXHIBIT A
TABLES OF PERCENTAGES
This Table of Percentages will be used in calculating the amounts payable
if one of the following options is applicable: the Pre-Pension Spouse Coverage
(50%), the Automatic 50% Spouse Option, the 50% Co-Pensioner Option, or the 100%
Co-Pensioner Option.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Participant's Age
Difference between
Participant's Age
and Spouse's
or Co-Pensioner's Age 50% Options
- --------------------------------------------------------------------------------
51 52 55 58 61 64
Participant and to to to to and
Older Under 54 57 60 63 Over
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20 or more years 71% 72% 73% 73% 74% 74%
17, 18 or 19 years 71% 72% 73% 74% 75% 75%
14, 15 or 16 years 72% 73% 74% 75% 76% 76%
11, 12 or 13 years 73% 74% 75% 77% 77% 78%
3, 9 or 10 years 74% 75% 77% 78% 79% 80%
5, 6 or 7 years 75% 76% 78% 79% 81% 82%
2, 3 or 4 years 76% 77% 79% 81% 82% 83%
less than 2 years 77% 79% 81% 83% 84% 85%
<CAPTION>
Participant
Younger
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
less than 2 years 77% 79% 81% 83% 84% 85%
2, 3 or 4 years 79% 80% 82% 84% 86% 87%
5, 6 or 7 years 80% 82% 84% 86% 88% 89%
<PAGE>
<CAPTION>
Difference between
Participant's Age
and Spouse's
or Co-Pensioner's Age 50% Options
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8, 9 or 10 years 82% 84% 86% 88% 90% 91%
11, 12 or 13 years 84% 85% 88% 90% 92% 93%
14, 15 or 16 years 86% 87% 89% 91% 93% 94%
17, 18 or 19 years 87% 89% 91% 93% 95% 96%
20 or more years 89% 91% 93% 94% 96% 96%
<PAGE>
<CAPTION>
Participant's Age
Difference between
Participant's Age
and Spouse's or
Co-Pensioner's Age 100% Options
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
51 52 55 58 61 64
and to to to to and
Under 54 57 60 63 Over
Participant
Older
20 or more years 56% 57% 58% 58% 58% 58%
17, 18 or 19 years 56% 58% 59% 60% 60% 60%
14, 15 or 16 years 57% 59% 60% 61% 62% 62%
11, 12 or 13 years 58% 60% 62% 63% 64% 64%
3, 9 or 10 years 59% 61% 63% 65% 66% 66%
5, 6 or 7 years 60% 62% 65% 67% 68% 69%
2, 3 or 4 years 62% 64% 67% 69% 71% 72%
less than 2 years 64% 66% 69% 71% 73% 75%
<CAPTION>
Participant
Younger
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
less than 2 years 64% 66% 69% 71% 73% 75%
2, 3 or 4 years 66% 68% 71% 74% 76% 78%
5, 6 or 7 years 68% 70% 73% 76% 79% 81%
8, 9 or 10 years 70% 73% 76% 79% 82% 84%
11, 12 or 13 years 73% 75% 79% 82% 85% 87%
14, 15 or 16 years 75% 78% 81% 84% 87% 90%
17, 18 or 19 years 78% 81% 84% 87% 90% 92%
20 or more years 80% 83% 87% 89% 92% 93%
</TABLE>
NOTES: Participant's age and spouse's or co-pensioner's age rounded to the
nearest whole year; e.g., age 51 years, six months becomes 52. Age
differential is net difference between participant's and spouse's or
co-pensioner's ages as rounded.
If the named co-pensioner is any person other than the pensioner's
spouse, it may, in compliance with
<PAGE>
Internal Revenue Service regulations, be necessary to modify the
amount payable to the pensioner and co-pensioner so as to provide that
the present value of the benefit payable to the pensioner is more than
50% of the present value of the pension that would have been payable
to the pensioner had he not elected a survivor option.
<PAGE>
EXHIBIT B
SPECIAL RULES REGARDING ALLOWED SERVICE
Any Participant covered by the September 1, 1993 Pension Agreement between
Acme Steel Company and the United Steelworkers of America who retires on or
after September 1, 1993, and who incurred 1 or more breaks in continuous service
prior to such date will, to the extent and under the conditions specifically set
forth below, be credited, for pension purposes only, with service (hereinafter
referred to as allowed service) for a period of employment with the Company
prior to such break.
A. Allowed service will be credited in accordance with C, D, E or F below only
upon retirement or death of the employee.
B. Allowed service will be credited in accordance with C, D, E or F below:
1. To determine the amount of (as distinct from eligibility for) any
benefit provided pursuant to the Pension Agreement, and
2. To determine eligibility for only
(a) Normal Retirement provided the Participant has attained age 65
and the sum of the Participant's allowed and continuous service
is 15 or more years;
(b) 62/15 Retirement;
(c) Permanent Incapacity Retirement;
(d) 70/80 Retirement;
(e) Deferred Vested Pension, provided the Participant has attained
age 40 and the sum of the Participant's allowed and continuous
service is 15 or more years if the final break in continuous
service occurred for reasons other than quit or discharged; or
(f) Surviving Spouse's Benefit.
<PAGE>
C. For the purposes of A and B above, allowed service will be credited for a
period of employment prior to a break in continuous service, excluding any
period between the last date worked and the date such a break occurs, if
the Participant either:
1. Had 1 or more years of continuous service prior to such break and
either:
(a) incurred such break for any reason other than discharge and has
30 or more years of continuous service since his last hiring
date; or
(b) incurred such break by reason of a quit and was reemployed within
6 months after such break; or
(c) incurred such break by reason of a quit to return to school and
worked as required for the Company during such summer vacation
from school and was available for work immediately upon
graduation; or
(d) incurred such break by reason of a quit and has 15 or more years
of continuous service since his last hiring date, and the length
of continuous service prior to such break was at least 2 times
the length of the period between such break and his last hiring
date; or
2. Incurred such break in continuous service by reason of absence due to
layoff or disability and:
(a) had 2 or more years of continuous service prior to the
commencement of the absence that resulted in such break; and
(b) the length of continuous service prior to such break was at least
2 times the length of the period between such break and his last
hiring date; and
<PAGE>
(c) had 15 or more years of continuous service since his last hiring
date; or
3. Incurred a break in continuous service by reason of payment of
severance allowance and the length of continuous service on which such
severance allowance was computed was at least 2 times the length of
the period between such break and his last hiring date.
D. For the purposes of A and B above, allowed service will be credited for
continuous service accrued prior to a break in such service by reason of
absence due to layoff or disability if the Participant incurred such break
prior to January 1, 1960 and the period of such absence but in no case more
than 5 years.
E. For the purposes of A and B above, if a Participant who worked at least 1
day in 1993 prior to September 1 had a break in continuous service due to
layoff which continued in excess of 2 years but such break was removed due
to the Participant's recall to work with the Company under a prior Pension
Agreement with the period during which he retains his accumulated
continuous service in accordance with the seniority provisions of the Basic
Agreement (including any service accumulation under the Basic Agreement
exclusively for purposes of recall), the period from the break in service
until the earlier of (i) the date the Participant returned to work or (ii)
5 years from the date last worked will be credited as allowed service.
F. If the Participant had 2 or more breaks in continuous service, only the
longest single period which meets the criteria for allowed service set
forth in C, D, or E above will be credited as allowed service.
G. In the case of a Participant whose pension is determined in accordance with
Sections 3.3(a) or (f) of the Plan the amount determined under that
provision will be increased by an amount equal to the Participant's
Enriched Benefit
<PAGE>
Unit multiplied by each year (and fractions thereof
calculated to the nearest month) of allowed service.
H. The increased amount determined under G above will be used in the
determination of regular pension in accordance with Section 3.3 of the
Plan.
In view of the expanded provisions contained in the January 1, 1976 Pension
Agreement for removing breaks in continuous service, the foregoing is limited to
breaks in continuous service that occurred prior to January 1, 1976 except with
respect to E above which also includes breaks in continuous service that
occurred on or after January 1, 1976.
<PAGE>
EXHIBIT C
PAYMENTS TO PRE-1974 SURVIVING SPOUSES
The Company will make a cash payment to certain surviving spouses as
described below:
1. For purposes of this Exhibit C, the term "Covered Person" shall mean a
person eligible for a Surviving Spouse Benefit pursuant to a Pension Agreement
in effect prior to July 31, 1974.
2. The total cash payment of a Covered Person shall be up to $6,000.
3. The cash payment provided for under this Exhibit C shall be made to
Covered Persons whose identity and location are known or made known to the
Company in 12 equal installments due and payable as follows:
First Installment - February 28, 1994
Second Installment - August 31, 1994
Third Installment - February 28, 1995
Fourth Installment - August 31, 1995
Fifth Installment - February 28, 1996
Sixth Installment - August 31, 1996
Seventh Installment - February 28, 1997
Eighth Installment - August 31, 1997
Ninth Installment - February 28, 1998
Tenth Installment - August 31, 1998
Eleventh Installment - February 28, 1999
Twelfth Installment - August 31, 1999
No payment shall be made to a Covered Person if the pensioner is not deceased as
of the payment date. Moreover, if the pensioner died within the 6-month period
preceding a payment date, the payment for such payment date will be prorated
based upon the month in which death occurred in such 6-month period (I.E., if
death occurred in January 1994, the February 28, 1994 payment shall be one-sixth
of the full amount; if death occurred in June 1994, the August 31, 1994 payment
shall be one-third of the full amount; etc.).
<PAGE>
4. Notwithstanding anything to the contrary stated herein, no installment
payment shall be made hereunder with respect to a Covered Person who dies prior
to the date such payment is due and payable.
<PAGE>
EXHIBIT D
PAYMENTS TO CERTAIN SURVIVING SPOUSES
The Company will make a cash payment to certain surviving spouses as
described below:
1. For purposes of this Exhibit D, the term "Covered Person" shall mean a
person who would qualify as a surviving spouse, as described in Sections 4.1 and
4.5 of the Plan effective September 1, 1993, with respect to a pensioner who
retired prior to August 1, 1974 on other than a deferred vested pension, and who
is deceased or dies on or before August 31, 1999; provided, however, that such
person is not otherwise eligible to receive a Surviving Spouse's Benefit
pursuant to the applicable terms of the Plan.
2. The total cash payment of a Covered Person shall be up to $6,000.
3. The cash payment provided for under this Exhibit D shall be made to
Covered Persons whose identity and location are known or made known to the
Company in 12 equal installments due and payable as follows:
First Installment - February 28, 1994
Second Installment - August 31, 1994
Third Installment - February 28, 1995
Fourth Installment - August 31, 1995
Fifth Installment - February 28, 1996
Sixth Installment - August 31, 1996
Seventh Installment - February 28, 1997
Eighth Installment - August 31, 1997
Ninth Installment - February 28, 1998
Tenth Installment - August 31, 1998
Eleventh Installment - February 28, 1999
Twelfth Installment - August 31, 1999
No payment shall be made to a Covered Person if the pensioner is not deceased as
of the payment date. Moreover, if the pensioner died within the 6-month period
preceding a payment date, the payment for such payment date will be prorated
based upon the month in which death occurred in such 6-month period (I.E., if
death occurred in January 1994, the February 28, 1994 payment shall be one-sixth
of the full amount; if death
<PAGE>
occurred in June 1994, the August 31, 1994 payment shall be one-third of the
full amount; etc.).
4. Notwithstanding anything to the contrary stated herein, no installment
payment shall be made hereunder with respect to a Covered Person who dies prior
to the date such payment is due and payable.
5. The Company shall make a good faith effort to identify and determine
the current address of all Covered Persons who may be entitled to payments
hereunder. Nothing herein, however, shall require the Company to incur any
costs or expenses which are unreasonable in connection with its efforts to so
identify and locate such individuals. If the Company becomes aware of the
identity and location of any Covered Person, the Company shall promptly make
such installment payments to such person if then living; provided, however, that
the Company shall have no obligation hereunder with respect to any payment due
hereunder if the Company, after making a good faith effort to do so, is unable
to determine the identity and current address of such person prior to the
termination of the Basic Labor Agreement.
6. Application for this payment shall be made on a form specified by the
Company. The surviving spouse must also provide certified copies of the
participant's birth certificate, the spouse's birth certificate, marriage
license, and a copy of a letter from the Social Security Administration showing
eligibility for widow or widower's benefits. The Company may request other
reasonable proofs in lieu of or in addition to the aforementioned items in order
to determine eligibility for benefits.
<PAGE>
EXHIBIT E
Special Rules with Respect to
RULE-OF-65 RETIREMENT
PREAMBLE
The Employment and Income Security Program was established by the Company
and the Union in recognition of their desire to provide increased economic
protection for long-service employees who are involuntarily displaced from their
jobs. The parties agree that the method of achieving this objective is to
facilitate the placement of such employees in suitable long-term jobs and, when
such jobs are not available, to reduce the adverse economic consequences to such
employees by providing eligible employees with extended SUB and rule-of-65
pensions as outlined herein.
Through the Employment and Income Security Program, the parties
specifically provide that employees who have at least 20 years of continuous
service as of their last day worked and who are laid off and are not placed in
suitable long-term jobs may receive additional income protection in the form of
extended SUB and insurance benefits. The parties also provide that employees
who have at least 20 years of continuous service as of their last day worked and
who are disabled may receive additional insurance protection in the form of
extended S&A and insurance benefits. In addition, the parties provide eligible
employees who are not offered suitable long-term employment with a pension under
rule-of-65 retirement plus a monthly supplement.
Pursuant thereto the parties have provided the rules set forth in this
Exhibit E in a manner which will best enhance the employment and income security
of eligible employees. Except as expressly provided herein, the application of
these rules shall not interfere with, limit or in any way adversely affect the
rights or obligations of any employee or the Company under any other existing
agreement.
I. Definition of Suitable Long-Term Employment
A. A job offered by the Company will constitute an offer of suitable
long-term employment (hereinafter "SLTE") if:
<PAGE>
1. The employee is physically qualified to perform the job, and
2. The employee has the ability and skills required to perform the
job or has the ability to absorb such training for the job as is
to be offered and as is necessary to enable the employee to
perform the job satisfactorily, and
3. The job offered is not a temporary job or a job known to be of
limited duration, and
4. The job offered is not in a salaried or plant protection
bargaining unit unless the employee has had significant work
experience with the Company of a technical, plant protection or
clerical nature during the 5-year period preceding his last day
worked, and
5. Subject to paragraph B below, the job offered is in a bargaining
unit represented by the Union, and
6. Except as may be provided pursuant to paragraph B below, the job
offered is at the employee's home plant, including a job which
the employee is not required to accept under applicable seniority
agreements or practices, provided there is no employee with a
greater right to such job under applicable seniority agreements
or practices who desires assignment to such job. Where an
applicable seniority agreement or practice permits an employee to
elect layoff in lieu of assignment to the job offered, such fact
shall not preclude the job offered from being SLTE.
B. 1. The parties recognize that situations may arise in the future
when the Company will not be able to offer SLTE to employees in
accordance with paragraph A above. In such instance, the Company
and the Union will discuss the terms and conditions for a
procedure for providing offers of SLTE at other employment
locations or in other employee groups in a manner consistent with
<PAGE>
understandings and procedures then prevailing in agreements
between the United Steelworkers of America and the Coordinating
Committee Steel Companies.
2. In the event that the Company and the Union cannot reach
agreement concerning such matters, the dispute shall be submitted
for resolution to the arbitrator selected in accordance with the
procedure set forth in the Basic Agreement at the request of
either the Company or the International Union.
In resolving any such dispute, the arbitrator may take into
consideration such factors as:
a. The nature of the operations and jobs involved;
b. The prospects for long-term employment;
c. The problems that employees are likely to encounter if they
were to accept employment;
d. The cost to the Company if it cannot make offers of SLTE at
the employment locations in question;
e. The existence of other employment alternatives.
In resolving such dispute, the arbitrator may take into account
the distance between the employee's home plant and a proposed
employment location but the fact that such distance may be
greater or lesser than the distances between employment locations
identified in similar arrangement agreed to by the United
Steelworkers with any of the Coordinating Committee Steel
Companies shall not be considered by the arbitrator as being
determinative of the issue. Finally, the proposals made by each
party with respect to any matter coming before the arbitrator and
the discussions had with respect thereto shall not be used, or
referred to, in any way during
<PAGE>
or in connection with the arbitration of any dispute under this
provision.
C. The Company may offer SLTE to an employee who is eligible or could
become eligible for 70/80 retirement and who had at least 20 years of
continuous service as of his last day worked. The employee may elect
to accept or refuse such offer. If he accepts such offer, he will be
treated the same as if he had been otherwise eligible for a rule-of-65
retirement, except that any elections provided would be for a 70/80
retirement rather than a rule-of-65 retirement if he has at the time
of retirement attained the age and service which would qualify him for
a 70/80 retirement. If he refuses such offer, the refusal will have
no effect upon his eligibility or potential eligibility for a 70/80
retirement.
II. Offer and Acceptance of SLTE
A. The Company may offer SLTE to an employee who is otherwise eligible or
could become eligible for a rule-of-65 retirement at any time prior to
the date on which the employee incurs a break in continuous service.
B. A refusal by an employee who is otherwise eligible or could become
eligible for a rule-of-65 retirement to accept an offer of SLTE will
result in his ineligibility for rule-of-65 retirement in connection
with his last separation from active employment prior to such refusal,
except as follows:
An employee may refuse an offer of SLTE at his home plant during his
grace period if the employee has a right under an applicable local
seniority agreement or practice established prior to January 1, 1978
which permits the employee to elect layoff in lieu of assignment to
the job offered. The employee's grace period shall be the period of
weeks following the employee's last day worked that is equal to the
number of credit units in excess of 52 credited to him under the SUB
Plan as of his last day worked.
C. In order to assist the employee in understanding the implications of
his decision to accept or
<PAGE>
reject an offer of SLTE, the Company will provide an employee
receiving such an offer with a written explanation of his rights and
obligations in connection with such offer, including the number of
days in which the employee must respond to such offer pursuant to
paragraph D below. A copy of this written explanation shall be
furnished to the appropriate Union representative.
At the request of the employee or the appropriate Union
representative, the appropriate Union representative may be present at
and participate in any discussion relating to such offer; provided,
however, that this provision shall not extend the time periods
provided in paragraph D below.
D. An employee who is offered SLTE will be required to respond by
accepting or rejecting such offer within 3 days following the receipt
by the employee of such offer; provided, however, that where a longer
period has been established by local practice for responding to offers
of work, such acceptance or rejection shall be made within the shorter
of the period established by such local practice or 7 calendar days
following receipt by the employee of the offer.
III. Additional SUB Credit Units
If an employee who would be eligible for a rule-of-65 retirement except for
the fact that the Company has not yet determined whether he will be offered
SLTE exhausts his SUB credit units, the Company shall grant him additional
credit units to provide SUB Weekly Benefits for which he may otherwise be
eligible for whatever period of time that it may require to offer him SLTE
or to determine not to offer him SLTE, and the Company shall continue his
insurance coverage, other than S&A coverage, for the same period.
<PAGE>
EXHIBIT F
COVERAGE OF PLANT PROTECTION OFFICERS
The Company and the United Plant Guard Workers of America and its Local 227
(referred to in this Exhibit F as the "Union") have reached the following
agreement.
The same Pension Plan and Insurance Program, as they may from time to time
be amended, that are in effect for production and maintenance employees
represented by the Union Steelworkers of America at the Company's Plant in
Chicago, Illinois (subject to all the terms and conditions of such Plan and
Program, including the same effective dates) shall be in effect for all
employees in the collective bargaining unit defined in the Agreement dated
November 1, 1993, between the Company and the Union.
<PAGE>
EXHIBIT G
MODEL AMENDMENT REQUIRED
BY
IRC SECTION 401(A)(17)
PART I
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 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 by the Commissioner for increases in the cost of
living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. 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.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee'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.
PART II
<PAGE>
Unless otherwise provided under the plan, each section 401(a)(17)
employee's accrued benefit under this plan will be the greater of the
accrued benefit determined for the employee under 1 or 2 below:
1. the employee'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 employee's
total years of service taken into account under the plan for
the purposes of benefit accruals, or
2. the sum of:
(a) the employee's accrued benefit as of the last day of
the last plan year beginning before January 1, 1994, frozen in
accordance with section 1.401(a)(4)-13 of the regulations, and
(b) the employee's accrued benefit determined under the
benefit formula applicable for the plan year beginning on or
after January 1, 1994, as applied to the employee's years of
service credited to the employee for plan years beginning on or
after January 1, 1994, for purposes of benefit accruals.
A section 401(a)(17) employee means an employee whose current accrued
benefit as of a date on or after the first day of the first plan year
beginning on or after January 1, 1994, is based on 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.
PART III
If this plan satisfies the requirements of section 1.401(a)(4)-13(d)
of the regulations for a fresh-start as of the last day of the last plan
year beginning before January 1, 1994, then, notwithstanding any other
provisions of the plan, any section 401(a)(17) employee's accrued benefit,
frozen in accordance with section 1.401(a)(14-13 of the regulations as of a
fresh-start
<PAGE>
date, is adjusted to reflect increases in the employee's compensation after
the fresh-start date. However, this adjustment may be made only if the
adjustment will not cause the plan to fail to satisfy the consistency
requirement of section 1.401(a)(4)-13(c), as modified by section
1.401(a)(17)-1(e) of the proposed regulations.
In determining a section 401(a)(17) employee's accrued benefit in any
plan year beginning on or after January 1, 1994, the portion of the
employee's frozen accrued benefit attributable to plan years beginning
before January 1, 1994, will be determined in accordance with Method A for
statutory section 401(a)(17) employees and Method B for section 401(a)(17)
employees other than statutory section 401(a)(17) employees.
A statutory section 401(a)(17) employee means an employee whose
current accrued benefit as of a date on or after January 1, 1994, is based
on compensation for a year beginning prior to January 1, 1989, that
exceeded $200,000.
A section 401(A)(17) employee means an employee whose current accrued
benefit as of a date on or after January 1, 1994, is based on compensation
for a year beginning prior to January 1, 1994, that exceeded $150,000.
Method A (statutory section 401(a)(17) employees):
Step 1: Determine each statutory section 401(a)(17) employee's accrued
benefit as of the last day of the last plan year beginning before
January 1, 1989, frozen in accordance with section 1.401(a)(4)-13
of the regulations.
Step 2: Adjust the amount in step 1 up through the last day of the last
plan year beginning before the first plan year beginning on or
after January 1, 1994, under the method provided under the plan
for increasing the amount in step 1 to take into account
increases in compensation in plan years beginning on or after
January 1, 1989. However, if the plan does not provide for such
increases, the amount in step 2 shall be equal to the amount in
step 1.
<PAGE>
Step 3: Determine the statutory section 401(a)(17) employee's accrued
benefit as of the last day of the last plan year beginning before
January 1, 1994, frozen in accordance with section 1.401(a)(4)-13
of the regulations.
Step 4: Subtract the amount determined in step 2 from the amount
determined in step 3.
Step 5: Adjust the amount in step 4 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
statutory section 401(a)(17) employee's average compensation
determined for the current year (as limited by section
401(a)(17)), using the same definition and compensation formula
in effect as of the last day of the last plan year beginning
before January 1, 1994. The denominator of the fraction is the
employee's average compensation for the last day of the last plan
year beginning before January 1, 1994, using the definition and
compensation formula in effect as of the last day of the last
plan year beginning before January 1, 1994.
Step 6: Adjust the amount in step 1 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
statutory section 401(a)(17) employee's average compensation for
the current year (as limited by section 401(a)(17)), using the
same definition of compensation and compensation formula in
effect as of the last day of the last plan year beginning before
January 1, 1989. The denominator of the fraction is the
employee's average compensation for the last day of the last plan
year beginning before January 1, 1989, using the definition and
compensation formula in effect as of the last day of the last
plan year beginning before January 1, 1989.
Step 7: Add the amounts determined in step 5, and the greater of steps 6
or 2.
Method B (section 401(a)(17) employees other
<PAGE>
than statutory section 401(a)(17) employees):
Step 1: Determine the accrued benefit of each section 401(a)(17) employee
other than statutory section 401(a)(17) employees as of the last
day of the plan year beginning before January 1, 1994, frozen in
accordance with section 1.401(a)(4)-13 of the regulations.
Step 2: Adjust the amount in step 1 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
average compensation of the section 401(a)(17) employee who is
not a statutory section 401(a)(17) employee determined for the
current year (as limited by section 401(a)(17), using the same
definition and compensation formula in effect as of the last day
of the last plan year beginning before January 1, 1994. The
denominator of the fraction is the employee's average
compensation for the last day of the last plan year beginning
before January 1, 1994, using the definition and compensation
formula in effect as of the last day of the last plan year
beginning before January 1, 1994.
<PAGE>
EXHIBIT 10.32
FIRST AMENDMENT
TO THE
CONSOLIDATED PENSION PLAN
FOR ACME SALARIED AND HOURLY EMPLOYEES
The Consolidated Pension Plan for Acme Salaried and Hourly Employees (the
"Plan"), as amended and restated effective November 1, 1994, is hereby amended
by this First Amendment, effective as of November 1, 1994 unless otherwise
noted, as follows:
1. The last paragraph of Section 4.2(b) of the master portion of the plan
is deleted in its entirety and substituted with the following:
If any amendment is made which affects the vesting schedule of
benefits under the Plan, each Participant who has 3 or more years of
service may elect, within a reasonable period after the adoption of
the amendment, to have his non forfeitable percentage computed under
the Plan without regard to such amendment. The period during which the
election may be made shall commence with the date the amendment is
adopted and shall end on the later of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment is effective; or
(3) 60 days after the Participant is issued written notice of the
amendment by the Committee.
2. The following paragraph is added at the bottom of the first page of
Exhibit B, entitled "Model Amendment Required By IRC Section 401(a)(17)," to
Appendix A of the Plan:
This limitation on compensation that may be considered for Plan
purposes will be applied by taking into account the compensation paid
by the Company to all members of the Participant's family to the
extent required by Section 401(a)(17) and Section 414(q) of the Code.
If the limitation is exceeded, the limitation will be prorated among
the affected individuals in proportion to each such individual's
compensation prior to the application of this limitation.
<PAGE>
3. The following sentence is added at the end of Section 2.1 to
Appendices A, B and C as follows:
A participant's right to his normal retirement pension is non
forfeitable upon the attainment of normal retirement age.
4. A new Section 3.22 is added to both Appendix B and Appendix C of the
Plan as follows:
SECTION 3.22 DIRECT ROLLOVERS. This section applies to
distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
Distributee's election under this 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.
(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 and the Distributees designated beneficiary; or for a
specified period of 10 years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Internal
Revenue Code; and the portion of any distribution that is not
includable 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
Internal Revenue 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 Internal Revenue Code, are
Distributees with regard to the interest of the spouse or former
spouse.
<PAGE>
(4) DIRECT ROLLOVER. A Direct Rollover is a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
5. Section 10.2(b) of Appendices B and C is deleted in its entirety and
substituted with the following:
b) no amendment will deprive any person of nonforfeitable rights to
benefits accrued to the date of such amendment. If any amendment
is made which affects the vesting schedule of benefits under the
Plan, each Participant who has 3 or more years of service may
elect, within a reasonable period after the adoption of the
amendment, to have his nonforfeitable percentage computed under
the Plan without regard to such amendment. The period during
which the election may be made will commence with the date the
amendment is adopted and will end on the later of:
1) 60 days after the amendment is adopted;
2) 60 days after the amendment is effective; or
3) 60 days after the Participant is issued written notice of the
amendment by the Committee.
EXECUTED this 19th day of September 1995, to be effective as of November
1, 1994.
Acme Steel Company
/s/ J. W. Hoekwater
By
--------------------------------------
Treasurer
ATTEST:
/s/ Martha M. Hosp
- ------------------------------------
Assistant Secretary
<PAGE>
1995 ANNUAL REPORT AND FORM 10-K
[PHOTO of the construction of the 676-foot tunnel furnace, part of Acme's
Modernization and Expansion Project.]
ACME METALS: BUILDING A PROFITABLE FUTURE.
<PAGE>
ACME METALS AT A GLANCE
[PHOTO of model of the Modernization and Expansion Project]
Acme Metals Incorporated, headquartered in Riverdale, Illinois, has two business
segments: Steel Making and Steel Fabricating. Acme, a leader in its major
product lines, has embarked on a modernization and expansion of its Steel Making
operations. This strategic investment will transform Acme Steel into a leading-
edge, low-cost integrated steel producer in North America, with expanded niche
markets for custom steels and benefits for its downstream Steel Fabricating
operations.
1995 SALES BY SEGMENT
STEEL MAKING
[PHOTO of coil of steel]
ACME STEEL COMPANY
Custom-produced steel in small order lots, in special chemistries and widths,
with exacting product quality and steel processing services matched by few mills
make Acme Steel unique. Its integrated steel making process differentiates its
product quality from mini-mills, while its production and processing capability
differentiates Acme Steel from other integrated steel makers.
[GRAPHIC showing that Acme Steel
contributed 45% of 1995 net sales]
STEEL FABRICATING
[PHOTO of strapping products]
ACME PACKAGING CORPORATION
Modern manufacturing facilities located in every major U.S. region, a broad
product line, and a strong sales and distribution network make Acme Packaging an
industry leader in steel strapping and strapping products.
[GRAPHIC showing that Acme
Packaging contributed 32% of 1995
net sales]
[PHOTO of tubing products]
ALPHA TUBE CORPORATION
A marketing-driven strategy, strong product quality, technical support, and a
broad value-added product line sold to a diverse customer base make Alpha Tube a
leader in the welded steel tube market.
[GRAPHIC showing that Alpha Tube
contributed 15% of 1995 net sales]
[PHOTO of auto jack]
UNIVERSAL TOOL & STAMPING COMPANY, INC.
Strong planning and control systems, new product development, customer technical
support, and a midwestern location convenient to automotive assembly plants make
Universal a leading manufacturer of automotive lifting equipment.
[GRAPHIC showing that Universal
Tool contributed 8% of 1995 net
sales]
<PAGE>
<TABLE>
<CAPTION>
PRODUCTS PRODUCTION FACILITIES PRINCIPAL MARKETS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sheet, strip, plate, bar, and Acme Steel's coke, iron, and steel Agricultural, automotive components,
semi-finished steel in low-, making operations are located in industrial equipment, industrial
mid-, and high-carbon; alloy; Chicago and Riverdale, IL. fasteners, pipe and tube, processor/
high-strength, low-alloy; and converter, and tool manufacturing
special grades industries
- ----------------------------------------------------------------------------------------------------------------
Steel strapping, strapping Acme Packaging's flagship plant Agricultural, automotive, brick,
tools, and industrial packaging in Riverdale, IL, is supported by construction, fabricated and primary
products satellite plants in New Britain, metals, forest products, paper, and
CT, Bay Point, CA, and Leeds, AL. wholesale industries
- ----------------------------------------------------------------------------------------------------------------
Welded steel tube Alpha operates two tube manufac- Appliance, automotive, construction,
turing plants and a steel processing heating/ventilation/air conditioning,
facility in the Toledo, OH, area. household and leisure furniture,
material handling, recreational
products, service center, truck
exhaust, and water heater industries
- ----------------------------------------------------------------------------------------------------------------
Auto and light truck jacks Universal's operations are located Automotive and truck original
in Butler, IN. equipment manufacturers
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ACME METALS INCORPORATED
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
[GRAPHICS depicting net sales, dollars in millions, for Acme: 1991, $337.0;
1992; $391.6; 1993, $457.4; 1994, $522.9; 1995, $521.6.
Graph depicting operating income (loss), dollars in millions, for Acme: 1991,
($1.5); 1992, ($2.1); 1993, $12.7; 1994, $33.6; 1995, $48.8.
Graph depicting net income (loss), dollars in millions, for Acme: 1991,
($2.3); 1992, ($2.8), before cumulative effect of changes in accounting
principles; 1993, $6.3; 1994, $17.0; 1995, $28.2.]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31, 1995 December 25, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Total assets $754.7 $682.3
- -------------------------------------------------------------------------------
Total long-term debt $276.8 $265.1
- -------------------------------------------------------------------------------
Total shareholders' equity $248.1 $223.3
- -------------------------------------------------------------------------------
Total debt as a percent of total capital 52.7% 54.3%
- -------------------------------------------------------------------------------
</TABLE>
ABOUT THE COVER:
- --------------------------------------------------------------------------------
Acme Metals' steel making subsidiary, Acme Steel, is building a new continuous
thin slab caster/hot strip mill to modernize and expand its operations. The
cover photo was taken in July 1995. When completed in the second half of 1996,
Acme's new facility will be the world's first steel mill to produce MiniGrated-
TM- steel, combining mini-mill efficiencies with Acme's traditional high-quality
liquid steel. This technology is ideally suited for Acme's steel business and
its customer base. See pages 6-8 for more information.
<TABLE>
<CAPTION>
CONTENTS
- -----------------------------------------------------------
<S> <C>
Acme Metals at a Glance IFC
- -----------------------------------------------------------
Letter to Shareholders 1
- -----------------------------------------------------------
An Interview With Acme's Chairman and CEO 2
- -----------------------------------------------------------
Building a Profitable Future-A Strategic Overview 4
- -----------------------------------------------------------
Acme's Steel Making Process-Today vs. Tomorrow 6
- -----------------------------------------------------------
Modernization and Expansion Project Update 8
- -----------------------------------------------------------
Form 10-K 9
- -----------------------------------------------------------
Officers and Directors IBC
- -----------------------------------------------------------
Shareholders' Information IBC
- -----------------------------------------------------------
</TABLE>
<PAGE>
[PHOTO of Brian W.H. Marsden]
Dear Acme Metals Shareholder:
In 1995, Acme Metals Incorporated earned record operating and net income on
sales that were essentially even with last year's record sales. Our steel making
segment benefited from improved selling prices and ongoing cost controls. Our
steel fabricating segment was helped by the continued strength of the economy,
higher selling prices in our strapping business, and a more value-added product
mix in our pipe and tube business. This strong performance has further enhanced
our financial position as we enter this key transition year.
Acme Steel's approximately $400 million modernization and expansion project
remains within our cost expectations and is on schedule to start up later this
year. The project, consisting of a continuous thin slab caster and seven-stand
hot strip mill, will reduce Acme Steel's cash manufacturing costs about 20
percent, increase shipping capability 35 percent, broaden our product range and
significantly improve product quality.
We've embarked on an initiative to attain internationally recognized
quality certifications that will position our businesses as premier suppliers
able to meet the needs of the world's most demanding manufacturers. Our Acme
Steel and Acme Packaging subsidiaries are installing state-of-the-art
information systems to enhance productivity and improve customer service. Alpha
Tube, our pipe and tube subsidiary, is laying the groundwork for a consolidation
of its three facilities that will reduce costs while improving product quality
and customer service. Universal Tool & Stamping, our jack and tool subsidiary,
has designed innovative new jacks to strengthen its position as a leading
supplier to the North American auto and light truck market.
Our people demonstrated great leadership and dedication in helping the
company achieve 1995's record performance. C.J. Gauthier and Julien L. McCall,
directors since 1986, will retire from the Board of Directors at the 1996 Annual
Meeting. In addition, Carol M. O'Cleireacain, the USWA-designated director, will
not stand for reelection when her term expires in 1996. We have benefited
greatly from their counsel and experience and are grateful for their many
contributions.
Looking ahead to 1996, analysts tell us they expect underlying demand for
steel and steel products to remain fairly strong. For Acme, 1996 will be a year
of transition as we complete and start up the new facility. As planned, startup
costs will reduce the earnings of our steel making segment, while we look for a
solid earnings performance from our steel fabricating segment.
Longer term, the new facility will enhance our proven strategy of providing
value-added products to attractive niche markets. We're very excited about the
opportunities that the new facility will open up for us-through lower costs,
higher-quality steels, the chance to expand market share and enter new markets.
Acme will be ideally positioned for long-term profitable growth as a low-cost,
superior-quality North American steel producer, which should lead to higher
earnings and enhanced shareholder returns.
/s/Brian W. H. Marsden
Brian W. H. Marsden
Chairman and Chief Executive Officer
March 4, 1996
1
<PAGE>
AN INTERVIEW WITH ACME'S CHAIRMAN AND CEO
[PHOTO of Brian W.H. Marsden]
Brian W. H. Marsden
YOU'RE IN THE MIDST OF THE BIGGEST CAPITAL INVESTMENT IN ACME'S HISTORY. HOW IS
IT PROGRESSING?
The project is on schedule and within our cost expectations. I'm confident we'll
be running the first test coils through the new mill sometime this summer. We
expect to see the first commercially suitable steel coils perhaps late in the
third quarter. By mid-1997, I expect the mill to be operating at levels that
will allow us to phase out the existing ingot pouring and rolling facilities.
ARE YOU MAKING SIMILAR PROGRESS ON THE "PEOPLE SIDE" OF THE NEW FACILITY?
At the outset of this project, we recognized that you can spend millions on
equipment, but if you haven't got the right people with the right skills to run
it, it isn't going to run well. So, early on, we put in place a diverse,
experienced management team who have been intimately involved in the mill's
construction. And with the full support of the union, we've selected operators
based on skills and aptitude. The selection process is complete and they've
begun rigorous training-in tandem with the mill construction-that will continue
until the new facility is up and running.
WHAT'S UNIQUE ABOUT THIS TECHNOLOGY VERSUS OTHER STEEL MAKING PROCESSES? IS THE
TECHNOLOGY PROVEN?
Integrated steel makers have used conventional continuous casters for years. But
they're not efficient for the special grades and smaller order sizes typical of
Acme's niche steel markets. Various mini-mills throughout the world use
continuous thin slab casters today, but they use electric furnaces to make their
liquid steel from scrap-which contains unwanted residual elements. These "tramp"
elements limit the quality of the finished steels produced by mini-mills. Our
new facility marries the best of both the integrated and mini-mill worlds. And
with the quality enhancements we've designed into our mill, we'll be able to
produce steels that will be unmatched in dimensional control, mechanical
properties and surface quality.
WHAT COULD GO WRONG?
There are always events that are outside your control, but we've done exhaustive
planning to keep surprises to a minimum. And, this has certainly been the case
to date on this project.
WHEN AND HOW WILL INVESTORS SEE THE BENEFITS OF THIS STRATEGIC INVESTMENT?
Once the new facility is fully operational in mid-1997, our earnings should
reflect the significant cost savings and growth opportunities created by
additional capacity and an expanded product range. Specifically, we expect to
save about 20 percent on our cash manufacturing costs-in excess of $70 per ton.
Our shipping capacity will increase by more than a third-that's another 250,000
tons of the highest-quality steel on the market. Our new rolling mill will be
able to produce coils twice as wide as today-up to 60 inches wide. These larger,
2
<PAGE>
superior-quality coils will reduce costs for both our customers and our
downstream steel fabricating businesses. We believe our financial performance
will improve in all phases of the business cycle and translate into
opportunities for enhanced, more consistent shareholder returns.
IS ACME MAKING ANY OTHER INVESTMENTS?
Yes. We're always seeking ways to judiciously invest capital to further improve
the costs of our operations. For example, we've become a minority partner in a
joint venture to build and operate a steel processing facility that will pickle
and slit wide steel coils from our new mill-further reducing our costs. In the
information technology area, we're installing state-of-the-art business systems
to enhance our ability to track orders, shipments and inventory, optimize
production schedules and support management decisions. We're also planning to
consolidate our three Alpha Tube operations into a single facility to cut costs
and improve quality. And, we'll continue to invest in projects that enhance the
environment-such as a wastewater cyanide treatment plant at our coke making
operation and a desulfurization facility at our steel making operation.
WHAT ARE YOUR PLANS FOR YOUR STEEL FABRICATING BUSINESSES?
First, let me reiterate that our long-term downstream acquisition strategy
remains in place. It's a viable strategy and has worked well for us-helping to
reduce the impact of cyclical steel demand on Acme's overall performance. Each
of our steel fabricating businesses is a little different, of course, so our
plans vary accordingly. Our packaging business is mature, growing at the overall
rate of the economy. As probably the low-cost, highest-quality producer of steel
strapping, we'll focus on opportunities to build on this position-perhaps
through other forms of packaging, such as plastic strapping. Our tubing business
has good growth prospects. We've progressively moved away from commodity
products into a more specialized, value-added product line. And with the
highest-quality steels produced by the new facility, we think we can expand this
business with even better products for our customers. Our jack business, Acme's
smallest, is already a leading supplier to the North American OEMs. So the
growth opportunities lie in becoming a more international competitor. We'll
continue to grow and fine tune these businesses, and perhaps add others in the
future. But for 1996, our focus is fixed on getting our steel modernization
project up and running.
WHAT'S YOUR OUTLOOK FOR ACME IN 1996?
Looking at 1996, we see a year
of transition as we complete and start up the new mill. In our Acme Steel
subsidiary, startup costs and-depending on the exact startup date-the additional
depreciation expense and interest expense that will no longer be capitalized
will reduce our second-half earnings. Importantly, we've planned for these costs
and expect our financial position to remain strong through completion and
startup of the new mill. We look for another strong earnings performance from
our steel fabricating businesses.
WHAT'S YOUR VISION FOR ACME'S LONGER-TERM FUTURE?
Profitable growth. That's the key to ensuring Acme's long-term success and
increasing shareholder value. We're also continually focusing on improving our
margins by driving efficiencies in costs such as energy, raw materials and
labor. For example, we've decided to remain predominantly a coal- and iron ore-
based steel company-not dependent on scrap. Using virgin iron ore will help us
maintain our superior product quality while avoiding the volatile prices of the
scrap market faced by the mini-mills. Clearly, Acme's next major step is to
bring the new facility on line as quickly and smoothly as possible. Then, we'll
evaluate which use of increased cash flows offers the best returns to
shareholders, whether it be internal expansion, acquisitions, debt repayment or
possibly even dividends.
3
<PAGE>
BUILDING A PROFITABLE FUTURE WITH. . .
. . .SUPERIOR PRODUCTS AND STRONG MARKET POSITIONS.
Acme Metals' steel making subsidiary, Acme Steel Company, is North America's
smallest integrated steel maker. Acme Steel is ideally suited to compete in the
high-quality, narrow hot-rolled U.S. steel markets. Customers in these
profitable niche markets tend to order small quantities of custom-produced
steels with special chemistries and widths. Acme Steel offers a wide variety of
grades of steels with a full range of in-house processing services to over 600
customers. Larger integrated steel makers have facilities designed for larger
markets, while mini-mill competitors can't match the quality inherent in Acme's
liquid steel making process. Acme's unique size, processing flexibility and
"designer" steels have helped it win approximately a one-third share of the
niche markets in which it currently competes.
Acme's steel fabricating businesses-Acme Packaging Corporation, Alpha Tube
Corporation and Universal Tool & Stamping-also hold significant positions in
each of their respective markets. Acme Packaging holds approximately a 40
percent share of the U.S. steel strapping market. Alpha Tube has continued to
upgrade its line of welded steel tubing to include more profitable, value-added
products and holds approximately a 10 percent share of the markets in which it
competes. Universal Tool & Stamping holds approximately a 30 percent share of
the North American OEM market for auto and light truck jacks. Over half
of 1995 net sales came from the steel fabricating business segment. Each
business is profitable and enhances margins through value-added products.
Combined, they are a captive market for up to 45 percent of Acme Steel's
tonnage. These downstream steel fabricating businesses reduce the cyclical
impact of steel demand on Acme Metals' overall financial performance.
4
<PAGE>
. . .STRATEGIC, MARKET-DRIVEN INVESTMENTS.
Acme Metals record 1995 performance tends to mask the inefficiencies of Acme
Steel's older, batch-type steel making technology, which can still do well in a
strong economy. To build a more consistent, profitable future, Acme is investing
approximately $400 million in a continuous thin slab caster/hot strip mill that
is ideally suited for Acme's niche markets. First of its kind worldwide, the new
facility combines state-of-the-art mini-mill casting and rolling technology with
Acme's high-quality, low-cost liquid steel making operations. The benefits will
be remarkable:
- - cash manufacturing costs will be reduced by more than 20 percent
- - product range will be expanded to include wider and thinner sheet and strip
steel
- - shipping capacity will be increased nearly 35 percent
- - cycle time to produce a coil from liquid steel will be cut from 10 days to
only 90 minutes.
The new facility is on track for a second-half 1996 start-up. This strategic
investment ideally positions Acme for enhanced growth and profitability as a
low-cost, superior-quality North American steel maker.
. . .SEASONED MANAGEMENT AND A TOP-QUALITY WORK FORCE.
Acme's people play a critical role in ensuring the company's long-term financial
success. The company's senior management team averages more than 25 years of
industry experience. Acme is strongly committed to employee skill development
and training, one of its most important investments. The company's Labor
Management Participation Team program, designed to foster problem solving in a
team environment, is one of the steel industry's most successful. In 1991, the
TOTAL QUALITY IMPROVEMENT PROCESS (TQIP) was initiated, reflecting Acme's total
organizational commitment to providing high-quality products and services that
totally satisfy the needs of its customers. To date, Acme has invested more than
24,000 hours of TQIP training in over 1,000 of its 2,750 employees.
Acme's long-term, positive labor-management relationship is a major factor
in making the new facility economically feasible. In 1993, Acme and the United
Steelworkers of America extended their long track record of partnership when
they successfully negotiated an innovative six-year labor agreement. The
contract provides the assurance there will be no work stoppages during this
critical period, eases the transition to a smaller work force, and provides
stability for employees and the opportunity to develop an extended partnership
between the company and its union employees.
5
<PAGE>
FROM MOLTEN STEEL TO COILS
TODAY-10 DAYS
Acme's basic oxygen furnaces produce a 100-ton heat of molten steel every
30 minutes. Acme's existing facilities use a costly batch process-an inefficient
way to make steel.
[GRAPHIC showing steel poured from a ladle into ingots]
Molten steel, tapped from the furnace, is poured into individual ingot molds.
[GRAPHIC showing ingot mold being lifted by crane]
The ingot molds are transported on rail cars to the Primary Rolling Mill, where
a crane strips the mold from the ingot.
[GRAPHIC showing ingots in soaking pit]
The ingot is reheated for up to 24 hours in a soaking pit to raise and
equalize its temperature to optimum rolling levels.
[GRAPHIC showing steel in rolling mill]
A crane transfers the reheated ingot from the soaking pit to the rolling mill,
where it's rolled into a slab.
The uneven head and tail of each slab must be cropped off, reducing product
yield.
- --------------------------------------------------------------------------------
TOMORROW-90 MINUTES
[GRAPHIC illustrating Acme's new steel making process from the ladle to the
descaler]
Acme's new facility starts with the same pure, high-quality steel made in basic
oxygen furnaces. Before casting, a ladle metallurgy station near the continuous
caster will fine tune the molten steel to exact customer
Molten steel, fine tuned to exact customer specifications, is ready for casting.
A crane will carry the ladle of steel from a ladle metallurgy furnace to a
turret on top of the continuous caster. The turret holds two ladles to assure
continuous operation.
Molten steel will pour from a ladle into a reservoir called a tundish.
Throughout pouring, the stream of steel is shrouded to protect it from oxygen
and other potential contaminants.
Again shrouded, the molten steel will pour from the tundish into a funnel-
shaped, water-cooled mold. An electromagnetic brake system will help control the
flow of liquid steel into the mold, while a hydraulic mold oscillator will help
minimize friction of the steel strand in the mold-both improving surface
quality.
As the solidifying steel passes through the continuous caster, guide rolls
contain the steel. Precise air-mist cooling will minimize cracking and improve
surface uniformity and product consistency.
As the slab emerges from the caster withdrawal area, it will automatically be
sheared to the exact length required to roll it into a coil of sheet or strip
steel.
6
<PAGE>
The rolled slab is transferred to a storage yard, where it's stacked to cool.
Then, each slab is inspected and conditioned to meet customer standards-a labor-
intensive process that can further reduce product yield. After conditioning, the
slab is transferred by rail to the hot mill for temporary storage.
The slab is placed into a reheat furnace to bring it to a rolling temperature of
about 2,350 degrees Fahrenheit.
After reheating, five passes through a reversing roughing mill reduce the slab's
thickness to approximately 7/8 of an inch-and it becomes a transfer bar.
The transfer bar is then coiled in a Stelco Coilbox to equalize temperature.
The transfer bar is fed out of the coilbox into six rolling stands, which reduce
the steel's thickness until it reaches the gauge specified by the customer-with
a maximum width of 30 inches.
After rolling, the strip steel moves down the runout table, where it's quenched
by water sprays and then coiled.
[GRAPHIC showing Acme's existing steel making process from conditioning
through coiling of steel]
- --------------------------------------------------------------------------------
specifications. Start to finish, the time needed to convert liquid steel into
coils in Acme's new facility will drop from days to minutes. State-of-the-art
quality enhancements will enable Acme to precisely control the thickness,
profile, flatness and surface quality of its steels to world-class standards.
Able to roll coils twice as wide as those produced today, the new mill will
greatly expand Acme's product range. With enhanced quality and increased
shipping capability, Acme will be ideally positioned to capture additional share
of its existing markets as well as enter new markets.
[GRAPHIC illustrating Acme's new steel making process from the rolling mill
through coiling of steel]
The slabs will move immediately into a tunnel furnace to be heated to optimum
rolling temperature. Then, the heated slabs move automatically into the rolling
mill.
The seven-stand, 60-inch wide rolling mill has an edger before the first roll to
improve control of metallurgical properties, while helping to prevent cracking.
Computer-controlled roll bending and shifting will control the profile of the
sheet, resulting in improved yield for customers. Seven stands, far more
powerful than the six stands used today, enable Acme to roll thinner, flatter
steels.
After rolling, computer-controlled laminar-strip cooling locks in precise
metallurgical properties.
After cooling, the steel is quickly coiled and automatically weighed and banded
for customer identification-ready for shipping or further finishing.
7
<PAGE>
[FIVE PHOTOS including: artist's depiction of the new facility; aerial photo-
graph of new facility; tunnel furnace under construction; installation of
mill housing; installation of gear boxes]
MODERNIZATION AND EXPANSION PROJECT UPDATE
- - TREMENDOUS PROGRESS WAS MADE IN 1995-FROM PREPARING THE SITE TO ERECTING
THE BUILDINGS, FROM SELECTING THE OPERATORS TO BEGINNING THEIR TRAINING.
- - MAJOR EQUIPMENT BEGAN ARRIVING IN EARLY 1996-MILL STANDS AND MOTORS, LADLE
METALLURGY FURNACES AND CASTER SEGMENTS, FOR EXAMPLE. INSTALLATION OF THESE
COMPONENTS HAS BEGUN.
- - AS MAJOR SUBSYSTEMS OF THE MILL ARE COMPLETED, THEY WILL BE "COLD
COMMISSIONED"-RIGOROUSLY TESTED WITHOUT ANY MOLTEN STEEL PRESENT TO ENSURE
THEY WORK PROPERLY.
- - "HOT COMMISSIONING"-TESTING WITH MOLTEN STEEL PRESENT-WILL FOLLOW THE COLD
TESTING PROCEDURES. HOT COMMISSIONING WILL BE DONE IN STAGES, STARTING WITH
THE LADLE METALLURGY FACILITY, THE FIRST STEP IN THE NEW CASTING AND
ROLLING PROCESS.
- - THE NEW FACILITY IS EXPECTED TO PRODUCE COMMERCIALLY SALABLE STEEL IN THE
FOURTH QUARTER OF 1996.
An artist's depiction of the new facility compared to an aerial photograph,
taken in February 1996, illustrates progress on the building's exterior.
Below, the 676-foot tunnel furnace is mechanically in place. Installation
of the seven-stand rolling mill is under way. Each of the new rolling
stands is more powerful than the entire six-stand finishing mill used
today.
<PAGE>
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
BRIAN W.H. MARSDEN 3,4
Chairman and Chief Executive Officer of Acme Metals Incorporated
STEPHEN D. BENNETT 3,4
President and Chief Operating Officer of Acme Metals Incorporated
C.J. GAUTHIER 1,2,3,5
Retired Chairman, President, and Chief Executive Officer of NICOR, Inc.
(public utility holding company)
EDWARD G. JORDAN 1,4,5
Retired Chairman of Consolidated Rail Corporation (Conrail)
ANDREW R. LAIDLAW 1,3,5
Chairman of the Executive Committee of the law firm of Seyfarth, Shaw,
Fairweather & Geraldson
FRANK A. LEPAGE 2,4,5
Retired Director and Executive Vice President of The Firestone Tire and
Rubber Company (manufacturer of tires and related products)
REYNOLD C. MACDONALD 1,3,4,5
Retired Chairman of the Board of Acme Steel Company
JULIEN L. MCCALL 2,4,5
Retired Chairman of the Board and Chief Executive Officer of National City
Corporation (bank holding company)
CAROL M. O'CLEIREACAIN 1,4,5
Independent Consultant and former Director, New York City Office of Management
and Budget (government agency)
WILLIAM P. SOVEY 2,3,4,5
Vice Chairman and Chief Executive Officer of the Newell Co. (diversified
manufacturer of hardware, housewares, office, and industrial products)
L. FREDERICK SUTHERLAND 2,4,5
President, Uniform Services Group of ARAMARK Corporation (highly diversified
services company)
WILLIAM R. WILSON 1,2,5
Retired Chairman of the Board and Chief Executive Officer of Lukens, Inc.
(diversified metals manufacturer)
C.J. GAUTHIER AND JULIEN L. MCCALL ARE RETIRING AT THE 1996 ANNUAL MEETING.
CAROL M. O'CLEIREACAIN WILL NOT STAND FOR REELECTION WHEN HER TERM EXPIRES IN
1996.
BOARD COMMITTEES
1 Audit Review
2 Compensation
3 Executive
4 Finance
5 Nominating
EXECUTIVE OFFICERS
BRIAN W.H. MARSDEN
Chairman and Chief Executive Officer
STEPHEN D. BENNETT
President and Chief Operating Officer
JAMES W. HOEKWATER
Treasurer
GREGORY J. PRITZ
Controller
GERALD J. SHOPE
Vice President-Employee Relations
EDWARD P. WEBER, JR.
Vice President, General Counsel, and Secretary
JERRY F. WILLIAMS
Vice President-Finance and Administration, and Chief Financial Officer
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS OF SUBSIDIARY COMPANIES
ACME PACKAGING CORPORATION
Robert W. Dyke, President
ACME STEEL COMPANY
Gary S. Lucenti, President
ALPHA TUBE CORPORATION
Edward Urbaniak, Jr.
UNIVERSAL TOOL & STAMPING COMPANY, INC.
Larry C. Kipp, President
INVESTOR INFORMATION
ANNUAL MEETING
Shareholders are cordially invited to attend the Annual Meeting of Shareholders,
which will be held at 10:00 a.m., April 25, 1996, at The Sutton Place Hotel, 955
Bay Street, Toronto, Ontario.
STOCK MARKET INFORMATION
Acme Metals Incorporated common stock is traded on the Nasdaq National Market
tier of the Nasdaq stock market under the symbol ACME and on the Toronto Stock
Exchange under the symbol AMK. As of March 4, 1996, there were 11,584,877 shares
of common stock outstanding, held by 6,010 shareholders of record.
<TABLE>
<CAPTION>
QUARTERLY STOCK PRICES
- --------------------------------------------------------------------
Quarter 1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
First 19 1/4-14 1/2 27 1/4-17 1/2 17 1/4-12 1/4
- --------------------------------------------------------------------
Second 17 1/2-15 1/4 26 1/4-21 1/2 18 -14
- --------------------------------------------------------------------
Third 18 1/4-15 1/4 26 1/2-21 1/2 20 3/4-13
- --------------------------------------------------------------------
Fourth 17 1/4-13 3/4 22 3/4-15 18 3/4-13 3/4
- --------------------------------------------------------------------
</TABLE>
DIVIDENDS
No dividends on the common stock have been declared or paid since Acme became a
public company. Special payments in 1992 and 1988 reflected the redemption of
preferred stock purchase rights. Certain debt covenants limit the company's
ability to pay future dividends.
- --------------------------------------------------------------------------------
SHAREHOLDER QUESTIONS AND 10-K OFFER
Shareholders with questions concerning Acme Metals, or requesting a copy of the
company's Form 10-K, should direct inquiries to C. Mark Hussey, director,
Investor and Public Relations, Acme Metals Incorporated, phone number
708-841-8383, extension 2266.
Shareholders with questions concerning the transfer of shares should contact:
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company of New York
Shareholder Services
P.O. Box 2500
Jersey City, NJ 07303-2500
201-324-0498 or 800-446-2617
CO-TRANSFER AGENT AND REGISTRAR
Montreal Trust Company
151 Front Street West
Toronto, Ontario, Canada M5J 2N1
416-981-9633
For information regarding lost stock certificates, duplicate mailings, or change
of address, including seasonal changes, please contact First Chicago Trust
Company of New York.
Hearing-impaired stockholders can communicate with First Chicago Trust
Company of New York via a telecommunications device (TDD), phone number
201-222-4955.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
200 East Randolph Drive
Chicago, IL 60601
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
[PHOTO of the construction of the 676-foot tunnel furnace, part of Acme's
Modernization and Expansion Project.]
ACME METALS INCORPORATED
13500 South Perry Avenue
Riverdale, Illinois 60627-1182
708-849-2500
<PAGE>
EXHIBIT 21
ACME METALS INCORPORATED
SUBSIDIARY LISTING
AS OF MARCH 4, 1996
-------------------------
SUBSIDIARY NAME, D/B/A, STATE OR COUNTRY OF
AND ITS SUBSIDIARIES INCORPORATION TYPE OF BUSINESS
- ------------------------- ------------------- --------------------
ACME STEEL COMPANY Delaware Integrated steel producer
Alabama Metallurgical Washington Inactive
Corporation
ACME PACKAGING CORPORATION Delaware Manufacture and sale of
(d/b/a Acme Steel Packaging steel strapping and
Corporation State of California) related tools
(d/b/a RAPZ Strapping Products,
State of Illinois and town of
New Britain, Connecticut)
Acme Steel Company Barbados Foreign trading company
International, Inc.
ALPHA TUBE CORPORATION Delaware Manufacture and sale of
welded carbon steel
tubing
Alta Slitting Corporation Delaware Slitting and processing
of steelproducts
UNIVERSAL TOOL & STAMPING Indiana Manufacture and sale of
COMPANY, INC. auto and truck jacks
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-17235,
33-19437, and 33-30841) and in the Registration Statements on Form S-8 (Nos.
33-38747 and 33-59627) of Acme Metals Incorporated of our report dated January
25, 1996 appearing on page 36 in this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
March 22, 1996
Chicago, Illinois
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