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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 29, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-14378
ACME METALS INCORPORATED
(Exact name of registrant as specified in its charter)
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DELAWARE 36-3802419
(State of incorporation) (I.R.S. Employer Identification No.)
13500 SOUTH PERRY AVENUE, RIVERDALE, ILLINOIS 60627-1182
(Address of principal executive offices) (Zip Code)
(708) 849-2500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $1.00 New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
12 1/2% Senior Secured Notes due 2002 New York Stock Exchange
13 1/2% Senior Secured Discount Notes due New York Stock Exchange
2004
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [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 3, 1997 of common stock, par value
$1.00, held by non-affiliates of the Registrant was: $190,804,709.
Number of shares of Common Stock outstanding as of March 3, 1997,
11,628,323.
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 24, 1997 is partially incorporated by reference into
Part III, Items 10, 11, 12 and 13.
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ACME METALS INCORPORATED
1996 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PAGE
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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................. 26
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 26
PART III
Item 10. Directors and Executive Officers of the Company............. 27
Item 11. Executive Compensation...................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 28
Item 13. Certain Relationships and Related Transactions.............. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 28
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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 Company, Inc. ("Universal"). The Company had publicly traded on
NASDAQ since 1986, but began trading on the New York Stock Exchange in May,
1996. The Company has also traded on 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 Company, 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
Consolidated Financial Statements on pages 54-56.
(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 - 40 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 44, 45, and 44 percent of
total Company sales in 1996, 1995, and 1994, 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, slab grinder, hot strip mill,
pickle lines, cold mills, annealing furnaces, slitter lines, and cut-to-length
lines. In addition, Acme has
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completed construction of a continuous thin slab caster and hot strip mill
("Modernization and Expansion Project") adjacent to its Riverdale steel making
operation and is currently commissioning the new facility.
Acme is the smallest integrated steel producer in the U.S. with a current
annual hot band shipping capability of approximately 720,000 tons, which is
expected to increase to approximately 970,000 tons when the Modernization and
Expansion Project reaches full production capability (see discussion under
section (e) entitled Modernization and Expansion Project). This compares with
total U.S. shipments of all steel products of approximately 104 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
represented approximately 33 percent of the Company's sales in 1996 and 32
percent in 1995 and 1994. 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, contractor
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 and truck
exhaust industries. Alpha's sales represented approximately 16 percent of total
sales for the Company in 1996 and 1994 and 15 percent in 1995.
Alpha currently operates two tubing facilities in Toledo, Ohio, equipped
with rolling mills for the production of steel tube and pipe. During the fourth
quarter of 1996, Alpha Tube announced it will lease a built-to-specification
manufacturing facility to consolidate both of the existing operations in
Walbridge, Ohio. In addition, Alta Slitting Corporation which provided slitting
capacity for Alpha and was shut down at the end of 1996, will be consolidated in
the new facility. The new manufacturing facility will be leased under an
operating lease and completed in early 1998.
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 the majority of its flat-rolled steel supply from Acme.
Universal markets its products to domestic and foreign transplant automotive
manufacturers and the automotive after market. Universal's sales were
approximately 7 percent of total Company sales in 1996 and 8 percent in 1995 and
1994. 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 2,840 employees, of which 664 are salaried
and 2,176 are paid hourly. The unionized work force totals 2,012, or 71 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 Cooperative Partnership (formerly administrated under the
Labor Management Participation Team and the Total Quality Improvement Program)
in 1996 as a vehicle for problem solving in a team environment
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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 1,647 employees at the Acme and Packaging operations in Chicago
and Riverdale, Illinois. The contract expires in 1999 and contains a no-strike
provision. The six-year contract which was ratified on October 1, 1993 provided
for a mid-term renegotiation of specific wage and benefit issues. On October 25,
1996, the Company reached an agreement with the United Steelworkers on the
mid-term wage reopener. The settlement was largely consistent with the pattern
established within the steel industry.
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 1996, Acme acquired approximately 41 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 29, 1996 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 flat-rolled steel products have averaged
approximately 45-50 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 beginning in 1996 pricing pressure stabilized.
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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 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 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 45-50 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, other small 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 existing outmoded steel
finishing process (which is currently being replaced by the Modernization and
Expansion Project) and the competitive forces affecting the entire steel
industry, the traditional integrated steel making process has proven to be only
marginally profitable even at the upper end of the business cycles. Therefore
Acme embarked on a Modernization and Expansion Project which is discussed below
in section (e) entitled Modernization and Expansion Project.
(E) THE MODERNIZATION AND EXPANSION PROJECT
Acme's existing steel 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 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 85 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 7 operating continuous thin slab casting facilities in North
America, which have a combined estimated capacity of 10.0 million tons per year.
In addition, new construction or expansion of existing thin slab casting
facilities will increase estimated combined capacity by 9.0 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 use or will use scrap steel as their raw
material.
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The Modernization and Expansion Project commenced in August of 1994
coincident with the completion of the financing. During the fourth quarter of
1996 the Company completed the construction phase of the Modernization and
Expansion Project and is currently in the commissioning phase. 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. In
addition, Acme ceased capitalizing the interest expense associated with the
Modernization and Expansion Project midway through the fourth quarter of 1996.
The total capitalized interest expense was $48.0 million, which was added to the
cost of the Modernization and Expansion Project and will be amortized over the
lives of the related assets. 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 was constructed in a new building
on a site adjacent to Acme's existing steel making facilities. Steel production
at Acme's existing steel rolling mill facilities will be gradually reduced and
completely shut down in the middle of 1997. When fully operational, the
Modernization and Expansion Project should be capable of producing Acme's
anticipated product mix. When the Modernization and Expansion Project reaches
full production capability it is expected to substantially reduce manufacturing
costs, increase shipping capabilities and broaden the range of products.
The Modernization and Expansion Project involves substantial costs in
addition to those for the construction of the facility itself. Prior to the
start-up of the new facility, in the fourth quarter of 1996 the Company incurred
training and pre-start-up costs totaling $9.9 million. In addition, during 1996,
the Company incurred $4.7 million of production inefficiencies related to
start-up of the new facility. In the first half of 1997, the Company expects to
incur approximately $15 million of production inefficiencies, assuming the
ramp-up of the new facility as well as the discommissioning of redundant
operations are achieved in a manner consistent with the Company's projections.
(F) JOINT VENTURE
On February 27, 1996, Acme and its joint venture partner began construction
of a $30 million state-of-the-art steel coil processing plant. The new facility
is 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 Modernization and Expansion 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 is a minority equity
participant with a 40 percent interest for a total contribution of $3.5 million.
The joint venture began limited operations during the fourth quarter of 1996.
Full operations are expected to be achieved by mid-1997.
(G) COMPETITIVE CONDITIONS FOR THE STEEL FABRICATING SEGMENT
Acme Packaging. In the steel strapping market, 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 Packaging. The
Company believes 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, which supplies all of Packaging's steel. The steel strapping market,
however, 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. As a result, Packaging is installing two plastic strapping
manufacturing lines to strengthen its competitive position in the marketplace.
The new strapping lines are expected to be operational in late 1997.
Alpha Tube. Alpha operates in a highly competitive market characterized by
numerous participants with widely varying capabilities. Alpha'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.
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Unlike Alpha, many of its competitors compete only on price and generally offer
little or no technical service. Alpha recently announced the beginning of its
consolidation project (see section (c) of Item (1)) which will improve its
material handling capability resulting in increased capacity of large diameter
tubing and lower operating costs.
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 slightly larger than that of Universal. Universal
competes in a limited market characterized by large purchasers with significant
buying power.
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, an ingot producing and narrow steel rolling mill facilities (the
"Existing Steel Plant") and a continuous thin-slab caster and seven stand hot
strip mill (the "CSP Plant"), both 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, as well as the CSP Plant. During 1997, the
operations of the Existing Steel Plant which have been made redundant by the
operations at the CSP Plant will be decommissioned. Acme also owns equity
interests in raw material (iron ore) mining ventures in Newfoundland, and
Quebec, Canada. In addition, during 1996 Acme and a joint venture partner began
construction of a processing facility in Chicago, adjacent to the Riverdale
operations, for the pickling, oiling, slitting and packaging of steel products.
This facility, which began limited operations during the fourth quarter of 1996,
is expected to achieve full operations by mid-1997.
Packaging's principal properties consist of steel strapping plants, which
include slitting and painting equipment, in Riverdale, Illinois; New Britain,
Connecticut; Leeds, Alabama; and Bay Point, California.
Alpha currently has two leased facilities located in the Toledo, Ohio
metropolitan area, which include two manufacturing and office buildings and
rolling mills for the production of welded steel tubing. Until December 31,
1996, Alta Slitting, a related subsidiary, operated a leased plant in the Toledo
area which slit steel for Alpha. Alta's operation will be consolidated under
Alpha's new facility discussed below. During the fourth quarter of 1996, Alpha
entered into an operating lease with respect to a new facility under
construction in Walbridge, Ohio, near Toledo, in which it will consolidate the
operations currently conducted at its two existing facilities and formerly
conducted at the Alta Slitting facility. This consolidated facility is expected
to be completed in early 1998.
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 properties are owned in fee except for the Alpha facilities.
The current Alpha facilities are leased, with one lease expiring in April 1998
and the other in February 1999. The consolidated facility under construction
will be leased as discussed above.
In the opinion of management, the manufacturing facilities of the Company's
subsidiaries are properly maintained and their production capability is adequate
to meet their 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
for adjustments relating to all tax years prior to 1982. With respect to any
additional
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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 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. Various Federal and state occupational safety and health laws
and regulations also apply to the work place environment.
These current environmental control requirements are comprehensive and
continue to 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. The U.S. EPA's proposal for revision of the National Ambient Air Quality
Standards for particulate matter and ozone are recent examples of this trend.
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.
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.
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The Company has made substantial capital investments in environmental
control facilities to achieve compliance with these laws, incurring expenditures
of $5.7 million for environmental projects (exclusive of any such expenditures
related to the Modernization and Expansion Project) in the period from 1994
through 1996. The Modernization and Expansion Project is being constructed under
a lump sum fixed price contract of which it is estimated that $9.8 million and
$12.1 million was capitalized in 1996 and 1995 for environmental compliance
excluding capitalized interest. The Company anticipates making further capital
expenditures of approximately $0.7 million for environmental projects during
1997 relating to existing facilities to maintain compliance with these laws; and
during 1997 it estimates a minimal amount will be expended for environmental
expenditures related to the Modernization and Expansion Project. 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
operating subsidiary 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.
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 and
remediation of the contamination of this property by lead, and/or other
substances and the appropriate remediation strategy. Discussions with
10
<PAGE> 11
the Alabama DEM regarding remediation plans for the site are ongoing. 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 ("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. Subsequent to the IPCB's decision, Acme and IEPA engaged in
negotiations to resolve these permit conditions; and, through modification of
certain provisions in the permit and the implementation of best management
practices, Acme anticipated achieving control of Acme's storm water discharge to
an extent that it will achieve compliance with other permit conditions. On
September 13, 1996, Acme received IEPA's new revised draft NPDES permit.
Although this revised draft permit resolved all prior issues, it included for
the first time additional discharge limits and biomonitoring requirements for
certain chemicals used in the plant's water treatment system. Acme has furnished
additional data to IEPA regarding these water treatment chemicals and is
awaiting IEPA's issuance of a further revised NPDES permit.
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, 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 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, 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. On September 10, 1996 Acme
filed, along with the other steel company, with U.S. EPA a phenol risk
assessment document supporting the granting of Removal Credits for 4AAP phenol.
To date, there has been no response or decision by U.S. EPA. Acme continues to
challenge the U.S. EPA's denial of the Removal Credits application and pursue
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 resulting in
the payment of penalties if its administrative and/or legal challenges are
unsuccessful. In the event Acme is
11
<PAGE> 12
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, 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").
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 when U.S. EPA and IEPA will resolve these issues or
whether additional emission controls will be required or the cost of such
controls at this time.
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. This emission control system was completed in the first quarter
of 1996 at a total cost of approximately $2.8 million, including approximately
$1 million for the control of emissions from the existing iron desulfurization
and iron transfer operations. The balance of the expenditures were made for the
control of other emission sources and improvements related to the Modernization
and Expansion Project.
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. On April 10, 1996,
a civil action was filed by the U.S. Attorney on behalf of U.S. EPA (U.S. vs.
Acme Steel Company, U.S. Dist. C. N.D. Ill. E.D., Case No. 96 C 2076) seeking
recovery of civil penalties with respect to emissions from its Riverdale steel
plant melt shop. This action is currently pending and in the early stages of
discovery. Therefore, the Company is unable to predict the outcome of this
litigation; or, if the outcome should be unfavorable, the amount of any civil
penalties which may be assessed. 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.
12
<PAGE> 13
Bay Point, California -- California Proposition 65 -- Lead. On June 10,
1996, after service of a 60-day notice of intent to file suit, Communities for a
Better Environment ("CBE") filed an action in the Superior Court of Contra Costa
County, California (Communities for a Better Environment vs. Acme Packaging
Corporation, et al., Case No. 96-02505) seeking injunctive and declaratory
relief and civil penalties based on Packaging's alleged failure to warn
residents near the plant of exposure to lead emissions from the Bay Point plant
("Proposition 65").
Packaging vigorously denies it has violated the provisions of California's
Proposition 65 regulations on lead exposure or failure to warn and is vigorously
defending this action.
This case is currently in the discovery phase and the Company is unable to
predict the outcome of this action; or, if the outcome should be unfavorable,
the amount of any civil penalties which may be assessed.
Other Matters
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, as that term is defined in the Agreement. 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.
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 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.
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, Case No. 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 approximately 1.7 acres of property located on Front
Street in Toledo, Ohio which the City acquired from Toledo Coke Corporation for
road widening purposes (the "Site"). On September 30, 1996, the City, Beazer
East, Inc. (successor-in-interest to Beazer Materials
13
<PAGE> 14
and Services, Inc./Koppers Company, Inc.) and the Toledo-Lucas County Port
Authority entered into an agreement regarding the completion and funding of
roadwork and related environmental work; and, the City, Beazer East, Inc. and
the Interlake Defendants (Acme Steel Company, The Interlake Corporation and The
Interlake Companies, Inc.) entered into a settlement agreement wherein the City
released Beazer East, Inc. and the Interlake Defendants from all claims and
agreed to dismiss the City's action against these defendants. On October 10,
1996, the Court entered a consent order dismissing with prejudice all of the
City's claims. The Court did not dismiss the cross-claims pending between Beazer
East, Inc. and the Interlake Defendants. In November 1995, the Court granted the
Interlake defendants' motion for summary judgement seeking indemnification by
Beazer East, Inc. for any environmental liabilities owed to the City. Beazer
filed its appeal of this decision. On November 22, 1996, the U.S. Sixth Circuit
Court of Appeals reversed the District Court's summary judgment order in favor
of the Interlake Defendants and remanded the indemnification issue back to the
District Court for trial. This trial is now scheduled to commence in June 1997.
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. (the "Duluth
Site"). Interlake's estimate, obtained from publicly filed documents, of the
potential remediation costs of contaminated soils pursuant to a plan approved on
September 25, 1995 by the Minnesota environmental agency ("MPCA"), range from $4
million to $5 million. The soil remediation will, pursuant to Interlake's
estimate, be substantially complete by mid-1997. The MPCA also requested
Interlake to investigate and evaluate remediation alternatives for the
underwater sediments at the Duluth Site. In March 1996, the MPCA named the
successors of certain coal tar processors as additional parties responsible for
a portion of the underwater sediments at the Duluth Site. Interlake reports its
consultants have substantially completed an investigation of the sediments; and,
based on this investigation, Interlake has commenced reviewing potential
remediation alternatives with MPCA and other parties. 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, is 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 Company's Common Stock is traded on the New York Stock Exchange under
the symbol AMI and on the Toronto Stock Exchange under the symbol AMK. As of
March 3, 1997 there were 11,628,323 shares of Common Stock outstanding held by
5,560 shareholders of record.
The (i) high and low sales price for the Common Stock as traded since May
21, 1996 on the New York Stock Exchange and (ii) high and low bid information
for the Common Stock as traded until May 20, 1996 on
14
<PAGE> 15
the NASDAQ National Market System under the symbol ACME, on a quarterly basis
for the two most recent fiscal years are as follows:
<TABLE>
<CAPTION>
QUARTER 1996 1995 1994
------- ---- ---- ----
<S> <C> <C> <C>
First....................................... 18 3/4-13 3/4 19 1/4-14 1/2 27 1/4-17 1/2
Second...................................... 19 -16 3/8 17 1/2-15 1/4 26 1/4-21 1/2
Third....................................... 17 1/2-13 7/8 18 1/4-15 1/4 26 1/2-21 1/2
Fourth...................................... 21 5/8-17 17 1/4-13 3/4 22 3/4-15
</TABLE>
No dividends have been declared or paid on the Common Stock since the
Company became a public company in 1986. Special payments in 1992 and 1988
reflected the redemption of preferred stock purchase rights. Certain covenants
in the Company's debt instruments and agreements limit its ability to pay future
dividends (see Notes to Consolidated Financial Statements titled Long-term Debt
and Revolving Credit Agreement on page 48 hereof).
15
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
TEN YEARS IN REVIEW (dollars in thousands except for per share data)
Certain amounts have been reclassified to conform with the 1996 presentation.
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
INCOME DATA
Net sales $498,242 $521,619
- -------------------------------------------------------------------------------------
Gross profit 50,465 84,448
- -------------------------------------------------------------------------------------
Income (loss) before income taxes, extraordinary items and
cumulative effect of changes in accounting principle 5,093 44,135
- -------------------------------------------------------------------------------------
Income tax provision (credit) 2,426 15,889
- -------------------------------------------------------------------------------------
Net income (loss) before extraordinary items and
cumulative effect of changes in accounting principle 2,667 28,246
- -------------------------------------------------------------------------------------
Extraordinary credit resulting from utilization of net
operating loss
- -------------------------------------------------------------------------------------
Extraordinary expense item related to penalty on
prepayment of debt
- -------------------------------------------------------------------------------------
Cumulative effect on prior years of changes in accounting
principle
- -------------------------------------------------------------------------------------
Net income (loss) 2,667 28,246
=====================================================================================
PER SHARE DATA
Income (loss) before extraordinary items and cumulative
effect of changes in accounting principle $0.23 $2.44
- -------------------------------------------------------------------------------------
Extraordinary credit (expense) item
- -------------------------------------------------------------------------------------
Cumulative effect on prior years of changes in accounting
principle
- -------------------------------------------------------------------------------------
Net income (loss) $0.23 $2.44
- -------------------------------------------------------------------------------------
Shareholders' equity $22.45 $21.42
- -------------------------------------------------------------------------------------
Weighted average shares outstanding (in thousands) 11,633 11,596
=====================================================================================
BALANCE SHEET
Current assets $182,837 $258,787
- -------------------------------------------------------------------------------------
Property, plant and equipment, net 560,725 379,178
- -------------------------------------------------------------------------------------
Total assets 805,749 754,743
- -------------------------------------------------------------------------------------
Current liabilities 115,940 108,330
- -------------------------------------------------------------------------------------
Long-term debt 310,085 276,831
- -------------------------------------------------------------------------------------
Shareholders' equity 260,701 248,111
=====================================================================================
CASH FLOWS
Net cash provided by operating activities 44,284 57,787
- -------------------------------------------------------------------------------------
Net cash used for investing activities (83,812) (81,793)
- -------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 19,709 410
- -------------------------------------------------------------------------------------
Net increase (decrease) in cash (19,819) (23,596)
=====================================================================================
RATIO ANALYSIS (PERCENT)
Gross profit margin 10.1% 16.2%
- -------------------------------------------------------------------------------------
Pre-tax margin 1.0% 8.5%
- -------------------------------------------------------------------------------------
Net margin 0.5% 5.4%
- -------------------------------------------------------------------------------------
Return on shareholders' equity 1.1%(f) 12.0%(e)
- -------------------------------------------------------------------------------------
Debt as a percentage of capitalization 54% 53%
=====================================================================================
ADDITIONAL INFORMATION
Depreciation $ 16,591 $ 13,613
- -------------------------------------------------------------------------------------
Capital expenditures 199,122 244,374
- -------------------------------------------------------------------------------------
Working capital 66,897 150,457
=====================================================================================
</TABLE>
(a) Computed before cumulative effect on prior years of changes in accounting
principle.
(b) Includes result of cumulative effect on prior years 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 shareholder's equity related to minimum
pension liability adjustment.
(f) Includes a $9.5 million increase in shareholder's equity related to minimum
pension liability adjustment.
16
<PAGE> 17
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 522,880 $457,406 $391,562 $376,951 $446,042 $439,412 $412,453 $335,488
- ------------------------------------------------------------------------------------------
76,288 45,223 29,546 27,748 36,712 51,886 54,493 31,314
- ------------------------------------------------------------------------------------------
28,693 10,432 (4,522) (3,050) 9,388 26,126 30,982 13,302
- ------------------------------------------------------------------------------------------
9,935 4,173 (1,673) (732) 3,755 9,926 12,393 6,360
- ------------------------------------------------------------------------------------------
18,758 6,259 (2,849) (2,318) 5,633 16,200 18,589 6,942
- ------------------------------------------------------------------------------------------
1,010 6,041
- ------------------------------------------------------------------------------------------
(1,787)
- ------------------------------------------------------------------------------------------
(50,323)
- ------------------------------------------------------------------------------------------
16,971 6,259 (53,172) (2,318) 5,633 16,200 19,599 12,983
==========================================================================================
$2.38 $1.15 $(0.53) $(0.43) $1.05 $3.00 $3.22 $1.19
- ------------------------------------------------------------------------------------------
$(0.22) $0.17 $1.03
- ------------------------------------------------------------------------------------------
$(9.32)
- ------------------------------------------------------------------------------------------
$2.16 $1.15 $(9.85) $(0.43) $1.05 $3.00 $3.39 $2.22
- ------------------------------------------------------------------------------------------
$19.31 $15.39 $16.55 $28.13 $28.65 $27.63 $24.62 $21.43
- ------------------------------------------------------------------------------------------
7,873 5,439 5,396 5,373 5,356 5,393 5,776 5,856
==========================================================================================
$ 273,842 $170,394 $148,860 $134,192 $126,497 $149,199 $102,572 $ 86,117
- ------------------------------------------------------------------------------------------
148,829 115,539 120,689 129,730 133,419 116,552 104,024 99,285
- ------------------------------------------------------------------------------------------
682,330 333,869 300,702 290,736 286,603 285,275 224,070 201,155
- ------------------------------------------------------------------------------------------
81,391 77,197 59,425 50,027 50,026 57,683 66,331 51,511
- ------------------------------------------------------------------------------------------
265,055 49,333 56,000 59,500 59,500 59,500 9,500 9,500
- ------------------------------------------------------------------------------------------
223,278 83,203 89,295 150,664 152,370 147,106 130,390 124,775
==========================================================================================
47,422 16,041 24,018 21,721 24,045 20,805 23,252 22,750
- ------------------------------------------------------------------------------------------
(334,124) (11,749) (6,562) (10,611) (37,693) (38,804) (16,014) (18,909)
- ------------------------------------------------------------------------------------------
312,897 (3,072) 34 (443) (328) 50,155 (15,410) 1,213
- ------------------------------------------------------------------------------------------
26,195 1,220 17,490 10,667 (13,976) 32,156 (8,172) 5,054
==========================================================================================
14.6% 9.9% 7.5% 7.4% 8.2% 11.8% 13.2% 9.3%
- ------------------------------------------------------------------------------------------
5.5% 2.3% (1.2)%(a) (0.8)% 2.1% 5.9% 7.5% 4%
- ------------------------------------------------------------------------------------------
3.3% 1.4% (0.7)%(a) (0.6)% 1.3% 3.7% 4.8% 3.9%
- ------------------------------------------------------------------------------------------
11.1%(d) 7.3%(c) (59.5)%(b) (1.5)% 3.8% 11.6% 15% 11%
- ------------------------------------------------------------------------------------------
54% 40% 40 %(b) 28 % 28% 29% 7% 7%
==========================================================================================
$ 15,514 $ 15,234 $ 14,705 $ 14,224 $ 13,031 $ 12,031 $ 10,742 $ 9,873
- ------------------------------------------------------------------------------------------
56,339 11,749 7,557 10,611 28,604 14,960 9,314 7,151
- ------------------------------------------------------------------------------------------
192,451 93,197 89,435 84,165 76,471 91,516 36,241 34,606
==========================================================================================
</TABLE>
17
<PAGE> 18
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 Consolidated Statements of Operations bear to net
sales.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------------
DECEMBER 29, DECEMBER 31, DECEMBER 25,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0%
Costs and expenses:
Cost of products sold................................... 86.7 81.3 82.5
Depreciation expense.................................... 3.2 2.5 2.9
----- ----- -----
Gross profit.............................................. 10.1 16.2 14.6
Selling and administrative expense...................... 7.1 6.8 6.4
Training and Pre-start-up -- Modernization and Expansion
Project.............................................. 2.0
Nonrecurring charge..................................... 1.8
----- ----- -----
Operating income.......................................... 1.0 9.4 6.4
Interest expense, net................................... (0.1) (1.3) (1.2)
Other -- net............................................ 0.1 0.3 0.3
Income tax provision...................................... 0.5 3.0 1.9
----- ----- -----
Net Income before extraordinary item...................... 0.5 5.4 3.6
Extraordinary item, net of tax............................ (0.3)
----- ----- -----
Net income................................................ 0.5% 5.4% 3.3%
===== ===== =====
</TABLE>
Fiscal 1996 as compared to fiscal 1995
NET SALES. Consolidated net sales of $498.2 million for the year ended
December 29, 1996 were less than the prior year by $23.4 million. The lower
sales level was a result of lower selling prices, $13.8 million, with decreased
shipments accounting for the remainder.
Steel Making Segment. In 1996, net sales for the Steel Making Segment of
$335.3 million were $21.5 million, or approximately 6 percent below last year's
comparable period. Sales to unaffiliated customers decreased 5 percent to $222.6
million while intersegment sales of $112.7 million were 8 percent lower than in
1995. The decrease in the Steel Making Segment's net sales was the result of a 4
percent decrease in average selling prices and lower flat-rolled and
semi-finished shipments. Sales of iron products during the period of $39.6
million approximated the same amount in the prior year, while semi-finished
product sales decreased $5.9 million compared to the prior year.
Steel Fabricating Segment. Steel Fabricating Segment net sales of $277.2
million in 1996 were 4 percent lower than the comparable period in the prior
year. Lower shipment volume accounted for $7.1 million of the sales decline
while average selling prices decreased sales by $4.2 million versus last year.
Sales of strapping and strapping tools of $163.5 million in 1996 were $3.4
million lower than sales in the previous year. Lower average selling prices
decreased net sales by $1.0 million, with reduced shipment volume contributing
$2.4 million to the sales decline.
Steel tube sales for 1996 totaled $77.1 million, down 5 percent from the
prior year. The $3.7 million reduction in sales was due almost entirely to lower
average selling prices as shipments approximated the prior year. Average selling
prices fell 4 percent, contributing to a decrease of $3.4 million in sales
versus 1995.
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<PAGE> 19
Sales of jacks and lifting tools for cars and light trucks totaled $36.6
million, a 10 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.
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>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sheet and strip steel....................................... 33% 33% 38%
Semi-finished steel......................................... 2% 4% 4%
Iron products and other..................................... 9% 8% 2%
-- -- --
TOTAL STEEL MAKING SEGMENT.................................. 44% 45% 44%
== == ==
Steel strapping and strapping tools......................... 33% 32% 32%
Welded steel tube........................................... 16% 15% 16%
Auto and light truck jacks.................................. 7% 8% 8%
-- -- --
TOTAL STEEL FABRICATING SEGMENT............................. 56% 55% 56%
== == ==
</TABLE>
GROSS PROFIT. The gross profit for the year ended December 29, 1996 of
$50.5 million was $34.0 million lower than last year, primarily reflecting lower
selling prices for the majority of the Company's products and significant
increases in operating costs in the Steel Making Segment. Gross profit, as a
percentage of net sales, was 10.1 percent in 1996 versus 16.2 percent in last
year's comparable period.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense
totaled $35.5 million (7.1 percent of net sales) and $35.6 million (6.8 percent
of net sales) for the years ended 1996 and 1995, respectively.
OPERATING INCOME. Operating income for the year ended December 29, 1996 was
$5.0 million compared to $48.8 million for the year ended December 31, 1995. The
significant decrease of $43.8 was primarily due to lower steel selling prices,
higher Steel Making operating costs, and training and pre-start-up costs related
to the Modernization and Expansion Project.
Steel Making Segment. The Steel Making Segment recorded an operating loss
of $14.9 million compared to the $28.5 million of income recorded during 1995.
The loss was driven by a 4 percent decrease in selling prices reducing results
by $12.6 million as compared to the prior period. Flat-rolled and semi-finished
shipments to external customers were approximately 11,000 tons or 3 percent
lower than last year's comparable period while shipments to the Steel
Fabricating Segment were 13,000 tons or 5 percent lower than in 1995. Also
contributing to the Steel Making Segment's loss for 1996 were higher costs
relating to the purchase and usage of natural gas and utilities and other raw
material costs along with increased maintenance, repair and labor costs.
Employee training and pre-start-up costs of $9.9 million and production
inefficiencies related to start-up of the Modernization and Expansion Project of
$4.7 million also decreased income from operations as compared to the prior
year. Finally, the Steel Making Segment began depreciating the new facility
midway through the fourth quarter of 1996 which resulted in an additional
depreciation expense of $3.0 million. Somewhat offsetting the decreased
shipments and increased costs were increased iron product sales contributing
$4.0 million of operating income in 1996 versus $2.2 million in the same period
of the prior year. Approximately 64 percent of shipments and 66 percent of gross
profit in 1996 were attributable to external customers while the remainder was
generated by sales to the Steel Fabricating Segment. In 1995, the Steel Making
Segment shipped 61 percent and derived 65 percent of its gross profit from
external customers.
Steel Fabricating Segment. Operating income for the Steel Fabricating
Segment of $20.0 million in 1996 was $0.4 million lower than last year. The
slight decrease was due primarily to lower average selling prices and higher
operating costs at the Alpha Tube subsidiary. Operating income for the remaining
fabricating businesses approximated the prior year.
INTEREST EXPENSE. Interest expense decreased $14.6 million over the prior
year. The decrease in interest expense resulted from the increased
capitalization of interest costs associated with the Modernization and
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<PAGE> 20
Expansion Project. The Company ceased capitalization of interest cost midway
through the fourth quarter of 1996 coincident with the start-up of commercial
production at the Modernization and Expansion Project and charged these interest
costs to current operations. Interest costs totaled $37.5 million, compared to
$35.4 million in the previous year. Interest costs of $31.3 million were
capitalized as part of the Modernization and Expansion Project in 1996, compared
to $14.6 million in the prior year. See Liquidity and Capital Resources included
herein and Long-term Debt and Revolving Credit Agreement in the Notes to
Consolidated Financial Statements.
INTEREST INCOME. Interest income was $8.7 million lower than in 1995 due
entirely to reduced on-hand cash and investment balances resulting from progress
payments for the construction of the Modernization and Expansion Project.
OTHER NON-OPERATING INCOME. Other non-operating income in 1996 was $0.6
million which was $1.2 million lower than 1995 due primarily to a $1.6 million
gain on the sale of the Company's interest in a West Virginia coal producing
property during 1995.
INCOME TAX EXPENSE. Income tax expense in 1996 totaled $2.4 million based
on a 47.6 percent effective tax rate as compared to the $15.9 million expense in
1995, based on a 36 percent effective rate. The higher 1996 tax rate is
attributable to increased state tax expense resulting from the distribution of
1996 earnings among the various states in which the Company conducts business.
The 1995 tax rate was favorably impacted by significant earnings on tax-free
investments.
NET INCOME. The Company recorded earnings of $2.7 million, or $0.23 per
share in 1996 versus the $28.2 million, or $2.44 per share in 1995.
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 1994.
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.
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<PAGE> 21
GROSS PROFIT. The gross profit for the year ended December 31, 1995 of
$84.4 million was $8.2 million higher than 1994, 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 1994'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 in 1994
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. 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 1994, 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.
Steel Fabricating Segment. Operating income for the Steel Fabricating
Segment of $20.4 million in 1995 was $1.3 million higher than 1994. 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 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 1994.
INTEREST EXPENSE. Interest expense increased $6.8 million over 1994. 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 1994. 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 comparable prior year. See Liquidity and Capital
Resources included herein and Long-term Debt and Revolving Credit Agreement in
the Notes to 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
21
<PAGE> 22
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 1993.
Sales of steel strapping and strapping tools totaled $166.8 million in
1994, a $12.7 million, or 8 percent, increase over 1993. Increased volume
accounted for $8.6 million, or 68 percent, of the improvement over 1993's
results. Average selling prices were 3 percent higher than the 1993 levels with
all of the increase coming in the latter part of the year.
Steel tube sales for 1994 reached $82.8 million, up 11 percent from the
comparable prior year level. 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 the 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 also 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
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<PAGE> 23
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 1993'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 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
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 1994
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements include working capital requirements,
cash interest payments and capital investments. Cash and cash equivalents at
December 29, 1996 were $33.2 million. The Company expects to finance its
operating and investing activities principally with cash from operations and if
required, borrowings against an $80.0 million Working Capital Facility beginning
as early as the end of the first quarter of 1997. Net cash provided by
operations was $44.3 million, $57.8 million and $47.4 million for 1996, 1995 and
1994, respectively. At December 29, 1996, the Company had total cash and cash
equivalents and short-term
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<PAGE> 24
investments of $45.0 million. These funds are invested in compliance with the
Company's bond indentures which restrict the type, quality and maturity of
investments.
During 1996, the Company's long-term indebtedness increased $33.2 million
to $310.1 million reflecting accretion of the Senior Secured Discount Notes of
$13.3 million, and the issuance of Environmental Improvement Revenue Bonds of
$19.9 million. The Company also currently has an unused $80.0 million Working
Capital Facility, of which approximately $69.0 million was available for
borrowing at December 29, 1996 as calculated under the borrowing base
calculation in the related agreement. The Working Capital Facility currently
expires in August, 1999. 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 $3.0
million, will reduce the borrowing base in 1997 by an equivalent amount. During
the fourth quarter of 1996 the Company entered into a lease agreement relating
to building space for its Alpha Tube subsidiary. This lease contains certain
guarantees to the lessor. For a discussion of these guarantees see Commitments
and Contingencies in the Notes to Consolidated Financial Statements. At December
29, 1996, the Company's ratio of debt to total capitalization was .54 to 1. The
Senior Secured and Senior Secured Discount Notes, the Term Loan, Environmental
Improvement Bonds and the Working Capital Facility were issued under respective
agreements containing certain limitations on transactions with affiliates
including: loans, advances, guarantees, capital contributions, the sale, lease
or purchase of any property or assets. Also, the respective agreements contain
restrictive covenants limiting 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 $199.1 million, $244.4 million and $56.3
million in 1996, 1995 and 1994, respectively. The majority of capital project
expenditures during 1996 and 1995 were for payments to the general and
sub-contractors, capitalized interest, and other internal capital expenditures
related to the construction of the Modernization and Expansion Project, totaling
$171.2 million in 1996, $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 $12.0 million in 1996 and $18.9 million in 1995 consisting of
services rendered during the respective years relating to the Modernization and
Expansion Project. While the Modernization and Expansion Project has been placed
in service, a limited amount of additional expenditures are expected before the
entire project is completed. 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
1996 were 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 $5.7 million from 1994 through 1996, exclusive of the
Modernization and Expansion Project. The Modernization and Expansion Project is
a turnkey lump sum contract of which approximately $9.8 million and $12.1
million, excluding capitalized interest, were capitalized during 1996 and 1995
to comply with environmental regulations.
During 1996 and 1995, Acme invested capital of $1.7 million and $1.8
million, respectively, 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 Modernization and Expansion Project. 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 joint venture began
limited operations in the fourth quarter of 1996. Full operations are expected
to be achieved by mid-1997.
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<PAGE> 25
The Company currently has sufficient cash and investments, when combined
with funds that will be generated from future operations and the availability of
an $80.0 million Working Capital Facility, to meet its working capital needs,
cash interest requirements and other capital investments.
The Company expects to spend approximately $35.0 million in 1999 related to
the relining and upgrading 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.
MODERNIZATION AND EXPANSION PROJECT
On October 3, 1996, the Company began the commissioning phase when it
announced the Modernization and Expansion Project produced a test coil through
its continuous thin slab caster. Mid-way through the fourth quarter of 1996, the
Company began commercial production at the new facility at which time
depreciation commenced and interest capitalization ceased. Also during 1996 the
Company incurred $9.9 million of training and pre-start-up costs and production
inefficiencies relating to the new facility of $4.7 million, all of which have
been charged to current operations. The Company is continuing its ramp-up of the
Modernization and Expansion Project and plans to reach full production
capability as quickly as possible, while decommissioning of redundant existing
facilities is expected to be complete by mid-year 1997.
OUTLOOK
Operating Costs
In 1997, the Company will continue its transition as it completes the
commissioning phase of the Modernization and Expansion Project as well as at its
joint venture steel processing facility. During this transition period the
Company will continue to experience production inefficiencies related to the
start-up of the new facility as well as additional costs of decommissioning the
redundant operations in the existing facilities. In the first half of 1997, the
Company expects to incur approximately $15 million of production inefficiencies,
assuming the ramp-up of the new facility as well as the decommissioning of
redundant operations are achieved in a manner consistent with the Company's
projections. When the Modernization and Expansion Project reaches full
production levels it is expected to reduce manufacturing costs by approximately
$70 per ton, increase shipping capability and broaden the range of products
while improving the range and quality of all its steel products and products it
furnishes to the Steel Fabricating Segment companies.
The Company expects 1997 earnings will be well below those recorded in
1996, with substantial operating losses in the first half of the year. The
earnings will be adversely impacted by production inefficiencies incurred
throughout the start-up of the Modernization and Expansion Project and the
decommissioning costs of the existing steel ingot and rolling mill operations.
Secondly, the effect of higher interest costs and increased depreciation expense
will further reduce the Company's results until the benefits of full operation
of the new facility are realized. Steel Fabricating Segment earnings are
expected to remain relatively steady.
Selling Prices
Beginning in the latter part of 1995 and continuing into 1997, the Company
has experienced substantial competitive pricing pressures resulting in lower
average selling prices in all of its Segments. These lower average selling
prices, along with the impact of the Modernization and Expansion Project
discussed above, are expected to reduce the Company's 1997 earnings.
Forward Looking Statements
Actual events might materially differ from those projected in the above
forward-looking statements. The timely and successful ramp-up of the
Modernization and Expansion Project and successful installation of computer
systems are important assumptions in the Company's projection of a fully
operational facility and the related earnings benefits. If there are substantial
unexpected production interruptions or other start-up difficulties; if the new
facility fails to achieve the production levels; if quality levels or
performance objectives represented and guaranteed by the equipment suppliers and
turnkey general contractor (although mitigated by
25
<PAGE> 26
liquidated damages of up to 30% of the contract) are not achieved, 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's products; costs for labor, energy, raw material,
supplies, pensions and active and retiree medical care; volume or units 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.
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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 24, 1997 under the caption Election of
Directors.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth, as of March 3, 1997, 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 (65).................. Chairman of the Company since April 15, 1996; Chairman
and Chief Executive Officer of the Company January 1,
1993 to April 15, 1996; Chairman, President and Chief
Executive Officer of the Company 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 (48)................... President and Chief Executive Officer of the Company
since April 15, 1996; President and Chief Operating
Officer of the Company January 1, 1993 to April 15,
1996; 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. Director of the Company since January
1, 1993.
James W. Hoekwater (50)................... 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 (39)..................... 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 (53)...................... 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.
Edward P. Weber, Jr. (59)................. 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 25, 1992.
</TABLE>
27
<PAGE> 28
<TABLE>
<S> <C>
Jerry F. Williams (57).................... 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 25, 1992.
</TABLE>
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 24, 1997 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 24, 1997 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 24, 1997 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
------- -----------
<C> <S> <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. Filed as Exhibit
3(i) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 (the "1995 10-K") and
incorporated by reference herein.
*3(ii) Amended and Restated By-Laws of the Registrant as adopted
February 27, 1997.
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 dated
August 8, 1994 and Form 8-A/A dated August 12, 1994 and
incorporated by reference herein.
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S> <C>
4.2 Indenture dated as of August 11, 1994 among the Registrant
and Guarantors and Shawmut Bank Connecticut, National
Association as trustee, relating to the 12 1/2% Senior
Secured Notes due 2002. Filed as Exhibit 4.2 to Amendment
No. 2 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 25, 1994 (Amendment No. 2 to the
"1994 10-K") and incorporated by reference herein.
4.3 Form of 12 1/2% Senior Secured Note due 2002 (included as
Exhibit A to Exhibit 4.2). Filed as Exhibit 4.3 to Amendment
No. 2 to the 1994 10-K and incorporated by reference herein.
4.4 Indenture dated as of August 11, 1994 among the Registrant
and Guarantors and Shawmut Bank, Connecticut, National
Association as trustee, relating to the 13 1/2% Senior
Secured Discount Notes due 2004. Filed as Exhibit 4.4 to
Amendment No. 2 to the 1994 10-K and incorporated by
reference herein.
4.5 Form of 13 1/2% Senior Secured Discount Note due 2004
(included as Exhibit A to Exhibit 4.4). Filed as Exhibit 4.5
to Amendment No. 2 to the 1994 10-K and incorporated by
reference herein.
4.6 Collateral Agency Agreement dated as of August 11, 1994
among the Registrant, Acme Steel Company ("Acme Steel"),
Acme Packaging Corporation ("Acme Packaging"), the Trustees,
the Term Loan Agent and the Collateral Agent. Filed as
Exhibit 4.6 to Amendment No. 2 to the 1994 10-K and
incorporated by reference herein.
4.7 Company Stock Pledge Agreement dated as of August 11, 1994
between the Registrant and the Collateral Agent. Filed as
Exhibit 4.7 to Amendment No. 2 to the 1994 10-K and
incorporated by reference herein.
4.8 Subsidiary Stock Pledge Agreement dated as of August 11,
1994 among Acme Steel, Acme Packaging and the Collateral
Agent. Filed as Exhibit 4.8 to Amendment No. 2 to the 1994
10-K and incorporated by reference herein.
4.9 Security Agreement dated as of August 11, 1994 between Acme
Steel and the Collateral Agent. Filed as Exhibit 4.9 to
Amendment No. 2 to the 1994 10-K and incorporated by
reference herein.
4.10 Mortgage dated as of August 11, 1994 from Acme Steel to the
Collateral Agent. Filed as Exhibit 4.10 to Amendment No. 2
to the 1994 10-K and incorporated by reference herein.
4.11 Intercreditor Agreement dated as of August 11, 1994 among
the Registrant, Acme Steel, Harris Trust and Savings Bank
and the Collateral Agent. Filed as Exhibit 4.11 to Amendment
No. 2 to the 1994 10-K and incorporated by reference herein.
4.12 Disbursement Agreement dated as of August 11, 1994 between
the Registrant and the Collateral Agent. Filed as Exhibit
4.12 to Amendment No. 2 to the 1994 10-K 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 and The
Interlake Corporation ("Interlake") dated May 30, 1986.
Filed as Exhibit 10.1 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 27, 1992 (the
"1992 Form 10-K") and incorporated by reference herein.
10.2 Cross-Indemnification Agreement between Acme Steel and
Interlake 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.
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S> <C>
10.4 First Amendment to the Credit Agreement dated as of May 21,
1995. Filed as Exhibit 10.4 to the 1995 10-K and
incorporated by reference herein.
10.5 Second Amendment to the Credit Agreement dated August, 1995.
Filed as Exhibit 10.5 to the 1995 10-K and incorporated by
reference herein.
*10.6 Third Amendment to the Credit Agreement dated April 5, 1996.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
10.11 Term Loan Agreement dated August 4, 1994 among the
Registrant, the Lenders and Lehman Commercial Paper Inc.
(the "Term Loan"). Filed as Exhibit 10.8 to Amendment No. 2
to the 1994 10-K and incorporated by reference herein.
10.12 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.
10.13 Form of Engineering, Procurement and Construction Contract
dated July 28, 1994 between Acme Steel and Raytheon
Engineers & Constructors, Inc. Filed as Exhibit 10.41 to
Amendment No. 3 to Form S-1 Registration Statement, No.
33-54101, and incorporated by reference herein.
10.14 Amendment 1 to Engineering, Procurement and Construction
Contract between Acme Steel 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.
10.15 Amendment 2 to Engineering, Procurement and Construction
Contract between Acme Steel 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.
10.16 Joint Development Program Agreement dated July 28, 1994
between Acme Steel and SMS Schloemann-Siemag, AG. Filed as
Exhibit 10.13 to the 1994 10-K and incorporated by reference
herein.
10.17 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.
10.18 Amendment to the Agreement between Registrant and Reynold C.
MacDonald dated June 1, 1995. Filed as Exhibit 10.17 to the
1995 10-K and incorporated by reference herein.
*10.19 Retainer Agreement between Registrant and Brian W. H.
Marsden dated March 1, 1997.
10.20 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 as reference herein.
10.21 Form of Indemnification Agreement for directors and certain
officers of the Registrant. Filed as Exhibit 10.20 to the
1995 10-K and incorporated as reference herein.
10.22 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>
30
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S> <C>
10.23 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.
10.24 Acme Metals Incorporated Deferred Compensation Plan as
Amended and Restated effective January 1, 1994 and adopted
November 21, 1994.(1) Filed as Exhibit 10.23 to the 1994
10-K and incorporated by reference herein.
*10.25 Key Executive Severance Pay Plan dated January 22, 1987, as
adopted May 25, 1992.(1) Filed as Exhibit 10.24 to the 1995
10-K and incorporated by reference herein. Exhibit 1 amended
through January 24, 1997.(1)
10.26 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.
*10.27 Acme Metals Incorporated Employee Stock Ownership Plan
Restated effective September 1, 1995.
*10.28 Acme Metals Incorporated Salaried Employees' Retirement
Savings Plan Restated effective September 1, 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.(1) Filed as Exhibit
10.30 to the 1995 10-K and incorporated by reference herein.
10.31 Appendix C to the Consolidated Pension Plan effective
December 31, 1993.(1) Filed as Exhibit 10.31 to the 1995
10-K and incorporated by reference herein.
10.32 First Amendment to the Consolidated Pension Plan dated
September 19, 1995.(1) Filed as Exhibit 10.32 to the 1995
10-K and incorporated by reference herein.
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.
*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 1996.
- -------------------------
* Filed herewith
(1) Filed pursuant to Item 14 of Form 10-K
31
<PAGE> 32
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> <C>
/s/ B. W. H. MARSDEN Chairman March 17, 1997
---------------------------------------------
Brian W. H. Marsden
/s/ S. D. BENNETT Director, President, and Chief March 17, 1997
--------------------------------------------- Executive Officer
Stephen D. Bennett
/s/ JERRY F. WILLIAMS Vice President-Finance and March 17, 1997
--------------------------------------------- Administration and Chief
Jerry F. Williams Financial Officer (Principal
Financial Officer)
/s/ GREGORY J. PRITZ Controller (Principal March 17, 1997
--------------------------------------------- Accounting Officer)
Gregory J. Pritz
</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> <C>
/s/ BUDDY W. DAVIS Director March 17, 1997
---------------------------------------------
Buddy W. Davis
/s/ EDWARD G. JORDAN Director March 17, 1997
---------------------------------------------
Edward G. Jordan
/s/ ANDREW R. LAIDLAW Director March 17, 1997
---------------------------------------------
Andrew R. Laidlaw
/s/ FRANK A. LEPAGE Director March 17, 1997
---------------------------------------------
Frank A. LePage
/s/ REYNOLD C. MACDONALD Director March 17, 1997
---------------------------------------------
Reynold C. MacDonald
/s/ ALLAN L. RAYFIELD Director March 17, 1997
---------------------------------------------
Allan L. Rayfield
/s/ WILLIAM P. SOVEY Director March 17, 1997
---------------------------------------------
William P. Sovey
/s/ L. FREDERICK SUTHERLAND Director March 17, 1997
---------------------------------------------
L. Frederick Sutherland
/s/ WILLIAM R. WILSON Director March 17, 1997
---------------------------------------------
William R. Wilson
</TABLE>
32
<PAGE> 33
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........................... 34
Report of Management........................................ 35
Consolidated Statements of Operations for the fiscal years
ended December 29, 1996, December 31, 1995 and December
25, 1994.................................................. 36
Consolidated Balance Sheets at December 29, 1996 and
December 31, 1995......................................... 37
Consolidated Statements of Cash Flows for the fiscal years
ended December 29, 1996, December 31, 1995 and December
25, 1994.................................................. 38
Consolidated Statements of Changes in Shareholders' Equity
for the fiscal years ended December 29, 1996, December 31,
1995 and December 25, 1994................................ 39
Notes to Consolidated Financial Statements.................. 40
</TABLE>
The following Consolidated Financial Statement Schedule of Acme Metals
Incorporated is included in Item 14(a)(2):
<TABLE>
<S> <C>
Quarterly Results (Unaudited)............................... 57
Schedule VIII -- Valuation and Qualifying Accounts and
Reserves.................................................. 58
</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.
33
<PAGE> 34
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 33 present fairly, in all material respects, the
financial position of Acme Metals Incorporated and its subsidiaries at December
29, 1996 and December 31, 1995 and the results of their operations and their
cash flows for each of the three years in the period ended December 29, 1996, 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 24, 1997
Chicago, Illinois
34
<PAGE> 35
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.
<TABLE>
<S> <C>
/s/ S. D. BENNETT /s/ J. F. WILLIAMS
- --------------------------------------------------- ---------------------------------------------------
Stephen D. Bennett Jerry F. Williams
President and Chief Executive Officer Vice President Finance and Administration and Chief
Financial Officer
</TABLE>
35
<PAGE> 36
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------------------------
DECEMBER 29, DECEMBER 31, DECEMBER 25,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................................. $498,242 $521,619 $522,880
COSTS AND EXPENSES:
Cost of products sold............................... 431,957 424,158 431,615
Depreciation expense................................ 15,820 13,013 14,977
-------- -------- --------
Gross profit.......................................... 50,465 84,448 76,288
Selling and administrative expense.................. 35,496 35,636 33,249
Training and Pre-Start-up -- Modernization and
Expansion Project................................ 9,933
Nonrecurring charge................................. 9,459
-------- -------- --------
Operating income...................................... 5,036 48,812 33,580
NON-OPERATING INCOME (EXPENSE):
Interest expense.................................... (6,193) (20,801) (14,031)
Interest income..................................... 5,620 14,278 7,712
Other -- net........................................ 630 1,846 1,432
-------- -------- --------
Income before income taxes and extraordinary item..... 5,093 44,135 28,693
Income tax provision.................................. 2,426 15,889 9,935
-------- -------- --------
2,667 28,246 18,758
Extraordinary item (expense), net of tax.............. (1,787)
-------- -------- --------
Net income............................................ $ 2,667 $ 28,246 $ 16,971
======== ======== ========
PER SHARE:
Income before extraordinary item.................... $ 0.23 $ 2.44 $ 2.38
Extraordinary item (expense), net of tax............ (0.22)
-------- -------- --------
Net income............................................ $ 0.23 $ 2.44 $ 2.16
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this Consolidated Financial
Statement.
36
<PAGE> 37
ACME METALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 33,224 $ 53,043
Short-term investments.................................... 11,817 83,756
Receivables, less allowances of $1,320 in 1996 and $1,335
in 1995................................................ 52,502 55,344
Inventories............................................... 68,884 51,932
Deferred income taxes..................................... 14,957 12,857
Other current assets...................................... 1,453 1,855
--------- ---------
Total current assets................................. 182,837 258,787
--------- ---------
INVESTMENTS AND OTHER ASSETS:
Investments in associated companies....................... 17,862 16,112
Restricted cash and investments........................... 50,305
Other assets.............................................. 19,028 19,309
Deferred income taxes..................................... 25,297 31,052
--------- ---------
Total investments and other assets................... 62,187 116,778
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost.................... 841,034 372,959
Construction in progress.................................. 6,319 279,799
Accumulated depreciation.................................. (286,628) (273,580)
--------- ---------
Total property, plant and equipment.................. 560,725 379,178
--------- ---------
$ 805,749 $ 754,743
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 73,796 $ 62,355
Accrued expenses.......................................... 39,966 41,192
Income taxes payable...................................... 2,178 4,783
--------- ---------
Total current liabilities............................ 115,940 108,330
--------- ---------
LONG-TERM LIABILITIES:
Long-term debt............................................ 310,085 276,831
Other long-term liabilities............................... 13,026 10,143
Postretirement benefits other than pensions............... 93,247 86,856
Retirement benefit plans.................................. 12,750 24,472
--------- ---------
Total long-term liabilities.......................... 429,108 398,302
--------- ---------
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, 11,610,723 and 11,579,768
shares issued in 1996 and 1995, respectively.............. 11,611 11,580
Additional paid-in capital................................ 165,342 164,987
Retained earnings......................................... 98,632 95,965
Minimum pension liability adjustment...................... (14,884) (24,421)
--------- ---------
Total shareholders' equity........................... 260,701 248,111
--------- ---------
$ 805,749 $ 754,743
========= =========
</TABLE>
The accompanying notes are an integral part of this Consolidated Financial
Statement.
37
<PAGE> 38
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------------
DECEMBER 29, DECEMBER 31, DECEMBER 25,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 2,667 $ 28,246 $ 16,971
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation....................................... 16,591 13,613 15,514
Accretion of senior discount notes................. 13,324 11,776 4,055
Deferred income taxes.............................. (2,073) (7,100) (2,893)
Nonrecurring charge................................ 9,459
Investments in associated companies................ (1,750) (1,754) 334
Pension contribution............................... (1,988) (13,951)
CHANGE IN CURRENT ASSETS AND LIABILITIES:
Receivables...................................... 2,842 5,534 (2,399)
Inventories...................................... (16,952) (6,950) 2,885
Accounts payable................................. 18,345 6,761 3,932
Other current accounts........................... (3,429) 1,066 6,591
Other, net......................................... 14,719 8,583 6,924
--------- --------- -----------
Net cash provided by operating activities............. 44,284 57,787 47,422
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments.............................. (26,929) (459,749) (1,310,998)
Sales and/or maturities of investments................ 149,173 603,469 1,033,213
Capital expenditures.................................. (27,909) (27,664) (11,677)
Capital expenditures -- Modernization and Expansion
Project............................................ (178,147) (197,849) (44,662)
--------- --------- -----------
Net cash used for investing activities................ (83,812) (81,793) (334,124)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt............................. (50,000)
Issuance of equity, net of costs...................... 119,262
Issuance of long-term debt............................ 19,873 255,000
Debt issuance costs................................... (550) (14,253)
Exercise of stock options and other................... 386 410 2,888
--------- --------- -----------
Net cash provided by financing activities............. 19,709 410 312,897
--------- --------- -----------
Net (decrease) increase in cash and cash
equivalents........................................ (19,819) (23,596) 26,195
Cash and cash equivalents at beginning of period...... 53,043 76,639 50,444
--------- --------- -----------
Cash and cash equivalents at end of period............ $ 33,224 $ 53,043 $ 76,639
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of this Consolidated Financial
Statement.
38
<PAGE> 39
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL MINIMUM
COMMON STOCK, PAID-IN RETAINED PENSION
$1 PAR VALUE CAPITAL EARNINGS LIABILITY
------------- ---------- -------- ---------
<S> <C> <C> <C> <C>
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)
------- -------- ------- --------
Net income.................................. 2,667
Stock plans -- issuance of shares........... 31 325
Tax benefit arising from stock plan
transactions............................. 30
Minimum pension liability................... 9,537
------- -------- ------- --------
BALANCE -- DECEMBER 29, 1996.................. $11,611 $165,342 $98,632 $(14,884)
======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of this Consolidated Financial
Statement.
39
<PAGE> 40
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 1996 and 1994.
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 Modernization and Expansion
Project 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. No restricted cash and investments were held at
December 29, 1996.
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 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.
40
<PAGE> 41
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
Construction in Progress
Construction in progress includes all costs related to capital projects
which were not completed at the end of the reporting period. At December 31,
1995, construction in progress included costs associated with the construction
of the Company's continuous thin slab caster/hot strip mill complex at its
Riverdale, Illinois steel making facility, including capitalized interest. The
Modernization and Expansion Project was placed in service in mid November 1996,
at which time the complex was transferred to property, plant and equipment and
depreciation commenced.
Training and Pre-Start-up -- Modernization and Expansion Project
Midway through the 4th quarter of 1996, the Company's Modernization and
Expansion Project was completed and placed in service. Up until this time, all
training and ramp-up related costs were expensed as incurred within the
Consolidated Statements of Operations as "Training and Pre-Start-up --
Modernization and Expansion Project." Subsequent to the placed-in-service-date
and the commencement of depreciation, production inefficiencies were incurred as
the ramp-up of operations continued. These cumulative production inefficiencies
were expensed as incurred and classified within "cost of products sold."
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 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.
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.
Forward Exchange Contracts
The Company uses forward exchange contracts to reduce some of the
uncertainty related to currency impacts associated with its iron ore purchases
from its mining joint venture in Canada. The use of forward exchange contracts
is limited to a level of purchase activity that is reasonably expected to occur,
with realized gains and losses recognized in earnings at the maturity of the
contract. Contracts generally mature on a periodic basis over a period not to
exceed 12 months. As of December 29, 1996 the Company had forward exchange
contracts to purchase Canadian dollars over the next 12 months.
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; 11,632,551 in
1996, 11,595,886 in 1995 and 7,872,642 in 1994.
41
<PAGE> 42
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. As a result of the decision to commence with the
Modernization and Expansion 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 Modernization and Expansion Project ($2.3 million).
INVENTORIES:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Raw materials.............................................. $15,642 $ 8,397
Semi-finished and finished products........................ 46,493 36,339
Supplies................................................... 6,749 7,196
------- -------
$68,884 $51,932
======= =======
</TABLE>
On December 29, 1996 and December 31, 1995, inventories valued on the LIFO
method were less than the current costs of such inventories by $57.6 million and
$58.2 million, respectively.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land................................................... $ 4,250 $ 3,770
Buildings.............................................. 106,334 41,365
Equipment.............................................. 730,450 327,824
Construction in progress, Modernization and Expansion
Project.............................................. 261,372
Construction in progress, other........................ 6,319 18,427
--------- ---------
847,353 652,758
Less accumulated depreciation.......................... (286,628) (273,580)
--------- ---------
$ 560,725 $ 379,178
========= =========
</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.
Capitalized expenditures related to the Modernization and Expansion Project
totaled $432.6 million at December 29, 1996, including $48.0 million of
capitalized interest. The Modernization and Expansion Project was placed in
service in mid November 1996, at which time depreciation commenced at a rate of
approximately $2.0 million per month. While the Modernization and Expansion
Project has been placed in service, a limited amount of additional expenditures
are expected before the entire project is completed.
42
<PAGE> 43
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Accounts payable at December 29, 1996 includes an accrual of $12.0 million
for services rendered in 1996 in relation to the Modernization and Expansion
Project which due to its non-cash nature has been excluded from the Statement of
Cash Flows. At December 31, 1995, accounts payable included a similar accrual of
$18.9 million which was liquidated in early 1996.
Construction in progress, other, at December 29, 1996, consists largely of
expenditures to upgrade the Company's management information system. At December
31, 1995, construction in progress, other, included major replacement projects
as well as expenditures to upgrade the Company's management information system.
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 the ESOP are based upon 7.5
and 3.5 percent, respectively, of eligible compensation. Amounts charged to
operations under these plans were $3.7 million in 1996 and $3.5 million each in
1995 and 1994.
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>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................. $ 2,830 $ 2,492 $ 2,605
Interest cost on projected benefit
obligation................................. 15,489 15,924 14,700
Actual (return) loss on plan assets.......... (26,232) (34,304) 1,558
Net amortization and deferral................ 11,161 18,120 (17,371)
-------- -------- --------
Net pension cost............................. $ 3,248 $ 2,232 $ 1,492
======== ======== ========
</TABLE>
Actuarial assumptions used for the Company's pension plan valuations were
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate:
For defined benefit pension costs.................. 7.5% 8.5% 7.5%
For projected benefit obligation................... 7.75% 7.5% 8.5%
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>
43
<PAGE> 44
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>
1996 1995
----------- -----------
UNDERFUNDED UNDERFUNDED
PLANS PLANS
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $186,489 in 1996 and $184,633 in 1995............... $ 207,817 $ 209,785
Effect of increase in compensation levels................. 3,564 3,654
--------- ---------
Projected benefit obligation for service rendered to
date................................................... 211,381 213,439
Plan assets at fair value, primarily common stock of
publicly traded companies and U.S. government bonds and
notes..................................................... (195,042) (185,313)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions........ (36,058) (52,234)
Prior service cost not yet recognized in net periodic
pension cost.............................................. (4,232) (4,805)
Unrecognized net asset at December 30, 1985 being recognized
over 15 years............................................. 7,702 9,629
Minimum pension liability adjustment........................ 28,999 43,756
--------- ---------
Accrued pension cost........................................ $ 12,750 $ 24,472
========= =========
</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. This liability is offset by an intangible
asset in the amounts of $4.2 million and $4.7 million for the years ended
December 29, 1996 and December 31, 1995, respectively, included in the
Consolidated Balance Sheets caption Other assets, with the remainder reflected
as a net-of-tax reduction of equity.
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 1996, 1995 and 1994, net
of retiree contributions of approximately 10 percent of costs, included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the
period.................................................... $ 2,230 $1,696 $1,685
Interest cost on accumulated postretirement benefit
obligation................................................ 8,248 8,131 7,203
Net amortization and deferral............................... 679 (144) 239
------- ------ ------
Net periodic postretirement benefit cost.................... $11,157 $9,683 $9,127
======= ====== ======
</TABLE>
44
<PAGE> 45
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the plans' combined unfunded status at
December 29, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................... $ 63,710 $ 67,052
Fully eligible active plan participants................ 26,180 19,457
Other active plan participants......................... 24,141 30,623
-------- --------
114,031 117,132
Unrecognized net (loss) and prior service cost........... (14,646) (23,678)
-------- --------
Accrued postretirement benefit cost...................... $ 99,385 $ 93,454
======== ========
</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 $13.1 million and the net periodic postretirement benefit cost by
approximately $1.4 million. The obligation for postretirement benefits as of
December 29, 1996 was determined using a 7.75 percent discount rate, as compared
to the 7.5 percent discount rate used at December 31, 1995.
The increase in the discount rate resulted in a decrease in the obligation
of approximately $3.1 million, which was more than offset by 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 revalued
obligation at the end of fiscal 1996 did not have any impact on the expense
recorded for 1996.
ACCRUED EXPENSES:
Included in the Consolidated Balance Sheets caption Accrued expenses are
the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Accrued salaries and wages................................. $13,941 $13,310
Accrued postretirement benefits other than pensions........ 6,138 6,598
Accrued taxes other than income taxes...................... 5,834 5,587
Accrued interest........................................... 7,357 7,205
Other current liabilities.................................. 6,696 8,492
------- -------
$39,966 $41,192
======= =======
</TABLE>
INVESTMENTS IN ASSOCIATED COMPANIES:
The Company has a 39.9 percent equity interest in a member of (15.1 percent
participation) an iron ore mining venture with a carrying value of $14.3 million
at December 29, 1996 and December 31, 1995. In 1996, 1995 and 1994, the Company
made iron ore purchases of $23.8 million, $21.8 million, and $20.7 million,
respectively, from the venture. At December 29, 1996, $4.0 million was owed to
the venture for iron ore purchases; amounts owed to the venture for such ore
purchases were $5.2 million at December 31, 1995.
45
<PAGE> 46
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
During 1996 and 1995, the Company invested capital of $1.7 million and $1.8
million, in a joint venture which will perform processing of certain of the
Company's steel products. The Company has invested 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. The joint venture began limited
operations during the fourth quarter of 1996. Full operations are expected to be
achieved by mid-1997.
INCOME TAXES:
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Taxes on income:
Current:
Federal.................................... $ 4,018 $18,510 $10,108
State...................................... 481 4,479 2,720
------- ------- -------
4,499 22,989 12,828
Deferred...................................... (2,073) (7,100) (2,893)
------- ------- -------
$ 2,426 $15,889 $ 9,935
======= ======= =======
</TABLE>
The effective income tax rates for 1996, 1995 and 1994 are reconciled to
the Federal statutory tax rate in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate...................... 35.0% 35.0% 35.0%
Change in tax rate due to:
Federal audit adjustment............................. -- 2.5 --
State taxes -- net of Federal tax effect............. 9.6 5.0 5.3
Municipal bond interest.............................. (1.0) (7.8) (4.8)
Rate change impact on net deferred tax asset......... -- -- (1.4)
Disallowed meals and entertainment................... 1.9 0.2 1.0
Employee life insurance premiums..................... 2.0 0.2 0.8
Other -- net......................................... 0.1 0.9 (1.3)
---- ---- ----
47.6% 36.0% 34.6%
==== ==== ====
</TABLE>
46
<PAGE> 47
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
at December 29, 1996 and December 31, 1995 are summarized below:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES
Property, plant and equipment.............................. $28,077 $16,839
Other assets............................................... 432
------- -------
Gross deferred tax liabilities........................... 28,509 16,839
------- -------
DEFERRED TAX ASSETS
Postretirement benefits other than pensions................ 38,442 37,080
Pensions................................................... 3,752 6,523
Other employee benefits.................................... 3,176 4,519
Inventories................................................ 5,224 4,188
Interest expense........................................... 11,249 6,135
Other liabilities.......................................... 2,832 2,303
Alternative minimum tax credits............................ 4,088
------- -------
Gross deferred tax assets................................ 68,763 60,748
------- -------
Net deferred tax asset................................ $40,254 $43,909
======= =======
</TABLE>
In 1996 and 1995, the change in the deferred tax asset primarily represents
the effect of changes in the amounts of temporary differences from the prior
year. Significant changes in such temporary differences related to (i) the use
of accelerated depreciation methods in relation to the Modernization and
Expansion Project resulting in a larger deferred tax liability, (ii) a reduction
in the deferred tax asset for pensions associated with a lower minimum liability
adjustment and (iii) an increase in the deferred tax asset for interest related
to the inability to deduct interest on the Company's Senior Secured Discount
Notes until paid.
The Company's federal tax liability is the greater of its regular tax or
alternative minimum tax. At December 31, 1996, the Company had $4.1 million in
alternative minimum tax credits to be carried forward.
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 $6.3 million, $20.3 million and $12.3 million during 1996, 1995
and 1994, respectively.
47
<PAGE> 48
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT:
The Company's long-term debt at December 29, 1996 and December 31, 1995 is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Senior Secured Notes, 12.5%, due 2002.................... $125,000 $125,000
Senior Secured Discount Notes, 13.5%, due 2004........... 109,155 95,831
Term loan, three month LIBOR plus 400 basis points (9.5%
at December 29, 1996), due 1998-2001................... 50,000 50,000
Note payable, 6.5% to 6.75%, due 1998-2008............... 6,000 6,000
Environmental Improvement Bonds, 7.95%, due 2025......... 11,345
Environmental Improvement Bonds, 7.90%, due 2024......... 8,585
-------- --------
$310,085 $276,831
======== ========
</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 the financing of the Modernization
and Expansion 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. The Company amortized deferred debt issuance costs of
$1.9 million in 1996 and 1995, and $0.7 million in 1994, a portion of which has
been capitalized in property, plant and equipment related to the Modernization
and Expansion Project.
Coincident with the issuance of the 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 in 1994.
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 equivalent to or in excess of par, together with
accrued and unpaid interest to the redemption date.
Senior Secured Discount Notes
The Senior Secured Discount Notes which provided gross proceeds of $80
million and mature in 2004, yield 13.5 percent and accrete to an aggregate
principal amount of $117.9 million on August 1, 1997. During 1996, the
Senior Secured Discount Notes accreted $13.4 million to a value of $109.2
million at December 29, 1996. 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 equivalent to or in excess of
par, 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 29, 1996, the interest rate in effect was 9.5
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
48
<PAGE> 49
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
November 2, 1997. The cost of this interest rate cap of $0.5 million is
being amortized over its effective period as an adjustment to interest
expense.
Note Payable
The Note payable of $6.0 million was an obligation assumed by the
Company on May 29, 1986 as a result of the reorganization of The Interlake
Corporation. The assumed debt was incurred in connection with the financing
of certain facilities which were retained by the Company in the spin-off.
(See General description of business under Item 1. on page 3 hereof.) The
Note payable bears an interest rate of 6.50 percent to 6.75 percent and
principal payments are due in varying installments from 1998-2008.
Environmental Improvement Bonds
The Environmental Improvement Bonds were issued in April and September
of 1996, with the Company receiving gross proceeds of $11.3 million and
$8.6 million at interest rates of 7.95 percent and 7.90 percent,
respectively. The gross proceeds of the notes were reduced by debt issuance
costs of $0.6 million which are being amortized over the lives of the
respective notes. The notes are due April 1, 2025 and 2024, respectively.
The Environmental Improvement Bonds may be redeemed at the option of the
Company in whole or in part, on or after April 1, 2006, at fixed redemption
prices equivalent to or in excess of par, together with accrued and unpaid
interest to the redemption date.
Working Capital Facility
The Company has a Working Capital Facility agreement with a group of
banks which provides aggregate commitments of $80.0 million secured by the
inventories and accounts receivable of the Company's subsidiaries of which
approximately $69.0 million is available for borrowing at December 29, 1996
as calculated under the borrowing base calculation. The Working Capital
Facility expires August 1999. The Working Capital Facility contains certain
covenants which require the Company to maintain compliance with
specifically defined financial ratios. No amounts were outstanding under
the credit agreement during 1996 and 1995. 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.
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 26, 2001 are $4.3
million in 1998, $15.2 million in 1999, $16.5 million in 2000 and $15.3 million
in 2001. Cash flows from operating activities were reduced by cash paid for
interest on debt of $21.8 million in 1996, $21.6 million in 1995 and $5.3
million in 1994.
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.
49
<PAGE> 50
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, Environmental Improvement Bonds 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
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
Environmental Improvement Bonds present value computation uses a discount rate
equal to the 30 year U.S. Treasury Bond rate at the end of the reporting period
plus or minus the spread between the U.S. Treasury Bond rate and the rate
negotiated at the inception of the loans.
Forward Exchange Contracts
As of December 29, 1996, the Company had entered into forward exchange
contracts with a domestic investment bank to purchase Canadian dollars at agreed
upon rates. The Canadian dollars are to be used to satisfy purchase obligations
from the Company's iron ore mining joint venture in Canada. The total notional
value of these contacts at December 29, 1996, which approximates fair value, was
$16.1 million.
The following table presents information on the Company's financial
instruments:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and Cash Equivalents....................... $ 33,224 $ 33,224 $ 53,043 $ 53,000
Short-term Investments.......................... 11,817 11,817 83,756 84,100
Restricted Cash and Investments................. -- -- 50,305 50,300
Long-term debt
- Senior Secured Notes........................ 125,000 135,312 125,000 127,500
- Senior Secured Discount Notes............... 109,155 112,429 95,831 99,100
- Term Loan................................... 50,000 50,000 50,000 50,000
- Notes Payable............................... 6,000 4,958 6,000 4,900
- Environmental Improvement Bonds............. 19,930 20,389 -- --
</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.
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.
50
<PAGE> 51
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STOCK COMPENSATION PLANS:
The Company has a Fixed Stock Incentive Program which, among other
benefits, allows for the granting of stock options and stock awards to its
officers and key employees.
The Company has a 1986 and a 1994 Stock Incentive Program which reserved
shares of common stock for issuance to officers and employees of the Company and
its subsidiaries. Both Programs provide for the issuance of stock options; stock
appreciation rights, stock awards and restricted stock to officers and employees
of the Company and its subsidiaries; since inception of the Programs, only stock
options and stock awards have been granted. The 1986 Stock Incentive Program,
which reserved 1,080,000 shares for issuance granted 805,700 stock shares and
249,925 stock awards which were frozen in 1994. Some of the stock options and
stock awards granted under this Program prior to April 1994 are still
outstanding. No stock options or stock awards have been granted from this
Program since April 1994. The 1994 Stock Incentive Program provided for the
reservation of 550,000 shares for issuance; to date, 297,000 stock options and
42,700 stock awards have been granted under this Program in the form of stock
options and awards.
Under both plans, the exercise price of stock options is fixed and equals
the market value of the stock on the date of grant. Vesting occurs in two equal
installments on the first and second anniversaries of the date of grant. Stock
options expire ten years after the date of grant.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
and continues to utilize APB No. 25 and its interpretations to account for stock
compensation plans. Accordingly, no compensation cost has been recognized for
the fixed stock options granted under its Fixed Stock Incentive Program. Had
compensation cost for options granted under the program been determined based on
the fair value at the grant date for awards in 1996 and 1995 consistent with the
provisions of SFAS No. 123, the Company's net income and net income per share
would have been reduced to the pro-forma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Net income as reported...................................... $2,667 $28,246
Net income -- pro-forma..................................... $2,040 $27,758
Net income per share -- as reported......................... $ 0.23 $ 2.44
Net income per share -- pro-forma........................... $ 0.18 $ 2.39
</TABLE>
The fair value of options at the date of grant were estimated using the
Black Scholes Model with the following weighted average assumptions used for
option grants in each year:
<TABLE>
<S> <C> <C>
Expected life of options.................................... 7 years
Risk-free interest rate..................................... 6.00%
Expected stock price volatility............................. 37.6%
Expected dividend yield..................................... --
Forfeiture rate............................................. 11%
</TABLE>
The assumption regarding the vesting of stock options relating to
executive's compensation in 1996 and 1995 is calculated on a pro-rata basis
determined by specific issuance dates. Options granted during the years 1996,
1995, 1994 and 1993 were considered in the appropriate period, using a two-year
vesting schedule.
51
<PAGE> 52
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Option groups outstanding and option life information at December 29, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$13.65 to $14.50.......................... 172,800 5.9 years $14.04 172,800 $14.04
$16.625 to $17.875........................ 313,200 6.8 years $17.12 172,700 $17.34
$18.75 to $24.25.......................... 199,150 6.3 years $22.37 183,150 $22.68
------- -------
685,150 528,650
------- -------
</TABLE>
Information regarding stock options outstanding and changes in option
activity for the three years ended December 29, 1996 is summarized below:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTION EXERCISE OPTION EXERCISE OPTION EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Stock options outstanding at
beginning of year.................. 606,950 $17.71 520,700 $17.79 608,350 $16.54
Options granted...................... 105,000 $16.90 108,500 $17.28 83,500 $23.88
Options exercised.................... (22,150) $ 8.37 (7,600) $14.18 (165,400) $16.16
Options canceled..................... (4,650) $21.32 (14,650) $19.40 (5,750) $20.98
------- ------ ------- ------ -------- ------
Stock options outstanding at end of
year............................... 685,150 $17.86 606,950 $17.71 520,700 $17.79
------- ------ ------- ------ -------- ------
Options exercisable at end of year... 528,650 $18.11 466,450 $17.31 394,450 $16.87
------- ------ ------- ------ -------- ------
Weighted-average fair value of
options granted during the year.... $ 8.52 $ 8.84 $ 12.24
------- ------- --------
</TABLE>
Compensation cost related to stock awards was $0.2 million in both 1996 and
1995. Stock awards granted in 1996 totaled 20,000 shares at a value of $17.25.
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. The compensation expense for the value of stock awards
granted is generally recognized ratably over the vesting period of 5 years
except in the case of 4,200 awards granted in 1995 for which the compensation
expense for the value of the stock awards is recognized ratably over a vesting
period of 3 years.
SHAREHOLDER RIGHTS PLAN:
On July 15, 1994, the Company adopted a shareholders' rights plan ("Rights
Plan") to protect shareholders against unsolicited attempts to acquire control
of the Company that do not offer what the Company believes to be an adequate
price to all shareholders. Preferred Share Purchase Rights ("Rights") were
issued to holders of record of the Company's Common Stock on August 5, 1994 and
will expire on August 5, 2004.
The Rights Plan provides for the issuance of one Right for each outstanding
share of the Company's Common Stock on and after August 5, 1994 until
expiration. The Rights will become exercisable after the tenth day following the
earlier to occur of (i) the date on which public disclosure is made that a
person or affiliated persons is the beneficial owner of 15% or more of the
Company's Common Stock or (ii) the commencement or disclosure of intention to
commence a tender or exchange offer by a person or affiliated persons which
could result in the acquisition by such person or persons of 30% or more of the
Company's
52
<PAGE> 53
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Common Stock. Each Right entitles the holder to purchase from the Company one
one-hundredth of a share of the Company's Series A Preferred Share Stock at an
exercise price of $80 per one one-hundredth of a share. The purchase price is
subject to adjustment, to prevent dilution, in the event of certain
merger/business combination situations involving the Company and in the event of
other circumstances more specifically described in the Rights Agreement dated as
of July 15, 1994 between the Company and First Chicago Trust Company of New
York, which was filed in its entirety as Exhibit 1 to the Company's Form 8-A
dated August 8, 1994 and to the Company's Form 8-A/A dated August 12, 1994.
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 1996, the Company
obtained approximately 41 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 facilities located in Riverdale, Illinois.
Based on the turnkey contract without taking into account financing costs,
internally generated costs directly related to the Modernization and Expansion
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 has long term operating lease commitments, principally for
building space for its Alpha Tube subsidiary and for various computer hardware
and software. A current lease agreement relating to building space for the Alpha
Tube subsidiary contains provisions for the Company to guarantee the lessor a
recovery of a fixed percentage of its interest in the property upon termination
of the lease. In the event the Company does not maintain compliance with
financial covenants which are consistent with those of the Working Capital
Facility the Company could be required to purchase the lessors' interest in the
property. See financial statement note entitled Long-term Debt and Revolving
Credit Agreement for a description of financial covenants. Lease terms cover
periods from 3 to 6 years. Rental expense under operating lease agreements
amounted to $1.4 million in 1996, $1.2 million in 1995, and $1.0 million in
1994. The approximate minimum rental commitments under noncancelable leases at
December 29, 1996 are as follows: 1997 $2.7 million, 1998 $2.7 million, 1999
$2.7 million, 2000 $1.0 million and 2001 $1.2 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 Environmental Protection Agency, for
example, is currently evaluating changes to the National Air Quality Standards
for particulate matter and ozone.
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,
53
<PAGE> 54
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, 1996 and 1995, the
Company had recorded reserves of approximately $0.2 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 Interlake on May 29, 1986, Acme
entered into certain indemnification agreements with Interlake. Pursuant to the
terms of the indemnification agreements, Interlake undertook to defend,
indemnify and hold Acme harmless from any claims, as defined, relating to Acme
operations or predecessor operations occurring before May 29, 1986, the
inception of Acme. 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'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
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 entered into a
Tax Indemnification Agreement ("TIA") which generally provides for Interlake to
indemnify Acme 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 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 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.
54
<PAGE> 55
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Steel making operations include the manufacture of sheet, strip and
semi-finished 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 Company, 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.
55
<PAGE> 56
SEGMENT INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net Sales:
Steel Making
Sales to unaffiliated customers..................... $ 222,642 $ 234,903 $ 231,225
Intersegment sales.................................. 112,700 121,929 118,195
--------- --------- ---------
335,342 356,832 349,420
Steel Fabricating
Sales to unaffiliated customers..................... 275,600 286,716 291,655
Intersegment sales.................................. 1,553 1,703 1,806
--------- --------- ---------
277,153 288,419 293,461
Eliminations........................................ (114,253) (123,632) (120,001)
--------- --------- ---------
Total............................................. $ 498,242 $ 521,619 $ 522,880
========= ========= =========
Income from Operations:
Steel Making........................................ $ (14,921) $ 28,461 $ 14,536(1)
Steel Fabricating................................... 19,957 20,351 19,044
--------- --------- ---------
Total............................................. $ 5,036 $ 48,812 $ 33,580
========= ========= =========
Identifiable Assets:
Steel Making........................................... $ 660,672 $ 495,338 $ 248,876
Steel Fabricating...................................... 107,652 115,332 105,699
Corporate.............................................. 37,425 144,073 327,755
--------- --------- ---------
Total............................................. $ 805,749 $ 754,743 $ 682,330
========= ========= =========
Depreciation:
Steel Making........................................... $ 12,572 $ 9,749 $ 11,753
Steel Fabricating...................................... 3,696 3,747 3,696
Corporate.............................................. 323 117 65
--------- --------- ---------
Total............................................. $ 16,591 $ 13,613 $ 15,514
========= ========= =========
Capital Expenditures:
Steel Making........................................... $ 195,297 $ 238,177 $ 53,205
Steel Fabricating...................................... 3,778 6,078 3,076
Corporate.............................................. 47 119 58
--------- --------- ---------
Total............................................. $ 199,122 $ 244,374 $ 56,339
========= ========= =========
Flat-rolled Steel Shipments (in tons).................... 611,882 619,052 675,430
========= ========= =========
</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.
56
<PAGE> 57
QUARTERLY RESULTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Net Sales..................................... $125,865 $127,268 $125,174 $119,935
Gross profit.................................. 14,445 14,257 16,345 5,418
Net income (loss)............................. 3,436 3,190 2,859 (6,818)
Net income (loss) per share................... $ 0.30 $ 0.27 $ 0.25 $ (0.59)
- ------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------
</TABLE>
The first quarter of 1995 includes a $1.6 million gain on the sale of the
Company's interest in Virginia coal 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.
57
<PAGE> 58
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
FISCAL YEAR OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful accounts
receivable...................... $1,335 $144 $ 12(a) $(171)(b) $1,320
====== ==== ==== ===== ======
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
====== ==== ==== ===== ======
</TABLE>
- -------------------------
(a) Consists principally of recoveries of accounts charged off in prior years.
(b) Uncollectible accounts charged off.
58
<PAGE> 59
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
24, 1997 appearing on page 34 in this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Chicago, Illinois
March 17, 1997
<PAGE> 1
ACME METALS INCORPORATED
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
AMENDED AND RESTATED
BY-LAWS
AS ADOPTED EFFECTIVE FEBRUARY 27, 1997
ARTICLE I
OFFICES
SECTION 1. GENERAL OFFICE The general office of the Corporation
shall be located in such place, within or without the State of Delaware, as the
Board of Directors shall, from time to time, determine or the business of the
Corporation may require.
SECTION 2. OTHER OFFICES The Corporation may also have offices at
such places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS All meetings of the stockholders for
the election of directors and for any other purposes shall be held at the
general office of the Corporation or at such other place either within or
without the State of Delaware as may be authorized by the Board of Directors
and stated in the notice of the meeting.
SECTION 2. ANNUAL MEETING An annual meeting of the stockholders of
the Corporation shall be held on the fourth Thursday of April of each year if
not a legal holiday, and, if a legal holiday, then on the next secular day
following, at 10 o'clock A.M., or on such other date and at such other time as
shall be fixed by the Board of Directors, when they shall elect the directors
nominated for election by a plurality vote and transact such other business as
may properly come before the meeting.
SECTION 3. SPECIAL MEETINGS Special meetings of the stockholders,
for any purpose or purposes prescribed in the notice of the meeting, may be
called only by the Board of Directors or the Chairman of the Board or the
President and shall be held at such place, on such date, and at such time as
they or he shall fix.
SECTION 4. NOTICE Written notice of every meeting of stockholders,
stating the place, date, and hour where it is to be held, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered either personally or by mail, postage prepaid, by or at the
direction of the Chairman of the Board, the President or the Secretary, to each
stockholder of
<PAGE> 2
the Corporation entitled to vote at such meeting not less than ten, nor more
than sixty, days before the date fixed for such meeting, except as otherwise
provided herein or required by law (meaning herein, as required from time to
time by the General Corporation Law of the State of Delaware from time to time
in effect or the Certificate of Incorporation or other certificate filed
pursuant to law). If mailed such notice shall be deemed to have been given
when deposited in the United States mail, with postage prepaid, addressed to
each stockholder at his address as it appears on the books of the Corporation.
When a meeting is adjourned to another place, date, or time, written notice
need not be given of the adjourned meeting if the place, date, and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 5. VOTING LISTS The officer or agent having charge of the
stock ledger of the Corporation shall make at least ten days before each
meeting of stockholders a complete list of the stockholders entitled to vote at
such meeting or any adjournment thereof, arranged in alphabetical order with
the address of and the number of shares registered in the name of each, which
list shall be open to the examination of any such stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten days prior to the meeting, either at a place where the meeting is to be
held, which place shall be specified in the notice of meeting, or if not so
specified, at the place where the meeting is to be held. The stock list shall
also be kept at the place of the meeting during the whole time thereof and
shall be open to the examination of any such stockholder who is present. This
list shall presumptively determine the identity of the stockholders who are
entitled to examine the stock list, vote at the meeting in person or by proxy,
and the number of shares held by each of them.
SECTION 6. QUORUM At all meetings of stockholders, in order to
constitute a quorum for the transaction of business, there shall be present in
person or represented by proxy holders of record of a majority of the shares of
the class or classes of the capital stock of the Corporation entitled to vote
at such meeting, except that as to any action to be taken by stockholders
voting separately as a class or classes, the holders of a majority of the
shares entitled to vote separately as one class shall constitute a quorum of
that class and may act separately with respect to such action whether or not a
quorum of another class or classes be present, unless a larger number may be
required by law. At any meeting of stockholders, if less than a quorum be
present, the holders of record of a majority of the shares present and entitled
to vote may adjourn the meeting from time to time until a quorum shall be
present. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 7. VOTE REQUIRED All elections for directors shall be
determined by a plurality of the votes cast, and except as otherwise required
by law or the Corporation's Certificate of Incorporation, all other matters
shall be determined by a majority of the votes present in person or represented
by proxy at the meeting and entitled to vote thereon.
SECTION 8. VOTING OF SHARES; PROXIES Except as otherwise provided
by law, each stockholder of record having the right to vote shall be entitled
at every meeting of the stockholders of the Corporation to one vote for each
share of stock having voting power standing in the name of
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such stockholder on the books of the Corporation and such votes may be cast
either in person or by written proxy. Every proxy must be executed in writing
by the stockholder or by his duly authorized attorney. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. All voting, except on the election of directors and where otherwise
required by law, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or his proxy, a stock vote shall be
taken. Every stock vote shall be taken by ballots, each of which shall state
the name of the stockholder or proxy voting and such other information as may
be required under the procedure established for the meeting. Every vote taken
by ballots shall be counted by an inspector or inspectors appointed by the
chairman of the meeting.
SECTION 9. WAIVER OF NOTICE Except as otherwise required by law,
any stockholder may at any time waive any or all notice to him of any meeting
of stockholders by delivering to the Corporation a writing to that effect
signed by him either before or after such meeting, and the presence of any
stockholder in person or by proxy at any meeting of stockholders shall
constitute waiver by him of notice of such meeting, except when the person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS The business and affairs of the
Corporation shall be managed by its Board of Directors which may exercise all
powers of the Corporation and do all such lawful acts and things as are not by
law or by these By-Laws required to be exercised or done by the stockholders.
SECTION 2. NUMBER AND TERM OF OFFICE The number of directors shall
be fixed from time to time by the Board of Directors, but shall not be less
than three nor more than fifteen. The directors shall be elected at such
times, and for such terms, as provided in the Corporation's Certificate of
Incorporation, and each shall hold office until his successor is elected and
qualified, or until his earlier resignation, death or removal from office.
SECTION 3. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES Subject to
the rights of the holders of any series of Serial Preferred Stock then
outstanding, nominations for the election of directors may be made by the Board
of Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors generally may
nominate one or more persons for election as directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of stockholders,
ninety days prior to the anniversary date of the immediately preceding annual
meeting, and (ii) with respect to an election to be held at a special meeting
of stockholders for the election of directors, the close of business on the
tenth day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated; (b) a representation that the stockholder is a holder of
record of
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stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a director of the Corporation if so elected. The presiding officer
of the meeting may refuse to acknowledge the nomination of any person not made
in compliance with the foregoing procedure.
SECTION 4. VACANCIES Vacancies occurring on the Board of
Directors or on any committee of the Board of Directors, or new directorships
to be filled by an increase in the number of directors, may be filled by a
majority of the directors then in office, or by a sole remaining director.
Each director so chosen shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 5. RULES The Board of Directors may adopt such special
rules and regulations for the conduct of their meetings and the management of
the affairs of the Corporation as they may deem proper and not inconsistent
with law or these By-Laws.
SECTION 6. PLACE OF MEETING The directors may hold their meetings
at the general office of the Corporation or at such other places as may be
stated in the notice of such meeting.
SECTION 7. REGULAR MEETINGS Regular meetings of the Board of
Directors may be held without notice at such date, time and place as shall from
time to time be determined by resolution of the Board of Directors.
SECTION 8. SPECIAL MEETINGS Special meetings of the Board of
Directors may be called at any time for any purpose by the Chairman of the
Board or the President, and shall be called by the Secretary when and as he
shall be so requested in writing by the Chairman of the Board, the President or
any three directors.
SECTION 9. NOTICE OF MEETINGS Notice of every meeting of the Board
of Directors stating the date, time and place of such meeting shall be
delivered, as hereinafter set forth, to each director at his business address
or such other address as he shall have previously specified in writing directed
to the Secretary. Notice, if by mail, shall be given not later than the third
day preceding the meeting. Such notice shall be deemed to be given when
deposited in the United States mail duly addressed with postage thereon
prepaid. Notice, if by telegram, cable, telex or similar communication, shall
be given at least twenty-four hours before the meeting. Such notice shall be
deemed to be given when delivered to the telegraph or cable company or, in the
case of a telex or similar communication, when transmitted. Notice may also be
given in person or by telephone at least twenty-four hours before the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice of
waiver of notice of such meeting.
SECTION 10. QUORUM At all meetings of the Board of Directors a
majority of the entire Board shall constitute a quorum sufficient for the
transaction of business, and any act of a majority
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of the directors present at a meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specified provided by
law or by these By-Laws. If a quorum shall not be present at any meeting of
directors, a majority of the directors present thereat may adjourn the meeting
from time to time without notice other than announcement at the meeting of the
time and place of such adjourned meeting.
SECTION 11. COMMITTEES The Board of Directors by resolution
adopted by a majority of the entire Board may designate from among its members
an Executive Committee and other committees, each consisting of three or more
directors. Each such committee shall serve at the pleasure of the Board of
Directors. A majority of the committee shall constitute a quorum sufficient
for the transaction of business, and any act of a majority of the members of
the committee present at a meeting at which there is an quorum shall be the act
of the committee.
SECTION 12. COMPENSATION The compensation of directors and the
Chairmen of committees shall be set from time to time by resolution of the
Board of Directors. Directors who are officers or employees of the Corporation
shall receive no compensation for their duties as directors. Directors shall
be reimbursed for expenses incurred in connection with their attendance at
meetings of the Board of Directors or any committee thereof.
SECTION 13. WAIVER OF NOTICE Except as otherwise required by law,
any director may at any time waive any or all notice to him of any meeting of
the Board of Directors or a committee by delivering to the Corporation a
writing to that effect signed by him either before or after such meeting, and
the presence of any director at any meeting of the Board of Directors or such
committee shall constitute a waiver by him of notice of such meeting if such
director does not protest, prior to the meeting or at its commencement, the
lack of notice.
SECTION 14. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE
Members of the Board of Directors, or of any committee thereof, may participate
in a meeting of such Board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other and such participation shall constitute
presence in person at such meeting.
SECTION 15. ACTION WITHOUT A MEETING Unless otherwise restricted
by the Certificate of Incorporation, any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting, if all members of the Board of Directors or the
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board of
Directors or committee.
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 1. APPOINTMENT The Executive Committee shall consist of
the Chairman of the Board of Directors and the President of the Corporation and
at least two other members of the Board of Directors or, if the offices of
Chairman of the Board of Directors and President are held by one individual,
the Executive Committee shall consist of such individual and at least three
other members of the Board of Directors. Vacancies in the Executive Committee
may be filled at any
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meeting of the Board of Directors. All directors who are not members of the
Executive Committee shall be alternate members of the Executive Committee.
Alternate members of the Executive Committee may from time to time be
designated by the Chairman of the Board or the President to take the place of
any absent member of the Executive Committee, and any alternate member of the
Executive Committee when so designated shall be deemed a member of the
Executive Committee at such meeting.
SECTION 2. POWERS The Executive Committee shall have and may
exercise all the powers of the Board of Directors with reference to the conduct
of the business and affairs of the Corporation in the interim between meetings
of the Board of Directors. The Executive Committee shall not have power,
however, to declare a dividend or to authorize the issuance of stock, to submit
to stockholders matters requiring authorization of stockholders, to fill a
vacancy on the Board of Directors or any committee, to fix the compensation of
directors for serving upon the Board of Directors or committees, to amend,
repeal or adopt By-Laws, or amend or repeal any resolution of the Board of
Directors which by its terms may not be so amended or repealed. The minutes of
each meeting of the Executive Committee shall be presented for approval at the
next succeeding meeting of the Board of Directors.
SECTION 3. PLACE OF MEETINGS Meetings of the Executive Committee
may be held at the general office of the Corporation or at such other places as
may be stated in the notice of the meeting, and may be called by the Chairman
of the Board or the President or by any other members of the Executive
Committee.
SECTION 4. QUORUM At any meeting of the Executive Committee, two
members or designated alternate members shall constitute a quorum for the
transaction of business. Any action of the Executive Committee to be effective
must be authorized by the affirmative vote of a majority of the members or
designated alternate members present, and in any event shall require not less
than two affirmative votes.
SECTION 5. NOTICE Notice of every meeting of the Executive
Committee stating the date, time and place of such meeting shall be delivered
to each member of the Executive Committee and to each alternate member of the
Executive Committee who may be designated to take the place of any absent
member at any meeting of the Executive Committee. Notice shall be given in the
manner hereinafter set forth at his business address or such other address as
he shall have previously specified in writing directed to the Secretary.
Notice, if by mail, shall be given not later than the third day preceding the
meeting. Such notice shall be deemed to be given when deposited in the United
States mail duly addressed with postage thereon prepaid. Notice, if by
telegram, cable, telex or similar communication, shall be given at least
twenty-four hours before the meeting. Such notice shall be deemed to be given
when delivered to the telegraph or cable company or, in the case of a telex or
similar communication, when transmitted. Notice may also be given in person or
by telephone at least twenty-four hours before the meeting. Neither the
business to be transacted at, nor the purpose of, any meeting of the Executive
Committee need be specified in the notice or waiver of notice of such meeting.
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ARTICLE V
OFFICERS
SECTION 1. NUMBER The officers of the Corporation shall consist of
a Chairman of the Board, a President, one or more Vice Presidents, a
Controller, a Secretary, and a Treasurer. Any two of the aforesaid offices
except those of Chairman of the Board and Secretary may be held by the same
person. The officers of the Corporation may also consist of one or more
Executive Vice Presidents, Group Vice Presidents, Assistant Treasurers or
Assistant Secretaries, as shall be determined by the Board of Directors.
SECTION 2. ELECTION The Board of Directors, immediately after each
annual meeting of stockholders, shall, by majority vote, elect the officers of
the Corporation. The Board of Directors may also elect or appoint such other
officers, agents and employees as it shall deem necessary who shall have such
authority and shall perform such duties as from time to time shall be
prescribed by the Board of Directors or the Executive Committee.
SECTION 3. TERM OF OFFICE The officers of the Corporation shall
hold office for a term of one year and until their successors are chosen and
qualify in their stead. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the directors. If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Board of Directors for the unexpired portion of
the term.
SECTION 4. CHAIRMAN OF THE BOARD The Chairman of the Board shall
preside at all meetings of the stockholders and the Board of Directors and
shall have such other duties as may be prescribed from time to time, by the
Board of Directors or the Executive Committee. The Chairman of the Board need
not be an employee of the Corporation. The Chairman of the Board may also be
the Chief Executive Officer of the Corporation if so appointed by the Board of
Directors.
SECTION 5. PRESIDENT The President shall have charge of the
business and operations of the Corporation, subject to the control of the Board
of Directors; shall in general supervise and see that all orders and
resolutions of the Board of Directors and of the Executive Committee are
carried into effect; shall do and perform all acts and things incident to the
position of President; and, shall have such other duties as may be prescribed
from time to time by the Board of Directors, the Executive Committee or the
Chief Executive Officer, if the President has not been so appointed by the
Board of Directors. He shall preside as Chairman at all meetings of the
Executive Committee. In the absence, death or inability to act of the Chairman
of the Board, the President shall, in addition to his other powers and duties,
have and exercise all powers and duties of the Chairman of the Board. The
President may also be the Chief Executive Officer and/or the Chief Operating
Officer of the Corporation, if so appointed by the Board of Directors.
SECTION 6. EXECUTION OF DOCUMENTS The President shall have, and
is hereby given, full power and authority to execute all duly authorized
contracts, agreements, deeds, conveyances or other obligations of the
Corporation, applications, consents, proxies and other powers of attorney, and
other documents and instruments, including those requiring a seal of the
Corporation, except where required or permitted by law to be otherwise executed
and except where the execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation. In
addition, the President may delegate to other officers, employees and agents
of the
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Corporation the power and authority to execute, on behalf of the Corporation,
duly authorized contracts, agreements, deeds, conveyances, or other obligations
of the Corporation, applications, consents, proxies and other powers of
attorney, and other documents and instruments, with such limitations as the
President may specify; such authority so delegated by the President shall not
be redelegated by the person to whom such execution authority has been
delegated.
SECTION 7. EXECUTIVE VICE PRESIDENTS An Executive Vice President
shall direct and be responsible for operation of such segments of the
Corporation's business, and such other functions as may be assigned to him from
time to time by the Board of Directors, the Executive Committee or the
President.
SECTION 8. GROUP VICE PRESIDENTS A Group Vice President shall,
under the direction and the supervision of the President or an Executive Vice
President , direct and be responsible for operation of such segments of the
Corporation's business, and such other functions as may be assigned to him from
time to time by the Board of Directors, the Executive Committee, the President
or an Executive Vice President.
SECTION 9. VICE PRESIDENTS Vice Presidents shall perform such
duties and have such powers as the Board of Directors may from time to time
prescribe, except that (a) no Vice President shall preside at a meeting of the
stockholders or of the Board of Directors or Executive Committee unless he is a
director of the Corporation; and (b) no Vice President shall have the power and
authority to delegate execution authority reserved to the President under
Section 6 of this Article.
SECTION 10. VICE PRESIDENT - FINANCE AND ADMINISTRATION The Vice
President - Finance and Administration shall be the chief financial and
administrative officer of the Corporation. He shall be in charge of the
financial affairs of the Corporation under the direction of the Board of
Directors and the supervision of the President or the Chief Executive Officer.
He shall supervise the activities of the Treasurer and the Controller and shall
report periodically to the Board of Directors or the Executive Committee
concerning the financial condition of the Corporation and shall perform such
other duties as shall be ordered by the Board of Directors, the Executive
Committee or the President or the Chief Executive Officer.
SECTION 11. VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY The Vice
President, General Counsel and Secretary shall be the chief legal officer of
the Corporation. He shall have charge of the legal affairs of the Corporation
under the direction of the Board of Directors and the Executive Committee and
the supervision of the President or the Chief Executive Officer and shall
perform such other duties as shall be ordered by the Board of Directors, the
Executive Committee or the President or the Chief Executive Officer. He shall
attend all meetings of the Board of Directors, the Executive Committee, and of
the stockholders, and record all the proceedings of the meetings of the Board
of Directors, the Executive Committee and of the stockholders in books to be
kept for that purpose and shall perform like duties for other committees of the
Board of Directors when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors and shall perform such other duties as may be prescribed by the Board
of Directors or the President or the Chief Executive Officer. He shall have
custody of the corporate seal of the Corporation and he or any Assistant
Secretary shall have the authority to affix the same to any instrument
requiring it and, when so affixed, it may be attested by his signature or by
the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the corporation and
to attest the affixing by his signature.
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SECTION 12. THE TREASURER Under supervision of the Vice President -
Finance and Administration, the Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Vice President - Finance and Administration an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. In addition, he shall perform such other acts as are usually
performed by the Treasurer of the Corporation or assigned to him by the Board
of Directors, the Executive Committee, the Chairman, the President or the Vice
President - Finance and Administration.
SECTION 13. CONTROLLER Under the supervision of the Vice President
- - Finance and Administration, the Controller shall be the chief accounting
officer of the Corporation. He shall, when proper, approve all bills for
purchases, payrolls, and similar instruments providing for disbursement of
money by the Corporation for payment by the Treasurer. He shall be in charge
of and maintain books of account and accounting records of the Corporation and
shall render to the Vice President - Finance and Administration an account of
all his transactions as Controller. In addition, he shall perform such other
acts as are usually performed by the Controller of a corporation or assigned to
him by the Board of Directors, the Executive Committee, the Chairman, the
President or the Vice President - Finance and Administration.
SECTION 14. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS The
Assistant Secretary and the Assistant Treasurer, if any, or, if there shall be
more than one, the Assistant Secretaries and Assistant Treasurers in the order
determined by the Board of Directors, shall, in the absence or disability of
the Secretary or Treasurer as the case may be, perform the duties and exercise
the powers of the Secretary or Treasurer as the case may be, and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE VI
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES Certificates representing shares of
stock of the Corporation shall be in such form as shall be determined by the
Board of Directors and as required by law. They shall be numbered and entered
in the books of the Corporation as they are issued, shall exhibit the holder's
name and the number of shares and shall be signed by the Chairman of the Board
or the President and the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer of the Corporation and shall bear the corporate seal.
Where any such certificate is countersigned by a transfer agent or a registrar
other than the Corporation or its employee, the signatures of any such officers
and the seal of the Corporation upon such certificates may be facsimiles,
engraved or printed.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES A new
certificate or certificates may be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a
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new certificate or certificates the Secretary may in its discretion and as a
condition precedent to the issuance thereof require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to give the Corporation a bond in such sum and with such surety or sureties as
it may direct as indemnity against any claims that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or destroyed. Worn, defaced and mutilated certificates of stock may be
surrendered and canceled and a new certificate in lieu of the same may be
issued.
SECTION 3. TRANSFER AGENTS AND REGISTRARS The Secretary shall
appoint one or more transfer agents and one or more registrars. Upon surrender
to the Corporation or to a transfer agent of the Corporation of a certificate
of stock duly endorsed or accompanied by proper evidence of succession or
assignment of authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto and cancel the old
certificate and every such transfer of stock shall be entered on the stock
books of the Corporation which shall be kept in the office of the Corporation
or at the office of its transfer agents. The stock books of the Corporation
shall contain the names and addresses of all stockholders of the Corporation,
the number and class of shares held by each and the dates when they
respectively became the owners of record thereof.
SECTION 4. HOLDER OF RECORD The Corporation shall be entitled to
treat the holder of record of any share or shares as the holder in fact thereof
and, accordingly, shall not be found to recognize any equitable or other claim
to or interest in such share on the part of any other person whether or not it
shall have express or other notice thereof, except as expressly provided by
law.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. FIXING OF RECORD DATE For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend or to receive any other distribution, or for the allotment of any
rights, or for the delivery of evidence of rights or evidences of interests out
of any change, conversion or exchange of capital stock, or for the purpose of
any other lawful action, the Board of Directors may fix in advance a date as
the record date for any such determination of stockholders, such date in any
case to be not more than sixty days and, in case of a meeting of stockholders,
not less than ten days prior to the date of such meeting. If no record date is
fixed, the record date for determining stockholders (i) entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held; and (ii) for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 2. DIVIDENDS The Board of Directors may from time to time
declare and the Corporation may pay dividends upon its outstanding shares of
capital stock, in the manner and upon the terms and conditions provided by law.
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SECTION 3. CORPORATE SEAL The seal of the Corporation shall be in
the form of a circle and shall bear the name of the Corporation.
SECTION 4. FISCAL YEAR The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 5. CHECKS, DRAFTS All checks, drafts or other orders for
the payment of money, notes or other evidence of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors or the Executive Committee
may from time to time designate.
SECTION 6. AMENDMENT OR REPEAL OF BY-LAWS Except as otherwise
provided by law or the Certificate of Incorporation of the Corporation, the
By-Laws may be amended or repealed by the affirmative vote of a majority of the
Board of Directors at any meeting of the Board of Directors.
SECTION 7. INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES
The Corporation shall indemnify to the full extent authorized by law, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative in nature, by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses, including attorneys'
fees, judgments, fines and amounts paid in connection with such action, suit or
proceeding. Such indemnification shall not be deemed exclusive of any other
rights to which a person may be entitled under any by-law, agreement, vote of
disinterested directors, or as a matter of law or otherwise. The Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of this Article.
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Acme Group
Third Amendment To Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
NBD Bank
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 dated as of May 21, 1995 and that certain Second Amendment
to Credit Agreement effective as of August 8, 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.
-1-
<PAGE> 2
The Borrowers have requested that the Lenders amend Section 7.11 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 the satisfaction of the conditions set forth in Section 2 below, Section
7.11 of the Credit Agreement shall be amended by (i) deleting the period
appearing at the end of subsection (c) thereof, substituting therefor a
semicolon followed by the word "and" and (ii) inserting the following new
subsection (d) immediately after subsection (c) as so amended:
"(d) indebtedness not otherwise permitted by this Section
aggregating not more than $25,000,000 at any one time outstanding."
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 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.
3. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this
-2-
<PAGE> 3
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 signing any such counterpart and
-3-
<PAGE> 4
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 5th day of April, 1996.
ACME STEEL COMPANY
By /s/ James W. Hoekwater
Its Treasurer
ACME PACKAGING CORPORATION
By /s/ James W. Hoekwater
Its Treasurer
ALPHA TUBE CORPORATION
By /s/ James W. Hoekwater
Its Treasurer
UNIVERSAL TOOL & STAMPING COMPANY, INC.
By /s/ James W. Hoekwater
Its Treasurer
ACME METALS INCORPORATED
By /s/ James W. Hoekwater
Its Treasurer
-4-
<PAGE> 5
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
By /s/ Jenny A. Gilpin
Its Vice President
MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION
By /s/ Stephen M. Reese
Its Vice President
NATIONAL CITY BANK
By /s/ Brian J. Cullina
Its Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Abigail Wolf
Its Authorized Signer
-5-
<PAGE> 1
RETAINER AGREEMENT
This Agreement made and entered into as of the first day of March 1997
between ACME METALS INCORPORATED, a Delaware corporation ("Acme") and BRIAN W.
H. MARSDEN ("Mr. Marsden").
RECITALS
WHEREAS, Mr. Marsden has been employed by Acme for many years in senior
executive positions, including a member and Chairman of the Board of Directors
and Chief Executive Officer, during which time he has acquired valuable
experience and knowledge regarding Acme's businesses; and
WHEREAS, Mr. Marsden has elected to retire from active employment with
Acme as of the last day of February 1997; and
WHEREAS, Acme wishes to continue to have available to it Mr. Marsden's
experience and knowledge in the capacity of a non-employee Chairman of the
Board of Directors of Acme and Mr. Marsden is willing to provide such services
to Acme upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual agreements and covenants
hereinafter contained, the parties agree as follows:
1. MEMBER AND CHAIRMAN OF THE BOARD OF DIRECTORS
Mr. Marsden's current term as a member of Acme's Board of Directors
expires at the 1998 Annual Meeting of Shareholders (April 1998), Mr. Marsden
agrees to continue to serve as a non-employee member and as the elected
Chairman of Acme's Board of Directors for the balance of his
1
<PAGE> 2
current term, performing such duties and responsibilities as are related to
such positions and perform such other tasks as, from time to time, may be
reasonably directed by the President and Chief Executive Officer or by the
Board of Directors of Acme.
2. COMPENSATION
a. MEMBER AND CHAIRMAN OF THE BOARD OF DIRECTORS. Mr.
Marsden, so long as he continues to serve his current or any
subsequent term of office as a member of Acme's Board of Directors
to which he is elected, Acme shall pay Mr. Marsden a retainer of
One Hundred Thousand and no/100 Dollars ($100,000.00), payable in
quarterly installments of Twenty-Five Thousand and no/100 Dollars
($25,000.00). In addition to this retainer, Mr. Marsden shall be
paid those fees paid to non-employee directors for attendance at
meetings, including those payable as a member or chairman of any
committee thereof; and, he shall be entitled to such benefits and
reimbursements as may be payable to non-employee directors of Acme.
b. EXPENSES. Acme shall reimburse Mr. Marsden for all
direct expenses incurred in the performance of services hereunder
in accordance with Acme's expense reimbursement policies and
practices.
c. PRORATION. In the event services shall be rendered for
less than a full calendar quarter, then the quarterly installment
shall be prorated.
d. SERVICES. In addition to the compensation and fees
payable hereunder, Acme shall provide Mr. Marsden with the
following services and benefits at Acme's expense:
2
<PAGE> 3
i. the use of an office at Acme's business offices located at
13500 South Perry Avenue, Riverdale, Illinois 60627, including
secretarial, telephone, fax and similar business office
services;
ii. continued participation in Acme's Automobile
Reimbursement Program comparable to the level of participation
of a full-time executive officer of Acme;
iii. payment or reimbursement of Mr. Marsden's dues at the
Midlothian Country Club;
iv. payment or reimbursement of the fees of Mr. Marsden's
tax preparer for preparing and filing his federal, state and
local income tax returns consistent with Acme's program for
executive officers; and
v. participation in Acme's Key Person Physical Examination
Program.
e. ADDITIONAL TAXES. To the extent, in respect of any
calendar year receipt by Mr. Marsden of the services and
benefits described in Section 3.d. above which shall result in
additional taxable income to him for federal income tax purposes, Acme
shall pay to him promptly after determination thereof an amount equal
in cash to such additional taxable income multiplied by Mr. Marsden's
marginal federal income tax rate for such year.
3. TERM.
This Agreement shall commence as of the first day of March 1997
and shall terminate on the day of Acme's 1998 Annual Meeting of Shareholders
(e.g., on or about April 30, 1998), subject to its earlier termination as
follows:
3
<PAGE> 4
a. In the event of Mr. Marsden's death, this Agreement shall terminate
as of the end of the calendar quarter in which his death shall
occur.
b. In the event Mr. Marsden shall suffer any physical or mental
disability which, in Acme's sole discretion, prevents the satisfactory
performance of the services to be rendered hereunder by Mr. Marsden for
a continuous period of three months, Acme may terminate this Agreement
upon written notice to Mr. Marsden at any time during the continuance
of such disability.
c. Thirty days after Acme's receipt of written notice from Mr. Marsden
of his election to terminate this Agreement.
4. NON-COMPETITION.
During the term of this Agreement and continuing for a period of two (2)
years after the termination of this Agreement Mr. Marsden shall review with and
obtain the consent of Acme's Chief Executive Officer prior to rendering
consulting services to a competitor of Acme or engaging in competition,
directly or indirectly, with Acme. Mr. Marsden shall not during the term of
this Agreement and thereafter disclose to any person (except as shall be
authorized by Acme) any confidential business or proprietary information or
trade secrets of Acme obtained by him during and in connection with his prior
service with Acme or during the term of this Agreement.
5. INDEPENDENT CONTRACTOR.
It is expressly understood and acknowledged by the parties hereto that Mr.
Marsden is an independent contractor and has entered into this Agreement as a
principal, not as an agent or employee of Acme. As an independent contractor,
it shall be Mr. Marsden's responsibility to report and pay any and all federal,
state and local taxes or assessments of any kind whatsoever imposed by
4
<PAGE> 5
law or which may be required in connection with the performance of consulting
services pursuant to this Agreement or the payment of monies for services
rendered hereunder.
6. GENERAL PROVISIONS.
a. This Agreement shall be construed in accordance with and
governed by the laws of the State of Illinois.
b. Notices served hereunder shall be deemed sufficient if sent by
United States first class registered or certified mail, postage
prepaid, to the following addresses or at such other addresses as the
parties may hereafter in writing designate:
Acme Metals Incorporated
Office of the Secretary
13500 South Perry Avenue
Riverdale, Illinois 60627-1182
Brian W. H. Marsden
41 Surrey Hill Court
Palos Heights, Illinois 60463
c. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof; and, this Agreement
shall not be modified in any manner except by written agreement signed by
both parties.
5
<PAGE> 6
IN WITNESS WHEREOF the parties have cause this Agreement to be duly
executed as of the date first specified above.
ACME METALS INCORPORATED
by /s/ S. D. Bennett
-----------------------------
S. D. Bennett
President and Chief Executive Officer
/s/ Brian W. H. Marsden
-----------------------------
Brian W. H. Marsden
6
<PAGE> 1
KEY EXECUTIVE SEVERANCE PAY PLAN Exhibit 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PARTICIPANT AND CURRENT TITLE OR PARTICIPATION PARTICIPATION
TITLE AT TERMINATION IN PLAN EFFECTIVE DATE TERMINATION DATE
---------------------------------- -------------- ----------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------
Brian W. H. Marsden January 22, 1987
Chairman of the Board
Acme Metals Incorporated
- --------------------------------------------------------------------------------------------
Stephen D. Bennett June 1, 1990
President and Chief Executive Officer
Acme Metals Incorporated
- --------------------------------------------------------------------------------------------
Gerald J. Shope May 25, 1995
Vice President-Human Resources
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
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PARTICIPANT AND CURRENT TITLE OR PARTICIPATION PARTICIPATION
TITLE AT TERMINATION IN PLAN EFFECTIVE DATE TERMINATION DATE
---------------------------------- -------------- ----------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------
Gary S. Lucenti May 25, 1995
President
Acme Steel Company
- --------------------------------------------------------------------------------------------
Larry C. Kipp May 25, 1995
President
Universal Tool & Stamping
Company, Inc.
- --------------------------------------------------------------------------------------------
Edward J. Urbaniak January 24, 1997
President
Alpha Tube Corporation
- --------------------------------------------------------------------------------------------
Reynold C. MacDonald January 22, 1987 May 25, 1995
Former Chairman of the Board
Acme Steel Company;
Director
Acme Metals Incorporated
- --------------------------------------------------------------------------------------------
Richard J. Stefan January 22, 1987 May 25, 1995
Retired 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
of Steel Products
- --------------------------------------------------------------------------------------------
James M. Schwyn May 25, 1992 May 25, 1995
Former President
Universal Tool & Stamping
Company, Inc.
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
- --------------------------------------------------------------------------------------------
PARTICIPANT AND CURRENT TITLE OR PARTICIPATION PARTICIPATION
TITLE AT TERMINATION IN PLAN EFFECTIVE DATE TERMINATION DATE
---------------------------------- -------------- ----------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------
Steven G. Jansto May 25, 1995 October 31, 1995
Former President
Alpha Tube Corporation
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
ACME METALS INCORPORATED
EMPLOYEE STOCK OWNERSHIP PLAN
RESTATED EFFECTIVE SEPTEMBER 1, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
1.1 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
1.2 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
1.3 Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
1.4 Continuous Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
1.5 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2
1.6 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3
1.7 Highly Compensated Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
1.8 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
1.9 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
1.10 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
1.11 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
1.12 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
1.13 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
1.14 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
1.15 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
ARTICLE 2 Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
2.1 Appointment of Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
2.2 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
2.3 Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
2.4 Immunity of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
2.5 Claims and Review Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7
ARTICLE 3 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8
3.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8
3.2 Rights of Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8
3.3 Certification of Participation and Compensation to Committee . . . . . . . . . . . . . . . . . . . Page 9
3.4 Determination of Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 9
3.5 Loss of Participation Eligibility with Continued Employment . . . . . . . . . . . . . . . . . . . . Page 9
ARTICLE 4 Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 9
4.1 Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 9
4.2 Form of Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 9
4.3 Determination of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
4.4 Payment of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
4.5 Non-Reversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
4.6 No Contributions by Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
ARTICLE 5 Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
5.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
5.2 Purchases of Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
5.3 Suspense Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
5.4 Sales of Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
6.1 General Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
6.2 Requirements for an Exempt Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
6.3 Proceeds of Exempt Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 12
6.4 Additional Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
ARTICLE 7 Allocations to Participants' Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
7.1 Participants' Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
7.2 Allocation of Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
7.3 Allocation of Company Stock Released From Suspense Account . . . . . . . . . . . . . . . . . . . . Page 13
7.4 Allocation of Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 14
7.5 Allocation of Dividends on Company Stock In Suspense Account . . . . . . . . . . . . . . . . . . . Page 14
7.6 Diversification of Certain Participants' Accounts . . . . . . . . . . . . . . . . . . . . . . . . . Page 14
7.7 Limitations on Annual Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 15
7.8 Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 17
ARTICLE 8 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 18
8.1 Normal Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 18
8.2 Distribution Upon Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 19
8.3 Distribution Upon Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 19
8.4 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 19
8.5 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 20
8.6 Payment of Benefits: Incompetency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 20
ARTICLE 9 Amendment, Transfer and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 21
9.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 21
9.2 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 22
9.3 Termination: Discontinuance of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 22
ARTICLE 10 Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 22
10.1 Coverage of Employees of Subsidiaries and Newly Acquired Facilities . . . . . . . . . . . . . . . Page 22
10.2 Participants' Rights, Acquittance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
10.3 Spendthrift Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
10.4 Delegation of Authority by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
10.5 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
10.6 Gender, Number and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
10.7 Limitation of Liability and Exhaustion of Remedies . . . . . . . . . . . . . . . . . . . . . . . . Page 24
</TABLE>
ii
<PAGE> 4
ACME METALS INCORPORATED
EMPLOYEE STOCK OWNERSHIP PLAN
ACME METALS INCORPORATED hereby restates the Acme Metals Incorporated
Employee Stock Ownership Plan effective September 1, 1995. The Plan was
established effective January 1, 1989 and was amended by Amendments No. 1
through 7. The Plan was restated effective November 1, 1994. The Plan is
intended to enable salaried employees to accumulate an ownership interest in
the Company and to provide for their retirement security.
The Plan is a combination stock bonus and money purchase plan and an
employee stock ownership plan within the meaning of the applicable provisions
of the Internal Revenue Code.
ARTICLE 1
Definitions
1.1 Committee. The term "Committee" means the administrative
committee appointed pursuant to Article 2 below to administer the Plan.
1.2 Company. The term "Company" means Acme Metals Incorporated, a
Delaware corporation, or any successor employer of the Participants covered by
the Plan which adopts the Plan with the consent of the Company.
1.3 Company Stock. The term "Company Stock" means common stock of
the Company or units in an investment fund consisting primarily of common stock
of the Company.
1.4 Continuous Service.
(a) The term "Continuous Service" means service prior to
retirement or termination of employment calculated from the
Participant's last hiring date in accordance with the
provisions in this Section 1.4, including service with
Interlake, Inc. which was credited under the Acme Steel
Company Salaried Employees Retirement Savings Plan and
including service with Cold Metal Products Eastern, Inc., The
Stanley Works and A. J. Gerrard and Company, Acme Packaging
Corporation, Acme Steel Company and with any other predecessor
employer designated by the Committee. After a break in
Continuous Service, Continuous Service shall be calculated
from the date of reemployment following the last unremoved
break in Continuous Service.
(b) A Participant shall not be denied credit for time lost which
does not constitute a break in service.
(c) Continuous Service shall be broken if a Participant (1) quits,
is discharged, or his employment is terminated for any other
reason; provided, however, that any Participant transferred
from Acme Steel Company to Acme Packaging Corporation
effective January 1, 1992, or to the Company effective June 1,
1992, pursuant to the reorganization of Acme Steel Company,
shall
Page 1
<PAGE> 5
not be deemed to have terminated his employment for purposes
of this Plan; (2) is absent due to layoff which continues for
more than two years; or (3) is absent due to authorized leave
which continues for more than two years or leave granted by
reason of non-compensable disability which continues for more
than two years or leave due to compensable disability incurred
during the course of employment which continues for more than
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; provided, however, that Continuous Service
shall not be broken by absence of an Employee who enters the
U.S. armed forces or merchant marine for active duty having
reemployment rights under the law with which he complies and
is reemployed or if such break does not exceed five one-year
periods of severance from service. In the case of an Employee
who is absent from work for maternity or paternity reasons,
the 12-consecutive month period beginning on the first
anniversary of the first date of such absence shall not
constitute a break in service. Absence for maternity or
paternity reasons means an absence by reason of (1) pregnancy
of the Employee, (2) the birth of a child of the Employee, (3)
the placement of a child with the Employee in connection with
the adoption of such child by the Employee, or (4) the
Employee's caring for such child for a period beginning
immediately following such birth or placement.
(d) In the event that a Participant incurs a break in service
causing a portion of his account to be forfeited and such
Participant is reemployed by the Company within one year after
such break in service, the Company shall repay the amount
previously forfeited, which shall be credited to his account
as of the end of the calendar quarter in which he is
reemployed.
(e) A Participant who incurs a break in service shall lose his
Continuous Service for the purpose of Section 8.3.
However, prior service will be restored when such former
Participant is reemployed if he is reemployed (a) within one
year of his break in service or (b) at any time if he had at
least one year of Continuous Service at the time his service
was broken.
(f) Continuous Service shall also include employment with a member
of a controlled group of corporations of which the Company is
a member or an unincorporated trade or business which is under
common control with the Company as determined in accordance
with Section 414(c) of the Internal Revenue Code and
regulations issued thereunder. For purposes of this plan a
"controlled group of corporations" shall mean a controlled
group of corporations as defined in Section 1563(a) of the
Internal Revenue Code, determined without regard to Section
1563(a)(4) and (e)(3)(C).
1.5 Earnings. The term "Earnings" means wages, salary, commissions,
overtime, incentive or bonus pay for services rendered to the Company,
excluding (a) any payments for supplemental sickness and accident benefits
payable under a program benefiting salaried employees of the Company; (b) any
payments by the Company (or debits) representing unused credits (or debits)
under any program of flexible benefits utilizing an individual spending account
for each Participant; provided, however, that amounts which a Participant
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elects to have credited to his account under a plan meeting the requirements of
Section 125 of the Internal Revenue Code shall not be excluded from the
definition of Earnings of the Participant but shall be treated as Earnings for
purposes of this Plan; (c) contributions by the Company to any public or
private employee pension plan, profit sharing plan or employee stock ownership
plan made on behalf of a Participant; provided, however, that qualified
elective contributions under the Acme Metals Incorporated Salaried Employees
Retirement Savings Plan shall not be excluded from the definition of Earnings
of a Participant but shall be treated as Earnings for purposes of this Plan;
(d) any income or gain received by or imputed to a Participant in respect of a
stock option (or the receipt or sale of stock acquired pursuant thereto) or of
a stock appreciation right, a stock award, or restricted stock purchase, or
under any compensation plan unless such plan provides for payment in cash only,
provided, however, that payments of awards in the form of common stock or other
securities of the Company under the Company's Executive Incentive Compensation
Plan shall not be excluded from the definition of Earnings of a Participant;
(e) any amounts which the Company is prohibited by Section 415 of the Internal
Revenue Code from contributing to a Participant's account; (f) severance
payments or premium reimbursements by the Company; and (g) any other
non-payroll income item received from the Company.
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 Earnings of each Participant
taken into account under the Plan shall not exceed the OBRA '93 Annual
Compensation Limit. The OBRA '93 Annual Compensation Limit is $150,000, as
adjusted by the Commissioner of Internal Revenue 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 Earnings are 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 Internal Revenue
Code shall mean the OBRA '93 Annual Compensation Limit set forth in this
provision.
If Earnings for any prior determination period are taken into account
in determining a Participant's benefits accruing in the current Plan Year, the
Earnings for that prior determination period are subject to the OBRA '93 Annual
Compensation Limit in effect for that prior determination period. For this
purpose, for
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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.
1.6 Employee. The term "Employee" means any salaried person employed
by the Company and any other person in a group designated by the Committee to
be considered "Employees" under the Plan as provided in Section 10.1. The term
"Employee" also includes employees who are also directors. The term "regular
full-time Employee" means any Employee who regularly works a normal schedule of
40 hours per week. The term "part-time Employee" means any Employee who
regularly works a normal schedule of less than 40 hours per week. The term
"temporary Employee" means any Employee hired to work a normal schedule of 40
hours per week during a period of fixed or limited duration which does not
exceed 12 months.
1.7 Highly Compensated Participant. The term "Highly Compensated
Participant" means a Participant who during the Plan Year in question or the
prior Plan Year (a) was 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, or
(b) received compensation exceeding $75,000, or (c) received compensation
exceeding $50,000 and was one of the 20% of the employees of the Company who
received the highest compensation from the Company for the Plan Year, or (d)
was an officer of the Company and received compensation exceeding $45,000
during the Plan Year, provided that the compensation amounts shall be adjusted
from time to time in accordance with regulations of the Secretary of the
Treasury relating to the maximum dollar limitation on additions to defined
contribution plans under Section 415(d)(1) of the Internal Revenue Code. All
other Participants are Nonhighly Compensated Participants.
1.8 Hour of Service. The term "Hour of Service" means each period of
60 minutes of employment with the Company for which (a) an Employee is directly
or indirectly paid, or entitled to payment, for the performance of duties or
for reasons other than the performance of duties or (b) back pay, irrespective
of mitigation of damages, has either been awarded or agreed to by the Company.
When required in determining eligibility, Hours of Service shall be credited to
the Employee under (a) for the period on which the duties were performed and
under (b) for the period or periods to which the award or agreement pertains
rather than the period on which made, but an Hour of Service shall not be
credited more than once with respect to the same 60-minute period or periods of
employment. Hours under this paragraph shall be calculated and credited
pursuant to Section 2530.200b-2 of the Regulations of the Department of Labor.
1.9 Participant. The term "Participant" means an Employee who has
satisfied the eligibility requirements set forth in Section 3.1 and is
participating in the Plan.
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1.10 Plan. The term "Plan" means this plan, the Acme Metals
Incorporated Employee Stock Ownership Plan, as amended from time to time.
1.11 Plan Year. The term "Plan Year" means a calendar year.
1.12 Trust Agreement. The term "Trust Agreement" means the agreement
between the Company and the Trustee setting forth the terms under which the
Trustee holds and administers the Trust Fund.
1.13 Trustee. The term "Trustee" means the entity or person
appointed by the Company to hold and administer the assets of the Plan pursuant
to a trust agreement between the Company and the Trustee.
1.14 Trust Fund. The term "Trust Fund" means the assets of the Plan
held in trust by the Trustee.
1.15 Year of Service. The term "Year of Service" means any 12-month
period during which an Employee completes at least 1,000 Hours of Service.
ARTICLE 2
Administrative Committee
2.1 Appointment of Administrative Committee. The Plan shall be
administered by an administrative committee consisting of not less than six
persons nor more than 10 persons who shall be appointed by the Board of
Directors of the Company. The Board shall have full power to determine the
period during which any Committee member shall 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 shall automatically cease to be a member of the Committee on
termination of his employment. An officer of the Company shall certify to the
Trustee the names of the members of the Committee and thereafter any change in
its membership.
2.2 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, shall 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, shall 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 shall notify the Trustee in writing of such action and of the name or
names of its member or 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 shall file with the
Trustee a written revocation of such designation.
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2.3 Powers and Duties. The Committee shall be charged with the
administration of the Plan and its duties shall 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 shall 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 Committee shall cause the
expenses of administration of the Plan and Trust Fund to be paid from the Trust
Fund unless paid by the Company.
The Plan shall be administered in accordance with the Employee
Retirement Income Security Act of 1974, Public Law 93-406 ("ERISA"), the Tax
Equity and Fiscal Responsibility Act of 1982, Public Law 97-248 ("TEFRA"), the
Deficit Reduction Act of 1984, Public Law 98-369 ("DEFRA"), the Retirement
Equity Act of 1984, Public Law 98-397 ("REA"), and the Tax Reform Act of 1986,
Public Law 99-514 ("TRA"), and such other laws as may hereinafter be enacted,
as all may be amended from time to time, and in conformity to 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 shall 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.
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 shall be entitled to rely upon and shall be fully protected in
any action taken by it in good faith in reliance upon and in accordance with
any opinions or reports furnished to it by any such accountant, counsel or
other specialist.
2.4 Immunity of Committee. To the extent permitted by ERISA, each
member of the Committee, whether or not then in office, shall 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 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 shall not be used as a source for any
compensation paid
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to members of the Committee by reason of their service on the Committee. All
reasonable expenses of the Committee properly and actually incurred shall be
paid by the Company. Members shall not be required individually to furnish
bonds or other security for faithful performance of their duties. The Company
shall furnish bonding as required by ERISA.
2.5 Claims and Review Procedures. If any difference shall arise
between the Company and any Participant who shall be an applicant for a
benefit, or to whom an account balance may be distributable, as to such
Participant's right to a benefit or the amount of his distribution and
agreement cannot be reached between the Company and the Participant, the
Participant of his authorized representative shall file a claim for a
distribution in the manner and on the forms provided by the Committee. The
Committee shall decide on the merits of such claim within 60 days after receipt
of the claim. The Participant and his authorized representative, if any, shall
be notified in writing of a favorable decision. If a claim is wholly or
partially denied, notice of the decision shall be furnished within 60 days
after receipt of the claim by the Committee. Such notice shall be written in a
manner calculated to be understood by the claimant and shall include:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the
denial is based;
(c) 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
(d) 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 shall be deemed denied for purposes of proceeding to review
as described herein. A claimant whose claim for benefits is denied in whole or
in part or his authorized representative may:
(a) 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;
(b) review pertinent documents in the Company's offices;
(c) submit positions on issues and comments in writing;
(d) in the Committee's discretion, make an oral presentation
before the Committee.
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The Committee shall promptly review each denial of a claim upon which an
application for review is submitted. Such review shall 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 shall be
rendered as soon as possible, but not later than 120 days after receipt of a
timely request for review. The decision on review shall be in writing and
shall include specific reasons for the decision, written in a manner calculated
to be understood by the claimant, and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE 3
Eligibility
3.1 Eligibility. Each regular full-time Employee shall become
eligible to participate in the Plan on the January 1, April 1, July 1, or
October 1 coinciding with or next following the date on which he completes
three months of Continuous Service with the Company following his most recent
date of hire. For the purpose of calculating three months of Continuous
Service with the Company, an Employee's continuous employment with any
predecessor employer designated by the Committee shall be included.
Each part-time or temporary Employee shall become eligible to
participate in the Plan on the January 1, April 1, July 1, or October 1
coinciding with or next following the date on which he completes a Year of
Service with the Company following his most recent date of hire. For the
purpose of calculating a Year of Service in the preceding sentence, each
Employee's continuous employment with any other predecessor employer designated
by the Committee shall be included.
Notwithstanding any other provisions in this Section 3.1, if any
former Participant in the Plan is reemployed, he shall be eligible to
participate in the Plan as of the April 1, July 1, October 1 or January 1
coinciding with or next following the reemployment date.
3.2 Rights of Spouse. On the death of a Participant, the full value
of any benefits available under the Plan shall be distributed to the
Participant's surviving spouse in accordance with Section 8.4 or, if the
Participant is not survived by a spouse, to the beneficiary or beneficiaries as
the Participant shall have designated on forms provided by and filed with the
Committee. Notwithstanding the foregoing sentence, a Participant may elect to
designate another person or persons as beneficiary if the Participant's spouse
consents in writing. In such written consent, the spouse shall acknowledge the
effect of the election. The spouse's signature on the consent must be
witnessed by a notary public or a representative of the Committee. The
Committee may accept designation of a non-spouse beneficiary without such
consent if the Participant establishes to the Committee's satisfaction that
there is no spouse or the spouse cannot be located. A consent
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shall be valid only as to the spouse who signed the consent. Another written
consent as specified above is required for each subsequent change of
beneficiary.
3.3 Certification of Participation and Compensation to Committee.
The Company, within a reasonable time after the last day of each payroll
period, shall certify to the Committee (a) the names of all Participants as of
such last day, (b) the Earnings (as defined in Section 1.5) of each Participant
for such payroll period, and (c) the amount of the Company's contribution for
the payroll period with respect to such Participants as provided in Section 4.1
hereof.
3.4 Determination of Eligibility. The Committee shall determine the
eligibility of each Employee for participation in the Plan. Subject to Section
2.5, such determination shall be conclusive and binding upon all persons.
3.5 Loss of Participation Eligibility with Continued Employment. If
a Participant ceases to be an Employee as defined in Section 1.6, but continues
in the employ of the Company or a member of the controlled group of
corporations or businesses of which the Company is a member, his participation
in the Plan shall be suspended. During the period of any such suspension, no
contributions shall be made thereto on his behalf. The account balance of any
such Participant shall be held in trust until distributed on account of
retirement, disability, death, termination of employment, or otherwise. In the
event any such Participant shall again become an Employee as defined in Section
1.6, the suspension shall immediately cease.
ARTICLE 4
Company Contributions
4.1 Formula. For each payroll period the Company shall contribute to
the Trust Fund an amount equal to three and one-half percent (3-1/2%) of each
Participant's Earnings (as such term is defined in Section 1.5) during such
payroll period on behalf of each Participant. Contributions under this
paragraph shall be considered to have been made under a money purchase pension
plan.
The Company shall be permitted to make such additional contributions
as may be required under Section 6.4 to make principal and interest payments on
exempt loans. Such additional contributions shall be considered to have been
made under a stock bonus plan within the meaning of Income Tax Regulations
Section 1.401-1(a) and (b) and shall be accounted for separately from
contributions made under the preceding paragraph.
4.2 Form of Company Contributions. The Company's contributions
hereunder may be in the form of cash or Company Stock. The Plan is intended
primarily to hold Company Stock. However, the Company
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shall make cash contributions in amounts sufficient to allow the Trustee to pay
principal and interest due on any loan made to the Trustee to finance the
purchase of Company Stock. The value of Company Stock contributed under the
provisions of this Section 4.2 shall be its fair market value at the time it is
contributed, as determined by the Committee.
4.3 Determination of Contribution. The Company shall determine and
certify to the Committee the amount of any contribution made by it under the
terms of this Plan and such determination shall be binding on all Participants,
the Committee, and the Company.
4.4 Payment of Contributions. The contribution for each payroll
period shall be paid to the Trustee within 60 days after the close of the
calendar quarter in which the payroll period ended.
4.5 Non-Reversion. In no event shall the principal or income of the
Trust Fund be paid to or revert to the Company, or be used for any purpose
whatsoever other than for the exclusive benefit of the Participants or their
beneficiaries, except as provided in this Section 4.5.
Contributions under the Plan are conditioned upon the deductibility of
the contributions under Section 404 of the Internal Revenue Code. If a
deduction is disallowed, the Trustee shall, at the request of the Committee,
return the contributions to the Company within one year after the date the
deduction is disallowed. The amount returned shall not include any earnings or
be adjusted for losses.
If a contribution or any portion thereof is made by the Company by a
mistake of fact, the Trustee shall, at the request of the Committee, return the
contribution within one year after the date of payment to the Trustee. The
amount returned shall not include any earnings or be adjusted for losses.
4.6 No Contributions by Participants. Participants shall not be
required or permitted to make contributions to the Plan.
ARTICLE 5
Investment of Funds
5.1 In General. The Trust Fund will be invested primarily in Company
Stock. The Trustee may acquire and hold assets other than Company Stock,
provided that the Trust Fund is at all times invested primarily in Company
Stock. The Trustee shall make investments of assets of the Trust Fund only as
directed by the Committee except for those funds over which the Trustee is
authorized to use its investment discretion as provided in the Trust Agreement.
The Trustee shall vote securities having voting rights, including Company
Stock, in the manner provided in the Trust Agreement.
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5.2 Purchases of Company Stock. Purchases of Company Stock may be
made from any shareholder of the Company or from the Company itself and shall
be made at prices which do not exceed fair market value. The Committee's
determination of the fair market value of Company Stock shall be conclusive and
binding. In determining fair market value the Committee shall be permitted to
take into account the price of Company Stock quoted on the NASDAQ system or the
system of any other national securities association or the price reported on
any national securities exchange on which Company Stock may be listed. If the
seller is the Company or any party in interest as defined in Section 3(l4) of
ERISA, 29 U.S.C. 1002(14), the purchase price paid for Company Stock shall not
be more than adequate consideration and no commission shall be paid. Shares of
Company Stock shall be voted on matters submitted to shareholders in the manner
provided in the Trust Agreement.
5.3 Suspense Account. The Committee shall have the power to direct
the Trustee to borrow funds in order to purchase Company Stock through a loan
or loans which meet the requirements of Article 6 below. The Trustee shall
create a suspense account for the purpose of holding Company Stock purchased
with the proceeds of any such loan. In the event there is more than one
outstanding loan, the Committee shall determine the proper priority of payments
with respect to such loans. Company Stock in the suspense account shall be
released and allocated to other accounts upon payment of principal and interest
on the loan as provided in Section 6.2.
5.4 Sales of Company Stock. The Committee shall have the power to
direct the Trustee to sell shares of Company Stock held in the Trust Fund. The
purchaser of such shares of Company Stock may be the Company. If the purchaser
is the Company or any party in interest as defined in Section 3(14) of ERISA,
29 U.S.C. Section 1002(14), the sale price shall not be less than adequate
consideration and no commission shall be paid.
ARTICLE 6
Loans
6.1 General Requirements. The Trustee shall have the power upon
direction of the Committee to enter into loan agreements and to obtain loans
from any source, including the Company. Any loan which is obtained from or
guaranteed by the Company or any other disqualified person within the meaning
of Section 4975(e)(2) of the Internal Revenue Code shall meet the requirements
for exempt loans under Section 6.2 below and the proceeds of the loan shall be
applied in accordance with Section 6.3 below.
6.2 Requirements for an Exempt Loan. Any exempt loan to the Trustee
must be made primarily for the benefit of Participants and beneficiaries of the
Plan and must bear a reasonable rate of interest. Any
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collateral given by the Plan to the Company or any other disqualified person
within the meaning of Section 4975(e)(2) of the Internal Revenue Code shall
consist only of shares of Company Stock which are acquired with the proceeds of
the loan or which were used as collateral for a prior exempt loan which was
repaid by the proceeds of the loan. The exempt loan must be without recourse
against the Trust Fund and no person entitled to payment under the loan shall
have any right to assets of the Trust Fund other than loan collateral,
contributions made to the Plan to meet loan obligations, and earnings
attributable to the loan collateral and to investment of the contributions made
to meet loan obligations.
Payments of principal and interest on an exempt loan shall be made by
the Trustee from contributions made by the Company to meet loan obligations,
earnings from investment of any such contributions, and earnings from Company
Stock pledged as loan collateral. Payments made on the loan shall not exceed
such amounts. Contributions to the Plan and such earnings must be accounted
for separately until the exempt loan is repaid.
The number of future years remaining until maturity of an exempt loan
must always be definitely ascertainable. The duration of the loan must be
determined without regard to any possible extension or renewal of the loan.
The terms and conditions of any exempt loan shall satisfy the
provisions of Income Tax Regulations Section 54.4975-7 at all times.
6.3 Proceeds of Exempt Loans. The proceeds of an exempt loan must be
used within a reasonable time after the loan is obtained to purchase Company
Stock or to repay the exempt loan or any prior exempt loan. Company Stock
acquired with exempt loan proceeds may not be subject to a put, call, or other
option or to a buy-sell or similar arrangement while held by the Trustee or
when distributed, regardless of whether the plan is an employee stock ownership
plan at the time of distribution. Any shares of Company Stock held as
collateral for an exempt loan shall be held in a suspense account until
released upon payment of the loan. An exempt loan must provide for release of
pledged shares of Company Stock according to a fraction in which the numerator
is the sum of the principal and interest payments on the loan for a Plan Year
and the denominator is the sum of principal and interest payments expected to
be paid during the current Plan Year and all future years of the loan. If the
interest rate on the exempt loan is variable, the rate to be used in
determining the amount of expected future payments on the loan is the rate in
effect at the end of the current Plan Year.
Notwithstanding the previous paragraph, an exempt loan may provide for
release of shares of Company Stock pledged as security on the loan on the basis
solely of principal payments, provided that the
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following three conditions are met: (a) the loan must provide for annual
payments of principal and interest at a cumulative rate not less rapid than
level annual payments over a period of 10 years; (b) any interest included on
the payment shall be disregarded only to the extent that it would be considered
interest under standard amortization tables; and (c) this alternative method of
calculation shall not be available if by reason of renewal, extension or
refinancing the sum of the expired duration of the exempt loan, the renewal
period, the extension period and the duration of a new exempt loan exceeds 10
years. If the foregoing provisions of this paragraph are met, the number of
shares of Company Stock to be released during the Plan Year shall be equal to
the number of pledged shares multiplied by a fraction in which the numerator is
the amount of principal paid on the exempt loan during the Plan Year and the
denominator is the sum of the principal payments expected to be made in the
current year and in all future years of the loan.
Shares of Company Stock which are released as collateral from the
suspense account shall be allocated to Participants' accounts in the manner
provided in Section 7.2.
6.4 Additional Company Contributions. If required by the terms of
any exempt loan, the Company shall make contributions sufficient to provide for
payment of principal and interest on the exempt loan as payment becomes due,
provided that such additional contributions shall not cause the limitations on
maximum additions to contributions set forth in Section 7.8 to be exceeded. If
the Company is unable to make contributions sufficient to pay principal and
interest on an exempt loan as due without exceeding the limitations, the
Company may make a loan to the Plan sufficient for such purpose, provided that
the loan qualifies as an exempt loan under the provisions of this Article 6.
ARTICLE 7
Allocations to Participants' Accounts
7.1 Participants' Accounts. The Committee shall maintain an account
for each Participant which shall consist of units of Company Stock , and such
other assets as the Committee shall determine.
7.2 Allocation of Company Contributions. Contributions received by
the Trustee on behalf of each Participant which are not used to pay the
principal and interest on an exempt loan shall be applied to acquire units of
Company Stock or units of other assets for such Participant's account.
7.3 Allocation of Company Stock Released From Suspense Account.
Company Stock released from the suspense account as a result of payments of
principal and interest on an exempt loan made from Company
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contributions shall be allocated among the accounts of Participants entitled to
share in the allocation in proportion to their relative Earnings during the
period to which the principal and interest relate.
7.4 Allocation of Forfeitures. Any portion of an account which a
Participant is not entitled to receive under Section 8.3 below shall be
allocated as a forfeiture to remaining Participants' accounts according to
Participants' relative Earnings for a subsequent payroll period and shall
reduce Company contributions for that payroll period.
7.5 Allocation of Dividends on Company Stock In Suspense Account.
Cash dividends on Company Stock held in the suspense account shall be applied
by the Trustee upon direction of the Committee to pay principal and interest on
an exempt loan or they may be distributed to Participants or allocated to
Participants' accounts in the proportion that an individual Participant's
account bears to the total value of the Trust Fund on the dividend record date.
Stock dividends on Company Stock held in the suspense account shall be
allocated to Participants' accounts in the proportion that an individual
Participant's account bears to the total value of the Trust Fund on the
dividend record date. Alternatively, the Committee may direct that the Trustee
sell the shares of Company Stock received as stock dividends on Company Stock
in the suspense account and apply the proceeds to pay principal and interest on
an exempt loan, in which case any Company Stock released as a result of such
payments shall be allocated to the accounts of Participants in the manner
provided in the preceding sentence.
7.6 Diversification of Certain Participants' Accounts. Any
Participant who has attained age 55 and has participated in the Plan for at
least 10 years shall be permitted to elect to diversify the investment of a
portion of his account by filing a written election to such effect with the
Committee. The first such election may be made at any time prior to the 90th
day following the end of the Plan Year following the Plan Year in which the
Participant first satisfied the age and participation requirements. The
portion of the Participant's account to which the election applies shall be up
to 25% of the value of Participant's account as of the end of the quarter in
which such election is received by the Committee. The Participant shall be
permitted to make a similar election prior to the 90th day following the end of
the succeeding four Plan Years. Any such election shall be effective for up to
25% of the value of the Participant's account as of the end of the quarter in
which the election is received by the Committee, to the extent that such value
exceeds the amount subject
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<PAGE> 18
to a prior election, except that in the fifth Plan Year in which the election
is permitted, the election may be made for up to 50% of the value of the
Participant's account as of the end of the quarter in which the election is
received. Notwithstanding anything to the contrary in this Section 7.6, any
Participant who is an "officer or director" as those terms are defined under
Section 16 of the Securities Exchange Act of 1934 and desires to elect to
diversify the investment of a portion of his account shall make such election
during the 10-day period falling within the first 90 days of the Plan Year for
which diversification is elected, which period begins on the third business day
following the date of release for publication by the Company of quarterly
summary statements of sales and earnings and ends on the 12th business day
following such date.
The Committee upon receipt of the Participant's election shall make
available no fewer than three investment funds in which the Participant may
direct that the specified portion of his account be invested. The Committee
shall adopt reasonable rules and procedures for election of diversification
options under this Section 7.6 and shall inform the Participant as to the
nature of the investment options and the procedures for making the elections.
These rules and procedures and the investment funds available to the
Participant shall conform to the requirements of Section 401(a)(28) of the
Internal Revenue Code, Section 16 of the Securities Exchange Act of 1934 and
regulations thereunder.
7.7 Limitations on Annual Additions. Notwithstanding any other
provisions in the Plan, the sum of the annual additions to a Participant's
account in any form for a calendar year shall not exceed the lesser of (a)
$30,000 (or, if greater, one quarter of the dollar limitation in effect under
Section 415(b)(1)(A) of the Internal Revenue Code) or (b) 25% of the
compensation received by the Participant from the Company within such year,
provided that, in any Plan Year in which not more than one-third of the
Company's contribution is allocated to the accounts of Highly Compensated
Participants, the limitation in (a) above shall be equal to the sum of the
amount described in (a) above plus the lesser of (i) such amount or (ii) the
sum of the value of Company Stock contributed by the Company on behalf of the
Participant for the Plan Year, the amount of cash contributed by the Company
for the Plan Year which is applied by the Trustee to purchase Company Stock
which is allocated to the Participant's account, and the amount of cash
contributed by the Company for the Plan Year which is applied by the Trustee to
pay principal and interest on an exempt loan, resulting in the release of
Company Stock held in the suspense account which is allocated to the
Participant's account. "Annual additions" means the sum of the following:
Company contributions made on the Participant's behalf and forfeitures
allocated to the Participant's account, provided that, in any Plan Year in
which not more than one-third of the Company's contribution is allocated to the
accounts of Highly Compensated Participants, annual additions shall not be
considered to include forfeitures of Company Stock purchased with the proceeds
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<PAGE> 19
of exempt loans and contributions to the Plan on behalf of Participants which
are used to pay interest on exempt loans. Annual additions shall also include
any amounts allocated to a separate account under a pension or annuity plan if
the purpose of such account is to provide medical benefits after retirement for
the Participant, his spouse or dependents, provided that the amounts allocated
to any such accounts shall not be taken into account in determining whether
annual additions exceed 25% of a Participant's compensation for a Plan Year.
"Compensation" for the purpose of this Section 7.7 means salary and other
amounts paid for services rendered which a Participant receives during a
calendar year, but not contributions made for a Participant under any employee
benefit plan including this Plan, deferred compensation, stock options, and
other distributions subject to special tax benefit.
If the annual additions to a Participant's account will exceed the
limitation imposed above in this Section 7.7, such additions shall be reduced
to the extent necessary to bring them within the limitation by making
reductions in the Participant's allocable share of Company contributions and
forfeitures.
If a Participant is also participating in any other defined
contribution plans (as defined in ERISA) maintained by the Company, the annual
additions made on behalf of the Participant under any such other plans shall be
aggregated with the annual additions under this Plan and such aggregate amount
shall not exceed the limitation set forth above in this Section 7.7. If
reduction is required, the Participant's contributions under other plans shall
be returned to him and, if that is not sufficient (or there were no such
contributions), the reduction shall be accomplished as described in the
preceding paragraph.
If a Participant is also participating in one or more defined benefit
plans (as defined in ERISA) maintained by the Company, then for any calendar
year the sum of the defined benefit plan fraction and the defined contribution
plan fraction shall not exceed one. Such fractions are defined in the
following paragraph. If the sum of the fractions indicates that a reduction in
annual additions to a Participant's account is required, such reduction shall
be accomplished as provided above in this Section.
The "defined benefit plan fraction" means a fraction in which (a) the
numerator is the total projected annual benefit of the Participant under all
defined benefit plans maintained by the Company and (b) the denominator is the
lesser of (i) 1.25 multiplied by the dollar limitation in effect under Section
415(b)(1)(A) of the Internal Revenue Code for such year or (ii) 1.4 multiplied
by 100% of the Participant's average compensation for his high three years.
Both numerator and denominator are determined as of the close of the pertinent
calendar year. The numerator is determined using the assumptions that the
Participant will continue employment until normal retirement age according to
the Plan and that his compensation and all other relevant factors used to
determine benefits remain constant as they are for the current year. The total
projected annual
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<PAGE> 20
benefit used in the numerator shall be adjusted for the age at which benefit
payments commence in accordance with Section 415(b)(2)(C), (D), and (E) of the
Internal Revenue Code. For purposes of applying the limitation test, annual
benefits in forms other than a straight life annuity shall be actuarially
adjusted to the equivalent of such annuity.
The "defined contribution plan fraction" means a fraction in which (c)
the numerator is the sum of the annual additions to the Participant's account
under all defined contribution plans maintained by the Company as of the close
of the year, and (d) the denominator is the sum of the lesser of (i) or (ii)
(set forth below) determined for the year and for each prior Year of Service
with the Company where (i) is 1.25 multiplied by the dollar limitation in
effect under Section 415(c)(l)(A) of the Internal Revenue Code for such year
(disregarding subsection (c)(6) thereof) and (ii) is the product of 1.4
multiplied by 25% of the Participant's compensation for the year (as determined
in accordance with Section 415(c)(1)(B) of the Internal Revenue Code).
7.8 Top-Heavy Provisions. In the event this Plan becomes "top-heavy"
within the meaning of Section 416(g) of the Internal Revenue Code, the
following provisions with respect to, minimum benefits, and limitations on
includable compensation shall take effect and remain in effect during such time
as the Plan is top-heavy:
Minimum Benefits: The Company shall contribute annually for each
Participant who is a non-key employee (within the meaning of Section 416(i)(1)
and (2) of the Internal Revenue Code) an amount which is not less than 3% of
such Participant's compensation (within the meaning of Section 415 of the
Internal Revenue Code). Notwithstanding the foregoing sentence, the percentage
referred to therein shall not exceed the percentage at which contributions are
made (or required to be made) under the Plan for the key employee within the
meaning of Section 416 of the Internal Revenue Code for whom such percentage is
the highest for the year. Such highest percentage shall be determined for each
key employee by dividing the contributions for such key employee by that
portion of his total compensation for the year which is not more than the OBRA
'93 Annual Compensation Limit. For purposes of this paragraph, all defined
contribution plans required to be included in an "aggregation group" pursuant
to Section 416(g)(a)(A)(i) of the Internal Revenue Code shall be treated as one
plan. This paragraph shall not apply to any plan required to be included in an
aggregation group if such plan enables a defined benefit plan required to be
included in such group to meet the non-discrimination requirements of Section
401(a)(4) or the participation requirements of Section 410 of
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<PAGE> 21
the Internal Revenue Code. Any Company contribution attributable to a salary
reduction plan or similar arrangement shall not be taken into account for
purposes of Section 416(c)(2) of the Internal Revenue Code.
Adjustment of Section 415 Limitations: While this Plan is top-heavy,
the factor of 1.0 shall be substituted for 1.25 for purposes of computing
denominators of the fractions pursuant to Section 415(e) of the Internal
Revenue Code. Such substitution shall not be made if the Plan provides minimum
contributions in the amount of 4% of each Participant's compensation and if the
Plan would not be top-heavy if 90% were substituted for 60% in the tests for
top-heaviness set forth in Section 416(g). Further, the substitution of 1.0
for 1.25 shall be suspended with respect to any Participant so long as there
are no Company contributions or forfeitures allocated to him. If the
substitution applies, the dollar amount in the numerator of the "transition
fraction" pursuant to Section 415(e)(6) shall be changed from $51,875 to
$41,500.
In General: The Committee shall comply with regulations issued to
prevent inappropriate omissions or avoid duplication of minimum benefits or
contributions in instances where the Company has two or more plans subject to
consideration. For purposes of determining the amount of the account of any
Participant, such amount shall be increased by the aggregate distributions made
with respect to such Participant under the Plan during the 5-year period ending
on the determination date.
The term "determination date" means with respect to any Plan Year the
last day of the preceding Plan Year.
ARTICLE 8
Benefits
8.1 Normal Distribution. A Participant shall be entitled to receive
without forfeiture the then undistributed balance in his account in the event
that (a) he retires on or after age 60, (b) he becomes permanently and totally
disabled (as determined by the Committee) or (c) his employment is terminated
by the Company unless such termination is for cause. The term "for cause" as
used in this Plan means any of the following:
(i) conviction of a felony;
(ii) gross negligence in performance of duties; or
(iii) knowingly engaging in wrongful misconduct which
results in substantial damage to the Company.
8.2 Distribution Upon Death. Upon the death of a Participant prior
to final distribution of any amount remaining to his credit, the full value of
such amount shall be distributed to the Participant's surviving spouse
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or if there is no surviving spouse, to any beneficiary or beneficiaries
designated in accordance with Section 3.2. In the absence of a valid
designation of beneficiary, any benefits payable upon death shall be
distributed by the Trustee to the estate of the Participant.
8.3 Distribution Upon Termination of Employment. A Participant who
terminates employment for reasons other than (a) retirement at or after age 60,
(b) total and permanent disability, or (c) termination by the Company (unless
such termination is for cause) shall be entitled to receive a percentage of his
account based upon his completed years of Continuous Service, as defined in
Section 1.4, in accordance with the following vesting schedule:
<TABLE>
<CAPTION>
YEARS OF CONTINUOUS SERVICE APPLICABLE PERCENTAGE
<S> <C>
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
</TABLE>
8.4 Payment of Benefits. The benefits provided pursuant to Sections
8.1, 8.2, and 8.3 shall be distributed to each Participant or beneficiary in a
lump sum. Such benefits may be distributed in cash or Company Stock, as the
Participant shall elect. Distribution of the account balance to which a
Participant or his beneficiary is entitled shall be accomplished no later than
the 60th day after the close of the Plan Year in which the Participant retires,
becomes permanently and totally disabled, or terminates his employment, unless
the Participant requests a later date in a signed written statement submitted
to the Committee.
Notwithstanding any other provision of this Plan, the entire interest
of a Participant shall be distributed in conformity to Sections 401(a)(9) and
409(o) of the Internal Revenue Code.
As required by Section 401(a)(9) of the Code, distribution to a
Participant must be made no later than April 1 in the calendar year following
the calendar year in which the Participant attains age 70-1/2.
As required by Section 409(o) of the Code, unless a Participant
otherwise elects, distribution of the Participant's account will be made not
later than one year after the close of the Plan Year in which the Participant
retires after attaining age 60, becomes permanently and totally disabled, or
dies or not later than one year after the close of the fifth Plan Year
following the Plan Year in which the Participant terminates employment, unless
the Participant is reemployed by the Company within one year. For purposes of
the
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preceding sentence, a Participant's account shall not be considered to include
Company Stock which was acquired with proceeds of an exempt loan until the
close of the Plan Year in which the exempt loan is repaid in full.
8.5 Direct Rollovers.
(a) This Section 8.5 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 8.5, 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.
(b) An Eligible Rollover Distribution is any distribution of all
or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated beneficiary,
or for a specified period of 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).
(c) 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.
(d) A Distributee includes a Participant or former Participant.
In addition, the Participant's or former Participant's
surviving spouse and the Participant's or former Participant'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.
(e) A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
8.6 Payment of Benefits: Incompetency. In the event a Participant or
beneficiary is declared an incompetent and a conservator or other person
legally charged with his care is appointed, any benefits to which such
Participant or beneficiary is entitled shall be payable to such conservator or
other person legally charged with his care. When a Participant or beneficiary
is unable to manage his affairs, but there has been no judicial determination
of incompetency, the Committee shall make such disposition of his benefits as
it
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shall deem to be in the best interests of the Participant or beneficiary, and
the Trustee shall be directed by the Committee to make payments accordingly.
ARTICLE 9
Amendment, Transfer and Termination
9.1 Amendment. The Company shall have the right at any time, and from
time to time, to amend, in whole or in part, any or all of the provisions of
the Plan. Any amendment shall be made in writing and shall be approved by the
Board of Directors of the Company and signed by one or more duly authorized
officers of the Company. However, no such amendment shall authorize or permit
any part of the Trust Fund to be used for or diverted to purposes other than
for the exclusive benefit of the Participants or their beneficiaries or permit
any portion of the Trust Fund to revert to or become the property of the
Company.
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 7.9 hereof,
each Participant who has 5 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 is effective or the change becomes
operative, or
(3) 60 days after the Participant is issued written notice of the
amendment or change by the Committee.
However, no amendment may be made to the Plan unless in compliance
with section 411(d)(6) of the Internal Revenue Code, which generally prohibits
any decrease in a Participant's account balance or elimination of an optional
form of distribution.
Notwithstanding anything in this Section 9.1 to the contrary, those
portions of this Plan which constitute a formula that determines the amount,
price and timing of grants or awards of equity securities of the Company to an
Officer/Director Participant, may not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code, ERISA
or the rules thereunder.
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No amendment which affects the rights, duties or responsibilities of
the Trustee may be made without the Trustee's written consent. Any such
amendment shall become effective upon delivery to the Trustee of a written
instrument authorized by the Board of Directors and executed by the Company and
that Trustee.
9.2 Transfer of Assets. The 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 or beneficiary 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 beforehand,
assuming for purposes of this test that this Plan had terminated immediately
before and the successor plan had terminated immediately after the transaction
in question.
9.3 Termination: Discontinuance of Contributions. The Company has
the right pursuant to resolution of its Board of Directors to suspend its
contribution hereunder for any period of time or to terminate this Plan. In
such event the Company shall deliver to the Trustee and the Committee written
notice of such suspension of contributions or termination.
In the event of termination of the Plan the Company shall direct the
Trustee with respect to providing for the expenses of the Plan and allocating
assets in the manner prescribed by ERISA. Upon the termination or partial
termination of the Plan or upon complete discontinuance of contributions
hereunder by the Company, Participants' accounts shall be nonforfeitable.
ARTICLE 10
Miscellaneous Provisions
10.1 Coverage of Employees of Subsidiaries and Newly Acquired
Facilities. The Committee shall have the power to authorize participation in
the Plan by any subsidiary corporation affiliated with the Company within the
meaning of Section 1504 of the Internal Revenue Code. Subject to receipt of
written authorization and approval from the Committee, any such subsidiary by
resolution of its own Board of Directors may adopt the Plan. From and after
the date as of which such subsidiary shall adopt the Plan, it shall be included
within the meaning of the word "Company" for all purposes hereunder, except
that the provisions of Article 2 (pertaining to the appointment of the
Committee) and Article 9 (pertaining to amendments to or termination of the
Plan) shall apply only to Acme Metals Incorporated unless expressly provided
therein to the contrary.
The Committee shall also have the power to designate groups of
employees of any such subsidiary or newly acquired facility as "employees"
within the meaning of Section 1.6 and to designate the periods of
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<PAGE> 26
continuous service recognized under Sections 1.4 and 3.1 for employees of
subsidiaries or newly acquired facilities who become covered by this Plan.
Actions by the Committee pursuant to this Section 10.1 shall be taken
on a non-discriminatory basis and shall be consistent with the requirements of
Sections 401(a) and 410(b) of the Internal Revenue Code and regulations
thereunder.
10.2 Participants' Rights, Acquittance. Neither the adoption of the
Plan, nor any modification thereof, nor the creation of the Trust Fund or any
account in connection with the Plan, nor the payment of any benefits, shall be
construed as giving to any Participant or other person any legal or equitable
right against the Company, or any officer or employee thereof or against the
Committee or the Trustee, except as herein provided. Under no circumstances
shall the terms of employment of any Participant be modified or in any way
affected hereby.
10.3 Spendthrift Clause. The benefits, payments, proceeds, claims or
privileges of any Participant or his beneficiaries hereunder shall not be
subject to attachment or garnishment or other legal process by any creditor of
any such Participant or beneficiary, nor shall any such Participant or
beneficiary have any right to alienate, anticipate, commute, pledge, encumber,
or assign any of the benefits or payments or proceeds which he may expect to
receive, contingently or otherwise, under this Plan, provided, however, that
such restriction on alienation shall not apply in the case of a qualified
domestic relations order as defined in Section 414(p) of the Internal Revenue
Code.
10.4 Delegation of Authority by the Company. Whenever the Company
under the terms of this Plan is permitted or required to do or perform any act,
it shall be done or performed by an officer thereunto duly authorized by the
Board of Directors of the Company.
10.5 Construction. This Plan shall be construed according to the
laws of the State of Illinois, and all provisions hereof shall be administered
according to, and its validity shall be determined under, the laws of such
state to the extent such laws are not preempted by ERISA.
10.6 Gender, Number and Headings. Wherever any words are used herein
in the masculine gender they shall be construed as though they were also used
in the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
Headings of sections of this Plan are inserted for convenience or reference and
are not part of this Plan and are not to be considered in the construction
hereof.
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10.7 Limitation of Liability and Exhaustion of Remedies. Except for
willful misconduct or fraud and except as provided by ERISA, neither the
Company, the Committee, nor the Trustee shall be subject to any liability in
connection with this Plan. No proceeding for the purpose of obtaining a
determination by a court with respect to any question affecting this Plan or
any rights hereunder may be commenced unless such question has been presented
in writing to the Committee, accompanied or supplemented by such supporting
information as the Committee may reasonably require, and the Committee has had
an opportunity to render a decision and, if requested, to conduct a full and
fair review of such decision rendered, all in accordance with Section 2.5
hereof.
In any action or proceeding involving Plan assets or any property
constituting part or all thereof, or the administration thereof, employees or
former employees of the Company or their beneficiaries or any other person
having or claiming to have an interest in this Plan or in Plan assets shall not
be necessary parties and shall not be entitled to any notice of process.
Any final judgment which is not appealed or appealable that may be
entered in any such action or proceeding shall be binding and conclusive on the
parties hereto and all persons having or claiming to have any interest in the
Plan or the Trust Fund.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
by its duly authorized officers on this 16th day of November,
1995, to be effective as of September 1, 1995.
ACME METALS INCORPORATED
By: /s/ Jerry F. Williams
---------------------
Its: Vice President
---------------------
ATTEST:
By: /s/ Martha M. Hosp
-------------------------
Its: Assistant Secretary
------------------------
Page 24
<PAGE> 1
ACME METALS INCORPORATED
SALARIED EMPLOYEES' RETIREMENT SAVINGS PLAN
RESTATED EFFECTIVE SEPTEMBER 1, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Appointment of Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Immunity of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Claims and Review Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Rights of Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Certification of Participation and Compensation to Committee . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Determination of Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Loss of Participation Eligibility with Continued Employment . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Definition: Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Form of Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Determination of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Payment of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Non-Reversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Withdrawal from Accounts During Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 Investment Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Manner of Making Directions; New Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Change of Investment Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 5 401(k) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Qualified Elective Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Payment of Qualified Elective Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Excess Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Distribution of Excess Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Distribution of Excess Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Earnings on Amounts Distributed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Withdrawal from 401(k) Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Withdrawal of Voluntary Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9 Withdrawal by Officer or Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 6 Allocation of Increases or Decreases In Net Worth of the Trust Assets and
Maintenance of Participants' Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Maintenance and Adjustment of Participants' Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
6.2 Allocation of Earnings and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Limitations on Annual Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 7 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 Normal Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 Distribution Upon Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Distribution Upon Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Allocation of Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Payment of Benefits; Incompetency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.8 Continuous Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 8 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Appointment of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Establishment of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Division of Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 9 Loans to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.3 Application Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4 Basis of Loan Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.5 Limitations on Amounts of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.6 Procedure for Determining Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.7 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.8 Accounting for Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.9 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 10 Amendment, Transfer and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Termination; Discontinuance of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 11 Coverage of Employees of Subsidiaries and Newly Acquired Facilities . . . . . . . . . . . . . . . . 31
ARTICLE 12 Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.1 Participants' Rights, Acquittance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.2 Spendthrift Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.3 Delegation of Authority by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.4 Construction of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.5 Gender and Number; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.6 Limitation of Liability; Exhaustion of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
ii
<PAGE> 4
ACME METALS INCORPORATED
SALARIED EMPLOYEES' RETIREMENT SAVINGS PLAN
THIS AMENDMENT made this ________ day of ____________, 1995, effective
as of September 1, 1995, by ACME METALS INCORPORATED, a Delaware corporation
(the "Company"),
W I T N E S S E T H:
WHEREAS, the Acme Steel Company Salaried Employees' Retirement Savings
Plan was amended and restated effective as of January 1, 1990, and was
subsequently amended by Amendments 1 through 4;
WHEREAS, Acme Steel Company assigned the Plan to the Company and the
Company assumed and adopted the Plan effective June 1, 1992;
WHEREAS, the Plan was thereafter amended by Amendments 5 and 6;
WHEREAS, the Company restated the Plan in its entirety effective as of
January 1, 1994, to incorporate all amendments to the Plan;
WHEREAS, the Plan was thereafter amended by Amendment No. 1;
WHEREAS, beginning with the transfer of funds to Vanguard Fiduciary
Trust Company (the "Trustee") effective as of August 31, 1995, the trustee,
record keeping and investment services to the Plan will be provided by The
Vanguard Group of Investment Companies, Inc., and its affiliates; and
WHEREAS, the Company desires to amend and restate the Plan to
incorporate certain of the record keeping service offerings of the Vanguard
Group of Investment Companies, Inc., and certain other design features adopted
by the Company;
NOW, THEREFORE, the Company amends and restates the Plan in the
following form effective as of September 1, 1995, except that certain features
will not be available during a transition period required for a final
accounting of assets from the former recordkeeper:
ARTICLE 1
Administrative Committee
1.1 Appointment of Administrative Committee. The Plan shall be
administered by an administrative committee consisting of not less than six
persons nor more than 10 (the "Committee") who shall be appointed by the Board
of Directors of the Company. The Board shall have full power to determine the
period during which any Committee member shall 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 shall automatically cease to be a member of the Committee on
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<PAGE> 5
termination of his employment. An officer of the Company shall certify to the
Trustee the names of the members of the Committee and thereafter any change in
its membership.
1.2 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, shall 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, shall 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 shall notify the Trustee in writing of such action and of the name or
names of its member or 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 shall file with the
Trustee a written revocation of such designation.
1.3 Powers and Duties. The Committee shall be charged with the
administration of this Plan and its duties shall 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 shall 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 Committee may adopt and amend, from time to time, rules of uniform
application (l) changing the frequency of changes in investment direction as
provided in Section 4.3, (2) changing the frequency of withdrawals of
contributions as provided in Section 3.7 and (3) changing the frequency of
changes in the rate of voluntary contributions as provided in Section 5.1.
The Plan shall be administered in accordance with the Employee
Retirement Income Security Act of 1974, Public Law 93-406 ("ERISA"), the Tax
Equity and Fiscal Responsibility Act of 1982, Public Law 97-248, ("TEFRA") the
Deficit Reduction Act of 1984, Public Law 98-369 ("DEFRA"), the Retirement
Equity Act of 1984, Public Law 98-397 ("REA"), the Tax Reform Act of 1986,
Public Law 99-514 ("TRA"), and the applicable provisions of the Internal
Revenue Code of 1986 as heretofore or hereafter amended (the "Internal Revenue
Code"), as all may be amended from time to time, and in conformity to
regulations and rulings issued pursuant to such laws.
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<PAGE> 6
Within the scope of authority conferred upon it by this document and
consistent with the provisions of ERISA, the Committee shall 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 of the Committee to any case.
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 shall be entitled to rely upon and shall be fully protected in
any action taken by it in good faith in reliance upon and in accordance with
any opinions or reports furnished to it by any such accountant, counsel or
other specialist.
1.4 Immunity of Committee. To the extent permitted by ERISA, each
member of the Committee, whether or not then in office, shall 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 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 shall 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 the Committee properly and actually
incurred shall be paid by the Company. Members shall not be required
individually to furnish bonds or other security for faithful performance of
their duties. The Company shall furnish bonding as required by ERISA.
1.5 Claims and Review Procedures. If any difference shall arise
between the Company and any Participant who shall be an applicant for a
benefit, or to whom an account balance may be distributable, as to such
Participant's right to a benefit or the amount of his distribution and
agreement cannot be reached between the Company and the Participant, the
Participant or his authorized representative shall file a claim for a
distribution in the manner and on the forms provided by the Committee. The
Committee shall decide on the merits of such claim within 60 days after receipt
of the claim. The Participant and his authorized representative, if any, shall
be notified in writing of a favorable decision. If a claim is wholly or
partially denied, notice of the decision shall be furnished within 60 days
after receipt of the claim by the Committee. Such notice shall be written in a
manner calculated to be understood by the claimant and shall include:
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<PAGE> 7
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the
denial is based;
(c) 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
(d) 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 shall be deemed denied for purposes of proceeding to review
as described herein. A claimant whose claim for benefits is denied in whole or
in part or his authorized representative may:
(a) 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;
(b) review pertinent documents in the Company's offices;
(c) submit positions on issues and comments in writing;
(d) in the Committee's discretion, make an oral presentation
before the Committee.
The Committee shall promptly review each denial of a claim upon which an
application for review is submitted. Such review shall 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 shall be
rendered as soon as possible, but not later than 120 days after receipt of a
timely request for review. The decision on review shall be in writing and
shall include specific reasons for the decision, written in a manner calculated
to be understood by the claimant, and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE 2
Eligibility
2.1 Eligibility. Each regular full-time employee shall become
eligible to participate in the Plan on the April 1, July 1, October 1, or
January 1 coinciding with or next following the date on which he completes
three months of continuous service with the Company following his most recent
date of hire. For the purpose of calculating three months of continuous
service with the Company, an employee's continuous employment with any
predecessor employer designated by the Committee shall be taken into account.
4
<PAGE> 8
Each part-time or temporary employee shall become eligible to
participate in the Plan on the April 1, July 1, October 1, or January 1
coinciding with or next following the date on which he completes a Year of
Service with the Company following his most recent date of hire. For the
purpose of calculating a Year of Service in the preceding sentence, each
employee's continuous employment with any predecessor employer designated by
the Committee shall be taken into account.
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 April 1, July 1, October 1 or January 1
coinciding with or next following his reemployment date.
2.2 Definitions. The term "employee" means any salaried person
employed by the Company and any other person in a group designated by the
Committee to be considered "employees" under the Plan as provided in Article
11. The term "employee" also includes employees who are also directors. The
term "regular full-time employee" means any employee who regularly works a
normal schedule of 40 hours per week. The term "part-time employee" means any
employee who regularly works a normal schedule of less than 40 hours per week.
The term "temporary employee" means any employee hired to work a normal
schedule of 40 hours per week during a period of fixed or limited duration
which does not exceed 12 months.
The term "Year of Service" means any 12-month period during which the
employee completes at least 1,000 Hours of Service.
The term "Hour of Service" means each period of 60 minutes of
employment with the Company for which (a) an employee is directly or indirectly
paid, or entitled to payment, for the performance of duties or for reasons
other than the performance of duties or for which (b) back pay, irrespective of
mitigation of damages, has either been awarded or agreed to by the Company.
When required in determining eligibility, Hours of Service shall be credited to
the employee under (a) for the period in which the duties were performed and
under (b) for the period or periods to which the award or agreement pertains
rather than the period in which made, but Hours of Service shall not be
credited more than once with respect to the same 60-minute period or periods of
employment. Hours under this paragraph shall be calculated and credited
pursuant to Section 2530.200b-2 of the Department of Labor Regulations.
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:
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<PAGE> 9
(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 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
Compensation 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 Plan Year. 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
6
<PAGE> 10
termination of employment with the Company, or such
Employee was a Highly Compensated Employee at any
time after attaining age 55.
(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. Section
1.414(q)-1T 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.
2.3 Rights of Spouse. On the death of a Participant, the full value
of any benefits available under the Plan shall be distributed to the
Participant's surviving spouse in accordance with Section 7.5 or, if the
Participant is not survived by a spouse, to the beneficiary or beneficiaries as
the Participant shall have designated on forms provided by and filed with the
Committee. Notwithstanding the foregoing sentence, a Participant may elect to
designate another person or persons as beneficiary if the Participant's spouse
consents in writing. In such written consent, the spouse shall acknowledge the
effect of the election. The spouse's signature on the consent must be
witnessed by a notary public or a representative of the Committee. The
Committee may accept designation of a non-spouse beneficiary without such
consent if the Participant establishes to the Committee's satisfaction that
there is no spouse or the spouse cannot be located. A consent shall be valid
only as to the spouse who signed the consent. Another written consent as
specified above is required for each subsequent change of beneficiary.
2.4 Certification of Participation and Compensation to Committee. The
Company, within a reasonable time after the last day of each payroll period,
shall certify to the Committee (a) the names of all Participants as of such
last day, (b) the earnings (as defined in Section 3.2) of each Participant for
such payroll period, and (c) the amount of the Company's contribution for the
payroll period with respect to such Participants as provided in Section 3.1
hereof.
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<PAGE> 11
2.5 Determination of Eligibility. The Committee shall determine the
eligibility of each employee for participation in the Plan. Subject to Section
1.5, such determination shall be conclusive and binding upon all persons.
2.6 Loss of Participation Eligibility with Continued Employment. If a
Participant ceases to be an "employee" as defined in Section 2.2, but continues
in the employ of the Company or a member of the controlled group of
corporations or businesses of which the Company is a member, his participation
in the Plan shall be suspended. During the period of any such suspension, the
Participant shall not be entitled to make any contributions to the Plan nor
shall any contributions be made thereto on his behalf. The account balance of
any such Participant shall be held in trust until distributed on account of
retirement, disability, death, termination of employment or otherwise. In the
event any such Participant shall again become an "employee" as defined in
Section 2.2, the suspension shall immediately cease.
ARTICLE 3
Company Contributions
3.1 Formula. For each payroll period the Company shall contribute to
the Trust an amount equal to 7-1/2% of each Participant's earnings (as such
term is hereinafter defined) during such payroll period on behalf of each
Participant. The Company intends that its contributions will normally be made
from its current or accumulated profits, but the existence of current or
accumulated profits shall not be a prerequisite for the Company's contribution
for any payroll period.
A portion of the contribution made by the Company each payroll period
on behalf of each Non-Highly Compensated Participant shall be allocated to each
such Participant's 401(k) fund (as defined in Section 6.2). That portion for
each payroll period shall be equal to the lesser of 2% of each Non-Highly
Compensated Participant's earnings for the payroll period or the entire
contribution made by the Company on behalf of the Participant for the payroll
period. The balance of the Company's contribution for the payroll period, if
any, shall be allocated to each Participant's retirement savings fund (as
defined in Section 6.2). The portion of the Company contribution allocated to
such Participant's 401(k) fund shall be treated as a qualified nonelective
contribution under Section 5.3 in any Plan Year in which the requirements of
Income Tax Regulations Section 1.401(k) - 1(b)(5) are satisfied with respect
to such contribution and in which the qualified nonelective contribution is
required to prevent excess contributions from occurring.
3.2 Definition: Earnings. The term "earnings" as used herein shall
mean wages, salary, commissions, overtime, incentive or bonus pay for services
rendered to the Company, excluding (a) any payments for supplemental sickness
and accident benefits payable under a program benefiting salaried employees of
the
8
<PAGE> 12
Company, (b) any payments by the Company (or debits) representing unused
credits (or debits) under any program of flexible benefits utilizing an
individual spending account for each Participant, provided, however, that
amounts which a Participant elects to have credited to his account under a plan
meeting the requirements of Section 125 of the Internal Revenue Code shall not
be excluded from the definition of earnings of the Participant but shall be
treated as earnings for purposes of this Plan, (c) contributions by the Company
to any public or private employee pension, profit sharing plan or employee
stock ownership plan made on behalf of a Participant, provided, however, that
qualified elective contributions under Article 5 of this Plan shall not be
excluded from the definition of earnings of a Participant but shall be treated
as earnings for purposes of this Plan, (d) any income or gain received by or
imputed to a Participant in respect of a stock option (or the receipt or sale
of stock acquired pursuant thereto) or of a stock appreciation right, a stock
award, or restricted stock purchase, or under any compensation plan unless such
plan provides for payment in cash only, provided, however, that payments of
awards in the form of common stock or other securities of the Company under the
Company's Executive Incentive Compensation Plan shall not be excluded from the
definition of earnings of a Participant, (e) any amounts which the Company is
prohibited by Section 415 of the Internal Revenue Code from contributing to a
Participant's account, (f) severance payments or premium reimbursements by the
Company, and (g) any other non-payroll income item received from the Company.
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 earnings of each Participant
taken into account under the Plan shall not exceed the OBRA '93 Annual
Compensation Limit. The OBRA '93 Annual Compensation Limit is $150,000, as
adjusted by the Commissioner of Internal Revenue 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 earnings are 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 Internal Revenue
Code shall mean the OBRA '93 Annual Compensation Limit set forth in this
provision.
If earnings for any prior determination period are taken into account
in determining a Participant's benefits accruing in the current Plan Year, the
earnings for that prior determination period are subject to the
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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.
3.3 Form of Company Contributions. The Company's contributions
hereunder may be in the form of cash or other property, including stock of the
Company, or any subsidiary of the Company. The value of property contributed
under the provisions of this Section 3.3 shall be its fair market value at the
time it is contributed.
3.4 Determination of Contributions. The Company shall determine and
certify to the Committee the amount of any contribution made by it under the
terms of this Plan and such determination shall be binding on all Participants,
the Committee, and the Company.
3.5 Payment of Contributions. The contribution for each payroll
period shall be paid to the Trustee within 60 days after the close of the
calendar quarter in which the payroll period ended.
3.6 Non-Reversion. In no event shall the principal or income of the
Trust be paid to or revert to the Company, or be used for any purpose
whatsoever other than for the exclusive benefit of the Participants or their
beneficiaries.
3.7 Withdrawal from Accounts During Employment. A Participant may, by
a request filed in writing with the Committee at least 30 days (or such shorter
period as the Committee shall establish) in advance, elect to make withdrawals
from the vested portion of his retirement savings fund in accordance with the
following rules:
(a) With respect to the portion of his account attributable to
Company contributions made with respect to his earnings prior
to January 1, 1982, a Participant may withdraw all or any part
thereof.
(b) With respect to the portion of his account attributable to
Company contributions made to the Participant's account with
respect to his earnings after January 1, 1982, a Participant
may make a withdrawal, with the approval of the Committee, for
the purpose of (i) paying medical expenses arising from
accident, sickness or disability incurred by the Participant
or a member of his family, (ii) paying post-secondary
educational expenses of the Participant or a member of his
family, or (iii) purchasing a primary residence of the
Participant. Withdrawals under this subparagraph (b) shall be
limited to 40% of that portion of the Participant's account
attributable to Company contributions with respect to the
Participant's earnings after January 1, 1982 which is vested
in accordance with Section 7.3. The Committee shall not
approve such withdrawals more frequently than annually.
(c) Notwithstanding anything in this Section 3.7 to the contrary,
any Participant who is an "officer or director," as those
terms are defined under Section 16 of the Securities Exchange
Act of
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1934 ("Officer/Director Participant"), who elects to make a
withdrawal from the portion of his retirement savings fund
primarily invested in common stock of the Company (the
"Company Stock Fund"), other than in connection with a
disability, shall be suspended from the Company Stock Fund for
a six- month period following the date of such withdrawal
during which period of suspension, the Officer/Director
Participant shall not be entitled to make any contributions to
the Company Stock Fund nor shall any contributions be made
thereto on his behalf.
Withdrawals under this Section shall be distributed in cash. The claims and
review procedure set forth in Section 1.5 shall apply to any request by a
Participant for a withdrawal under this Section 3.7 which is denied in whole or
in part by the Committee. The Committee shall have sole discretion to
interpret this Section 3.7. The Committee's decision on review of the
Participant's appeal shall be final and binding on all persons and shall be
upheld on review unless determined to be arbitrary or capricious.
ARTICLE 4
Investment Directions
4.1 Investment Funds. Company contributions to the retirement savings
fund, qualified nonelective deferrals and qualified elective deferrals
allocated to the 401(k) fund and (prior to January 1, 1989) each Participant's
voluntary contributions shall be invested by the Trustee as a single trust in
one or more of such funds as the Committee shall from time to time make
available. The Committee shall make available at least four funds one of
which will be a money market fund.
4.2 Manner of Making Directions; New Participants. Each new
Participant in the Plan shall file an investment direction with the Committee
at least 30 days (or such shorter period as the Committee shall establish)
prior to the date on which he becomes eligible to participate. In the absence
of such direction, the Committee shall file a direction with the Trustee on
behalf of the Participant directing that contributions under Sections 3.1 and
5.1 be invested in the money market fund.
4.3 Change of Investment Direction. A Participant may change his
investment direction at such time and in such manner as the Committee shall
establish. Notwithstanding anything in this Section 4.3 to the contrary, any
Officer/Director Participant who desires to change his investment direction
either from or into the Company Stock Fund may do so only during a period
beginning on the third business day following the date of release for
publication by the Company of quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date. In no
event shall an Officer/Director Participant make such a new investment
direction within six months after the date of his most recent previous
investment direction. A change in investment direction may apply to the
Participant's existing account as of such date or to future contributions made
under Sections 3.1 and 5.1, or both, as he may elect.
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ARTICLE 5
401(k) Contributions
5.1 Qualified Elective Contributions. A Participant may elect to
reduce his earnings for each payroll period by a specified percentage not less
than one-half of 1% nor more than 10% of his earnings for the period. The
Company shall contribute the amount so elected (referred to herein as
"qualified elective contributions") to the Trustee to be allocated to each
Participant's 401(k) fund (as defined in Section 6.2). Once each quarter a
Participant may change the rate of qualified elective contributions or may
discontinue qualified elective contributions which shall be effective no later
than the beginning of a payroll period which is within 30 days after the change
notice is given. Qualified elective contributions and any increase or decrease
in the amount of a Participant's qualified elective contributions shall be made
in increments of one-half of 1% of his earnings. A Participant's qualified
elective contributions during any taxable year of the Participant shall not
exceed $7,000 or such higher amount as is permitted from time to time by
regulations of the Secretary of the Treasury. The Committee in its discretion
may prospectively decrease the rate of qualified elective contributions of any
Participant at any time in order to prevent qualified elective contributions in
excess of the amount permitted in the preceding sentence (hereinafter referred
to as "excess deferrals") or to satisfy the nondiscrimination test set forth
below in Section 5.3.
5.2 Payment of Qualified Elective Contributions. Qualified elective
contributions shall be paid by the Company to the Trustee not later than 60
days following the last day of the payroll period to which they relate, and in
no event shall such payments be made later than the date for filing the
Company's income tax return for the Plan Year to which they relate.
5.3 Excess Contributions. The term "excess contributions" means the
amount of qualified elective contributions of Highly Compensated Participants
in excess of the amount permitted under the terms of this Section 5.3. Highly
Compensated Participants' qualified elective contributions shall be treated as
excess contributions in any Plan Year to the extent that the average
contribution percentage of Highly Compensated Participants is more than the
greater of (a) one and one-quarter times or (b) two times (provided that the
difference between the average contribution percentage of Highly Compensated
Participants and the average contribution percentage of Non-Highly Compensated
Participants does not exceed two percentage points) the average contribution
percentage of Non-Highly Compensated Participants. If a Participant is a
Highly Compensated Participant in two or more plans which allow for qualified
elective contributions, the qualified elective contributions under all the
plans shall be aggregated for the purpose of determining the average
contribution percentage of Highly Compensated Participants under this Plan.
The term "average contribution
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percentage" with respect to Highly Compensated Participants means the average,
calculated separately, of the rate of each such Participant's qualified
elective contributions, and with respect to Non-Highly Compensated Participants
means the average, calculated separately, of the rate of each such
Participant's qualified nonelective contributions (if taken into account in the
Plan Year as provided in Section 3.1) and qualified elective contributions.
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. Section 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.
5.4 Distribution of Excess Contributions. The Committee shall
determine the amount of each Participant's excess contributions by reducing the
contribution percentages of Highly Compensated Participants in the order of
size of the contribution percentage until the average contribution percentage
of Highly Compensated Participants is equal to the level permitted by the
preceding Section. In the event that excess contributions are made with
respect to any Participant in any Plan Year, the Committee may, within 2-1/2
months after the end of the Plan Year in which the excess contribution is made,
recharacterize all or any part of a Participant's excess contribution as a
voluntary contribution and shall allocate the amount so recharacterized to the
participant's voluntary fund. Any excess contribution which is not
recharacterized shall be distributed to the Participant within 2-1/2 months
after the end of the Plan Year in which the excess contribution is made. If
the Committee fails to recharacterize or distribute all or any portion of an
excess contribution within the 2-1/2 month period following the end of the Plan
Year in which the excess contribution is made, it shall distribute such amount
to the Participant prior to the end of the Plan Year following the year in
which the excess contribution is made.
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5.5 Distribution of Excess Deferrals. In the event that a
Participant's qualified elective contributions in any taxable year of the
Participant exceed $7,000, or any higher amount permitted by regulations of the
Secretary of the Treasury, the Committee shall direct the Trustee to distribute
the excess deferrals to the Participant on or before the April 15 following the
end of the taxable year in which the excess deferrals were received by the
Trustee. Excess deferrals may be distributed to a Participant in the same
taxable year in which received by the Trustee, provided that the Committee and
the Participant designate the distribution as an excess deferral and the
distribution is made after the date on which the Trustee received the excess
deferral.
5.6 Earnings on Amounts Distributed. Any distribution of excess
contributions or of excess deferrals shall include dividends, interest and
changes in the value of assets attributable to the amount distributed. This
portion of the income (or loss) shall be determined for the Plan Year of the
excess contribution or the Participants' taxable year of the excess deferral by
multiplying the income (or loss) on the Participant's 401(k) fund during the
Plan Year or taxable year in question by a fraction in which the numerator is
the excess amount and the denominator is the balance in the Participant's
401(k) fund as of the end of the Plan Year or taxable year disregarding the
income (or loss) on the 401(k) fund for the year. The amount of income (or
loss) so determined shall be increased by 10% for each complete and partial
calendar month between the last day of the Plan Year or taxable year and the
date of distribution. For this purpose the month in which distribution is made
shall be taken into account if distribution is made after the 15th day of the
month and shall be disregarded if distribution is made on or before the 15th
day of the month.
5.7 Withdrawal from 401(k) Fund. A Participant may, by a request
filed in writing with the Committee at least 30 days (or such shorter period as
the Committee shall establish) in advance, elect to make withdrawals from the
portion of his 401(k) fund consisting of his qualified elective contributions
at any time if necessary to meet an immediate and heavy financial need of the
Participant. A withdrawal will be considered to be for such a need if it is
made for the purpose of (a) paying medical expenses incurred by the Participant
or the Participant's spouse or dependents, (b) paying tuition for the next
semester of post-secondary education for the Participant, his spouse or
dependents, (c) purchasing a principal residence, excluding mortgage payments,
of the Participant, or (d) preventing the eviction of the Participant from his
principal residence or the foreclosure of a mortgage on the Participant's
principal residence.
A withdrawal will be considered necessary to meet the need if (a) the
need cannot be met from insurance proceeds or other reimbursement or
compensation, (b) the Participant's assets and those of his spouse and minor
children that are reasonably available to him are insufficient to meet the need
or, even if sufficient, cannot reasonably be liquidated for that purpose
without causing further hardship, (c) the need
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<PAGE> 18
cannot be met by the Participant's ceasing to make qualified elective
contributions, (d) the available loans and distributions from this Plan or any
other Plan of the Company are inadequate to meet the need and (e) the
Participant is unable to borrow funds from commercial sources on reasonable
commercial terms to meet the need. The Committee shall be permitted to rely on
the Participant's representations as to the existence of the conditions
described above in order to establish the necessity for the withdrawal unless
it appears to the Committee to be unreasonable to do so.
In the event that a Participant makes a withdrawal under this Section
5.7, the following limitations will apply:
(a) The Participant shall not be permitted to elect qualified
elective contributions during the 12-month period following
the withdrawal; and
(b) The Participant's qualified elective contributions during the
Participant's taxable year following the taxable year of his
withdrawal shall not exceed the amount by which the
Participant's qualified elective contributions for the taxable
year of the withdrawal is less than the limit on qualified
elective contributions under Section 402(g) of the Internal
Revenue Code for the subsequent taxable year.
Notwithstanding any other provision of this Plan, if these conditions are
satisfied, the withdrawal will be deemed to be necessary to satisfy the
Participant's need, provided that the amount withdrawn does not exceed the
amount of the need and the Participant has obtained all other distributions and
all nontaxable loans currently available to him under all of the plans
maintained by the Company.
Withdrawals shall not be made under this Section more frequently than
annually.
The claims and review procedure set forth in Section 1.5 shall apply
to any request by a Participant for a withdrawal under this Section 5.7 which
is denied in whole or in part by the Committee. The Committee shall have sole
discretion to interpret this Section 5.7. The Committee's decision on review
of the Participant's appeal shall be final and binding on all persons and shall
be upheld on review unless determined to be arbitrary or capricious.
5.8 Withdrawal of Voluntary Contributions. Participants shall not be
permitted to make voluntary contributions under the Plan after December 31,
1988. The Committee shall continue to maintain a separate record pursuant to
Section 6.2 of the portion of a Participant's account attributable to voluntary
contributions made prior to January 1, 1989 and to recharacterized excess
contributions. At any time a Participant may withdraw all or any part of the
account balance maintained with respect to his voluntary contributions made
prior to January 1, 1989 upon notice in writing delivered to the Committee at
least 30 days (or such shorter period as the Committee shall establish) in
advance of such date. Withdrawals under this Section shall be
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<PAGE> 19
distributed in cash. A Participant shall be deemed to withdraw the portion of
his account represented by his voluntary contributions made prior to January 1,
1989 before withdrawal of any other portion of his account.
5.9 Withdrawal by Officer or Director. Notwithstanding anything in
Sections 5.7 or 5.8 to the contrary, any Officer/Director Participant who
elects to make a withdrawal from the portion of his 401(k) Fund consisting of
his qualified elective contributions, his voluntary contributions made prior to
January 1, 1989 which are invested in the Company Stock Fund, other than in
connection with a disability, shall be suspended from the Company Stock Fund
for a six-month period following the date of such withdrawal during which
period of suspension, the Officer/Director Participant shall not be entitled to
make any contributions to the Company Stock Fund nor shall any contributions be
made thereto on his behalf.
ARTICLE 6
Allocation of Increases or Decreases
In Net Worth of the Trust Assets and
Maintenance of Participants' Accounts
6.1 Maintenance and Adjustment of Participants' Accounts. The
Committee shall maintain a separate record of account for each Participant.
The Committee shall maintain separate accounts of the voluntary fund, the
401(k) fund, and the retirement savings fund. The term "voluntary fund" shall
mean the Participants' voluntary contributions made prior to January 1, 1989,
and recharacterized excess contributions and the net earnings on such voluntary
and recharacterized contributions. The term "401(k) fund" shall mean qualified
nonelective deferrals and qualified elective deferrals by the Company
authorized under Section 401(k) of the Internal Revenue Code and net earnings
thereon. The term "retirement savings fund" shall mean the remainder of the
trust assets which do not comprise the voluntary fund and the 401(k) fund. The
voluntary fund, the 401(k) fund and the retirement savings fund shall not
constitute a segregated fund but each fund shall for accounting and
recordkeeping purposes be treated as though separate from each other fund. The
Committee shall show separately the interest of each Participant in the
respective investment funds of the retirement savings fund, the 401(k) fund and
the voluntary fund. The Committee shall also, for the purpose of withdrawals
under Section 3.7, show separately the various portions of the Participant's
retirement savings fund derived from contributions under the Plan with respect
to his earnings after December 31, 1981 and prior to January 1, 1982.
For purposes of this Article, the terms "account for each
Participant," "Participant's account," "accounts of Participants," "401(k)
account" and similar phrases without limitation shall include the undistributed
account balance of a Participant who shall have retired or terminated his
employment, or any
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undistributed account balance payable to the beneficiary of a Participant who
shall have died, retired or terminated his employment.
6.2 Allocation of Earnings and Losses.
(a) The dividends, capital gains distributions, and other earnings
received on any shares or units of the Vanguard Funds or on
any other Plan investments which are specifically credited or
earmarked to a Participant's account under the Plan shall be
allocated to such account and immediately reinvested, to the
extent practicable, in additional shares or units of such
Vanguard Funds or other earmarked Plan investments.
(b) Any Plan earnings or losses attributable to the investment of
a Participant's account under the Plan in a loan to the
Participant under Article 9 shall be allocated to the
Participant's account in accordance with the provisions of
Article 9.8.
(c) To the extent not otherwise provided in subsection (a) or (b)
above, the assets of the Plan shall be valued at their current
fair market value on periodic valuation dates as determined by
the Committee, which shall occur no less frequently than once
each calendar quarter. On each such periodic valuation date,
the earnings or losses of the Plan since the immediately
preceding periodic valuation date shall be allocated to the
accounts of all Participants and former Participants under the
Plan in the ratio that the fair market value of each such
account as of that immediately preceding valuation date,
reduced by any distributions or withdrawals therefrom since
such preceding valuation date, bears to the total fair market
value of all accounts as of the immediately preceding
valuation date, reduced by any distributions or withdrawals
therefrom since such preceding valuation date.
6.3 Limitations on Annual Additions. Notwithstanding any other
provisions in the Agreement, the sum of the annual additions to a Participant's
account in any form for a calendar year shall not exceed $30,000 (or, if
greater, one quarter of the dollar limitation in effect under Section
415(b)(1)(A) of the Internal Revenue Code) or 25% of the compensation received
by the Participant from the Company within such year, whichever is less.
"Annual additions" means the sum of the following: Company contributions made
on the Participant's behalf, including qualified nonelective contributions and
qualified elective contributions, and forfeitures allocated to the
Participant's account. Annual additions for the purpose of the dollar
limitation set forth above shall also include any amounts allocated to a
separate account under a defined benefit plan if the purpose of such account is
to provide medical benefits after retirement for the Participant, his spouse or
dependents, and such participant is a key employee within the meaning of
Section 416(i)(1) of the Internal Revenue Code. "Compensation" for the
purposes of this Section means salary and other amounts paid for services
rendered which a Participant receives during a calendar year, but not
contributions made for a Participant under any employee benefit plan including
this Plan, deferred compensation, stock options, and other distributions
subject to special tax benefit.
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If the annual additions to a Participant's account will exceed the
limitation imposed above in this Section, such additions shall be reduced to
the extent necessary to bring them within the limitation by making reductions
as follows: the Participant's contributions shall be returned to him to the
extent necessary and if that is not sufficient (or there were no such
contributions), the Participant's allocable share of Company contributions and
forfeitures shall be reduced.
If a Participant is also participating in any other qualified defined
contribution plans (as defined in ERISA) maintained by the Company, the annual
additions made on behalf of the Participant under any such other plans shall be
aggregated with the annual additions under this Plan and such aggregate amount
shall not exceed the limitation set forth above in this Section. If reduction
is required, it shall be accomplished as described in the preceding paragraph.
If a Participant is also participating in one or more qualified
defined benefit plans (as defined in ERISA) maintained by the Company, then for
any calendar year the sum of the defined benefit plan fraction and the defined
contribution plan fraction shall not exceed one (1.0). Such fractions are
defined in the following paragraph. If the sum of the fractions indicates that
a reduction in annual additions to a Participant's account is required, such
reduction shall be accomplished as provided above in this Section.
The "defined benefit plan fraction" means a fraction in which (a) the
numerator is the total projected annual benefit of the Participant under all
defined benefit plans maintained by the Company and (b) the denominator is the
lesser of (i) 1.25 multiplied by the dollar limitation in effect under Section
415(b)(1)(A) of the Internal Revenue Code for such year or (ii) 1.4 multiplied
by 100% of the Participant's average compensation for his high three years.
Both numerator and denominator are determined as of the close of the pertinent
calendar year. The numerator is determined using the assumptions that the
Participant will continue employment until normal retirement age according to
the Plan and that his compensation and all other relevant factors used to
determine benefits remain constant as they are for the current year. The total
projected annual benefit used in the numerator shall be adjusted for the age at
which benefit payments commence in accordance with Section 415(b)(2)(C), (D),
and (E) of the Internal Revenue Code. For purposes of applying the limitation
test, annual benefits in forms other than a straight life annuity shall be
actuarially adjusted to the equivalent of such annuity.
The "defined contribution plan fraction" means a fraction in which (c)
the numerator is the sum of the annual additions to the Participant's account
under all defined contribution plans maintained by the Company as of the close
of the year, and (d) the denominator is the sum of the lesser of (i) or (ii)
(set forth below) determined for the year and for each prior year of service
with the Company where (i) is 1.25 multiplied by
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<PAGE> 22
the dollar limitation in effect under Section 415(c)(1)(A) of the Internal
Revenue Code for such year (disregarding subsection (c)(6) thereof) and (ii) is
the product of 1.4 multiplied by 25% of the Participant's compensation for the
year (as determined in accordance with Section 415(c)(1)(B) of the Internal
Revenue Code).
In computing the denominator for any year ending after December 31,
1982, the Committee may elect to use the following special procedure as
provided in Section 415(e)(6) of the Internal Revenue Code. Such special
procedure applies to all Participants for all years ending before January 1,
1983. The special procedure consists of multiplying the denominator as
determined for the year ending in 1982 in conformity with Section 415, as in
effect during 1982, by a "transition fraction." Such "transition fraction"
means a fraction in which (e) the numerator is the lesser of (i) $51,875 or
(ii) 1.4 multiplied by 25% of the Participant's compensation for the year
ending in 1981, and (f) the denominator of such "transition fraction" is the
lesser of $41,500 or 25% of the Participant's compensation for the year ending
in 1981.
After the Committee determines that the Plan satisfies the
requirements of Section 415 of the Internal Revenue Code for the last year
beginning before January 1, 1983, the Committee may utilize regulations when
prescribed by the IRS under which the sum of the defined benefit plan fraction
and the defined contribution plan fraction, as computed under Section 415(e)(1)
of the Internal Revenue Code, as amended by TEFRA, will not be allowed to
exceed one (1.0) for the year.
Pursuant to such regulations, the Committee shall subtract the amount
authorized from the numerator of the defined contribution plan fraction (not to
exceed such numerator) in order to adjust such sum so that it will not exceed
one (1.0).
This Section is designed to apply the requirements of Section 415 of
the Internal Revenue Code as amended by TEFRA and set forth in implementing
regulations. This Section shall therefore be interpreted so as to achieve
compliance with Section 415 as presently constituted and with such regulations
as may be issued pursuant thereto.
6.4 Top-Heavy Provisions. In the event this Plan becomes "top-heavy"
within the meaning of Section 416(g) of the Internal Revenue Code, the
following provisions with respect to vesting, minimum benefits, and limitations
on includable compensation shall take effect and remain in effect during such
time as the Plan is top-heavy:
Minimum Benefits: The Company shall contribute annually for each
Participant who is a non-key employee (within the meaning of Section 416(i)(1)
and (2) of the Internal Revenue Code) an amount which is not less than 3% of
such Participant's compensation (within the meaning of Section 415 of the
Internal
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<PAGE> 23
Revenue Code). Notwithstanding the foregoing sentence, the percentage referred
to therein shall not exceed the percentage at which contributions are made (or
required to be made) under the Plan for the key employee within the meaning of
Section 416 for whom such percentage is the highest for the year. Such highest
percentage shall be determined for each key employee by dividing the
contributions for such employee by that portion of his total compensation for
the year which is not more than the OBRA '93 Annual Compensation Limit. For
purposes of this paragraph, all defined contribution plans required to be
included in an "aggregation group" pursuant to Section 416(g)(a)(A)(i) of the
Internal Revenue Code shall be treated as one plan. This paragraph shall not
apply to any plan required to be included in an aggregation group if such plan
enables a defined benefit plan required to be included in such group to meet
the non-discrimination requirements of Section 401(a)(4) or the participation
requirements of Section 410 of the Internal Revenue Code. Any Company
contribution attributable to a salary reduction plan or similar arrangement
shall not be taken into account for purposes of Section 416(c)(2) of the
Internal Revenue Code.
Adjustment of Section 415 Limitations: While this Plan is top-heavy
the factor of 1.0 shall be substituted for 1.25 in computing denominators of
the fractions pursuant to Section 415(e) of the Internal Revenue Code. Such
substitution shall not be made if the Plan provides minimum contributions in
the amount of 4% of each Participant's compensation and if the Plan would not
be top-heavy if 90% were substituted for 60% in the tests for top-heaviness set
forth in Section 416(g). Further, the substitution of 1.0 for 1.25 shall be
suspended with respect to any Participant so long as there are no Company
contributions, forfeitures or voluntary nondeductible contributions allocated
to him. If the substitution applies, the dollar amount in the numerator of the
"transition fraction" pursuant to Section 415(e)(6) shall be changed from
$51,875 to $41,500.
In General: The Committee shall comply with regulations issued to
prevent inappropriate omissions or avoid duplication of minimum benefits or
contributions in instances where the Company has two or more plans subject to
consideration. For purposes of determining the amount of the account of any
Participant, such amount shall be increased by the aggregate distributions made
with respect to such Participant under the Plan during the 5-year period ending
on the determination date.
The term "determination date" means with respect to any Plan Year the
last day of the preceding Plan Year.
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ARTICLE 7
Benefits
7.1 Normal Distribution. A Participant shall be entitled to receive
without forfeiture the then undistributed account balances in the retirement
savings fund, the 401 (k) fund and the voluntary fund in the event that (a) he
retires on or after age 60, (b) he becomes permanently and totally disabled (as
determined by the Committee) or (c) his employment is terminated by the Company
unless such termination is for cause. The term "for cause" as used in this
Plan means any of the following:
(i) Conviction of a felony;
(ii) gross negligence in performance of duties; or
(iii) knowingly engaging in wrongful misconduct which results in
substantial damage to the Company.
7.2 Distribution Upon Death. Upon the death of a Participant prior to
final distribution of any amount remaining to his credit, the full value of
such amount shall be distributed to the Participant's surviving spouse or if
there is no surviving spouse, to any beneficiary or beneficiaries designated in
accordance with Section 2.3. In the absence of a valid designation of
beneficiary, any benefits payable upon death shall be distributed by the
Trustee to the estate of the Participant.
7.3 Distribution Upon Termination of Employment. A Participant who
terminates employment for reasons other than (a) retirement at or after age 60,
(b) total and permanent disability, or (c) termination by the Company (unless
such termination is for cause) shall be entitled to receive without forfeiture
his entire account balance in his 401(k) fund and voluntary fund , plus all or
a portion of his account balance in the retirement savings fund determined as
follows: 100% of the portion of his account balance in the retirement savings
fund which is attributable to his account balance with respect to his earnings
prior to January 1, 1982, plus a percentage of the portion of the remainder of
his account balance in the retirement savings fund based upon his completed
years of continuous service, as defined in Section 7.8, in accordance with the
following vesting schedule:
21
<PAGE> 25
<TABLE>
<CAPTION>
YEARS OF SERVICE APPLICABLE PERCENTAGE
---------------- ---------------------
<S> <C>
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
</TABLE>
7.4 Allocation of Forfeitures. Any portion of a Participant's account
which the Participant is not entitled to receive in accordance with Section 7.3
shall be forfeited and shall reduce the amount of the Company contributions
under Section 3.1.
7.5 Payment of Benefits. The benefits provided pursuant to Sections
7.1, 7.2, and 7.3 shall be distributed to each Participant or beneficiary in a
lump sum except in the case of Participants who retire after attaining age 60
and after completing at least 15 years of continuous service or who are
eligible for a pension other than a deferred vested pension pursuant to the
Consolidated Pension Plan for Acme Salaried and Hourly Employees or would be so
eligible if they were Participants in that Plan. Such Participants as
identified in the foregoing clause may elect to receive distribution in a
series of installments. Except where limited by Section 401(a)(9) of the
Internal Revenue Code in the manner described below in this Section 7.5, such
installments may be payable in a series over a period not exceeding 30 years or
in a combination of lump sum and installments, subject in either case to the
following conditions:
(a) Participants electing the installment form of payment must
direct the investment of their account to the money market
fund and will not be permitted thereafter to change either
this investment direction or the period over which the
installments are payable.
(b) Installment payments will be made on a quarterly basis with
the initial installment payments in an amount of not less than
$1,000; such payments will be adjusted after the end of each
calendar year to an amount equal to the value of the account
at the end of the year just completed divided by the number of
installment payments remaining and such adjusted amount shall
remain in effect until the next such adjustment.
(c) Notwithstanding the foregoing, a Participant receiving
installment payments may, at any time, elect to receive the
entire remaining balance of his account as a single lump sum
payment.
(d) If a Participant receiving installment payments is reemployed
by the Company, such payments shall cease and, unless the
Participant elects the lump sum payment referred to in (c)
above with respect to the remaining balance of his account
prior to the end of the calendar quarter
22
<PAGE> 26
during which his date of reemployment falls, such remaining
balance shall become subject thereafter to the investment
direction, withdrawal restrictions and other provisions of the
Plan.
Such benefits may be distributed in cash or other property, including, in the
case of the Company Stock Fund, stock or securities of the Company, as the
Participant shall direct. Commencement of payment or distribution of the
account balances to which a Participant or his beneficiary is entitled shall be
accomplished no later than the 60th day after the close of the Plan Year in
which the Participant retires, becomes permanently and totally disabled, or
terminates his employment, unless the Participant requests a later date in a
signed written statement submitted to the Committee. No election is
permissible which will cause a distribution with respect to the Participant in
the event of his death to be more than "incidental" in amount in relation to
the amount the Participant is expected to receive during his lifetime within
the meaning of regulations issued by the Internal Revenue Service. The
Committee may make distributions required hereunder through a paying agent
appointed by the Committee.
Notwithstanding any other provisions of this Plan, the entire interest
of a Participant shall be distributed in conformity to Section 401(a)(9) of the
Internal Revenue Code.
The entire interest of each Participant, if living, which is payable
as a lump sum shall 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 such distribution is to be in periodic payments, distribution shall
be made in accordance with regulations so as to be completed in a period not
exceeding:
(i) the life of the Participant,
(ii) the lives of such Participant and a designated
beneficiary,
(iii) a period certain not extending beyond the life
expectancy of such Participant, or
(iv) a period certain not extending beyond the life
expectancies of such Participant and a designated
beneficiary.
If such periodic distribution has begun and the Participant dies
before his entire interest has been distributed to him, the remaining portion
of such interest shall be distributed at least as rapidly as under the method
of 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.
23
<PAGE> 27
If a Participant dies before periodic distribution of his interest has
begun, the entire interest shall be distributed within five years after the
death of such Participant, unless (x) or (y) below applies:
(x) If, however, any portion of the Participant's interest is
payable to (or for the benefit of) a designated beneficiary,
such portion shall be designated in substantially equal
installments (in accordance with regulations) over a period
not to exceed the life of such designated beneficiary (or over
a period not extending beyond the life expectancy of such
beneficiary). Such distributions are required to begin no
later than one year after the date of the Participant's death
or such later date as regulations prescribe.
(y) 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 shall be made as if the Participant had died on
the date of the spouse's death.
For purposes of applying the provisions of said Section 401(a)(9), 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 shall be calculated once at the time benefit payments commence and
shall not be recalculated (unless such calculation is discovered to be
erroneous).
Any amount paid to a child of a Participant shall be treated as if it
had been paid to the Participant's surviving spouse if such amount will become
payable to such surviving spouse when such child reaches majority (or upon
another event permitted under regulations).
7.6 Direct Rollovers.
(a) This Section 7.6 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 7.6, a
distributee may elect, at the time and in the manner prescribed by the
Committee to have any portion of an eligible rollover distributed paid directly
to an eligible retirement plan specified by the distributee in a direct
rollover.
(b) An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of 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
24
<PAGE> 28
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(c) 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 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.
(d) A distributee includes a Participant or former Participant.
In addition, the Participant's or former Participant's surviving spouse and the
Participant's or former Participant'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.
(e) A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
7.7 Payment of Benefits; Incompetency. In the event a Participant or
beneficiary is declared an incompetent and a conservator or other person
legally charged with his care is appointed, any benefits to which such
Participant or beneficiary is entitled shall be payable to such conservator or
other person legally charged with his care.
7.8 Continuous Service.
(a) The term "continuous service" as used in this Plan means
service prior to retirement or termination of employment calculated from the
Participant's last hiring date in accordance with the provisions in this
Section 7.8, including service with Interlake, Inc. which was credited under a
prior version of this Plan and including service with Cold Metal Products
Eastern, Inc., The Stanley Works, and A. J. Gerrard and Company, and with any
predecessor employer designated by the Committee. After a break in continuous
service, continuous service shall be calculated from the date of reemployment
following the last unremoved break in continuous service.
(b) A Participant shall not be denied credit for time lost which
does not constitute a break in service.
(c) Continuous service shall be broken if a Participant (l) quits,
is discharged, or his employment is terminated for any other reason; provided,
however, that any Participant transferred from Interlake, Inc. to Acme Steel
Company effective May 29, 1986, pursuant to the reorganization of Interlake,
Inc., or from Acme
25
<PAGE> 29
Steel Company to Acme Packaging Corporation effective January 1, 1992, or to
the Company effective June 1, 1992 pursuant to the reorganization of Acme Steel
Company, shall not be deemed to have terminated his employment for purposes of
this Plan; (2) is absent due to layoff which continues for more than two years;
or (3) is absent due to authorized leave which continues for more than two
years or leave granted by reason of non-compensable disability which continues
for more than two years or leave due to compensable disability incurred during
the course of employment which continues for more than 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; provided, however, that
continuous service shall not be broken by absence of an employee who enters the
U.S. armed forces or merchant marine for active duty having reemployment rights
under the law with which he complies and is reemployed or if such break does
not exceed five one-year periods of severance from service. In the case of an
employee who is absent from work for maternity or paternity reasons, the 12
consecutive month period beginning on the first anniversary of the first date
of such absence shall not constitute a break in service. Absence for maternity
or paternity reasons means an absence by reason of (l) pregnancy of the
employee, (2) the birth of a child of the employee, (3) the placement of a
child with the employee in connection with the adoption of such child by the
employee, or (4) the employee's caring for such child for a period beginning
immediately following such birth or placement.
(d) In the event that a Participant incurs a break in service
causing a portion of his account to be forfeited in accordance with Section 7.4
and such Participant is reemployed by the Company within one year after such
break in service, the Company shall repay the amount previously forfeited,
which shall be credited to his retirement savings account as of the end of the
calendar quarter in which he is reemployed.
(e) A Participant who incurs a break in service shall lose his
service for the purpose of Section 7.3. However, prior service will be
restored when such former Participant is reemployed if he is reemployed (a)
within one year of his break in service or (b) at any time if he had at least
one year of continuous service at the time his service was broken.
(f) Continuous service shall also include employment with a member
of a controlled group of corporations of which the Company is a member or an
unincorporated trade or business which is under common control with the Company
as determined in accordance with Section 414(c) of the Internal Revenue Code
and regulations issued thereunder. For purposes of this Plan a "controlled
group of corporations" shall mean a controlled group of corporations as defined
in Section 1563(a) of the Internal Revenue Code, determined without regard to
Section 1563(a)(4) and (e)(3)(C).
26
<PAGE> 30
ARTICLE 8
Trustee
8.1 Appointment of Trustee. The Trust assets shall be managed by a
corporate Trustee, and such successor corporate Trustees as shall be appointed
from time to time by the Board of Directors of the Company.
8.2 Establishment of Trust. The Trustee shall receive the
contributions of the Company and the Participants. All such contributions
together with the income therefrom shall constitute a single trust, which shall
be held, managed, invested and administered in trust pursuant to the terms of a
trust agreement between the Company and the Trustee.
8.3 Division of Responsibility. The various responsibilities
assigned to the Trustee and other fiduciaries (in the sense of the ERISA
definition of fiduciary) pursuant to this Plan and the trust agreement are
intended to be allocated to each fiduciary separately and no responsibility
shall be shared with another fiduciary hereunder unless this Plan or the trust
agreement specifically provides for sharing. The Trustee shall have the sole
responsibility for the management of assets held by it subject to this Plan
except as to assets for which a third person investment adviser or investment
agent is appointed. The Company shall have the sole responsibility for making
contributions to provide benefits under this Plan and shall have the sole
authority to appoint and remove the Trustee and members of the Committee and to
amend or terminate the Plan. The Committee shall have the sole authority for
the administration of this Plan. Each of the fiduciaries may rely upon any
direction, information, or action of another fiduciary furnished or taken
pursuant to this Plan as being proper without inquiry into the propriety
thereof. Each fiduciary shall be responsible for the proper exercise of its
own powers, duties, responsibilities and obligations under this Plan and, as
permitted by ERISA, shall not be responsible for any act or failure to act of
another fiduciary.
ARTICLE 9
Loans to Participants
9.1 Loans. Any Participant may apply for a loan from the portion of
his account attributable to his qualified elective contributions. The loan
application shall be processed in accordance with the procedures set forth in
this Article 9.
9.2 Administration. The Committee shall administer the loan program
set forth in this Article 9. The Committee shall have complete discretion to
grant or deny loan applications and to renew or modify loans on terms which are
not inconsistent with the provisions of this Article 9. The Committee shall
make loans available to all Participants on a reasonably equivalent basis.
27
<PAGE> 31
9.3 Application Procedure. A Participant shall apply for a loan by
completing a loan application and such other forms as are required by the
Committee and by delivering the completed form(s) to the Committee. An
applicant shall be required to provide all information requested and consent
required by the Committee as a condition of approval of the loan.
9.4 Basis of Loan Decision. The Committee shall approve or disprove
loan applications based upon the standards set forth in this Article 9. The
Committee in appropriate cases may take into account the applicant's credit
worthiness or financial condition.
9.5 Limitations on Amounts of Loans. The minimum amount of any loan
is $1,000. The maximum amount of any loan, when added to the outstanding
balance of all other loans to the Participant from the Plan, shall not exceed
the lesser of (1) 50% of the vested portion of the account, or (2) $50,000
reduced by the excess, if any, of the highest outstanding balance of loans from
the Plan to the Participant during the one-year period ending on the day before
the loan is made over the outstanding balance of loans from the Plan to the
Participant on the date the loan is made. The maximum term of any loan shall
be five years, except in the case of a loan to acquire the principal residence
of the Participant, in which case the maximum term shall be ten years. No
Participant shall have more than three loans outstanding at any time. Loans
shall not be made available to Highly Compensated Employees or officers or
shareholders of the Company in an amount greater than the amount made available
to other Participants.
9.6 Procedure for Determining Interest Rate. Each loan made under
this Article 9 shall bear a reasonable rate of interest and shall be amortized
in substantially level payments no less frequently than quarterly over the term
of the loan. The rate of interest on a loan shall be considered to be
reasonable if it provides the Plan with a return commensurate with interest
rates charged by persons in the business of lending money on loans with similar
characteristics. The Committee shall employ reasonable procedures for
ascertaining such prevailing rates in the geographical area in which the loan
is made and may rely on the lending experience of the Company at the time of
the loan. Payment of principal and interest on the loan shall be credited to
the account of the borrower as received by the Trustee.
9.7 Collateral. Each loan to a Participant shall be evidenced by
adequate collateral. Collateral shall be considered to be adequate if it may
be sold, foreclosed upon or otherwise disposed of upon default on the loan and
if the collateral is sufficiently liquid and has sufficient value so that loss
of principal or interest is not likely to result from the loan. The Committee
may accept as collateral a Participant's pledge of a portion, not to exceed
50%, of the vested interest in his account. A Participant's account may be
used as security for the loan only if the Participant's spouse consents in
writing to the use of the account as security for the loan
28
<PAGE> 32
within the 90-day period ending on the date on which the security is provided.
The spouse's signature must be witnessed by a notary public or a person
designated by the Committee to represent the Plan for the purpose of witnessing
the spouse's signature. A spouse's consent to the use of the account as
security shall not be required where the Participant's spouse cannot be
located, provided that the Participant furnishes evidence or certification
satisfactory to the Committee to this effect.
9.8 Accounting for Loans. A loan to a Participant from the Plan
shall be considered an investment of the account of the Participant from which
the loan is made, and all loan repayments by the Participant shall be credited
to such account and reinvested in the funds authorized under the Plan.
9.9 Default. In the event that a Participant fails to pay any
installment of principal or interest due on a loan pursuant to its terms, the
principal balance on the loan shall immediately become due and payable. If the
default is not cured pursuant to the terms of the loan, the Committee shall
sell or otherwise dispose of the security for the loan and shall cause the
proceeds to be transferred to the Trust in satisfaction of the loan. In the
event that a portion of the account is pledged as security for a loan which is
in default, the Committee shall foreclose on the loan by causing the account to
be adjusted to reflect satisfaction of the loan; provided, that this shall not
occur prior to a distributable event under the Plan.
ARTICLE 10
Amendment, Transfer and Termination
10.1 Amendment. The Company shall have the right at any time, and
from time to time, to amend, in whole or in part, any or all of the provisions
of the Plan. Any amendment shall be made in writing and shall be approved by
the Board of Directors of the Company and signed by one or more duly authorized
officers of the Company. However, no such amendment shall authorize or permit
any part of the Trust Fund to be used for or diverted to purposes other than
for the exclusive benefit of the Participants or their beneficiaries or permit
any portion of the Trust Fund to revert to or become the property of the
Company. No amendment which affects the rights, duties or responsibilities of
the Trustee may be made without the Trustee's written consent. Any such
amendment shall become effective upon delivery to the Trustee of a written
instrument authorized by the Board of Directors and executed by the Company and
the Trustee.
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 6.4 hereof,
each Participant who has three or more years of service may elect, within a
reasonable
29
<PAGE> 33
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.
However, no amendment may be made to the Plan unless in compliance
with Section 411(d)(6) of the Internal Revenue Code, which generally prohibits
any decrease in a Participant's account balance or elimination of an optional
form of distribution.
Notwithstanding anything in this Section 10.1 to the contrary, those
portions of this Plan which constitute a formula that determines the amount,
price and timing of grants or awards of equity securities of the Company to an
Officer/Director Participant, may not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code, ERISA
or the rules thereunder.
10.2 Transfer of Assets. 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 or beneficiary 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 beforehand,
assuming for purposes of this test that this Plan had terminated immediately
before and the successor Plan had terminated immediately after the transaction
in question.
10.3 Termination; Discontinuance of Contributions. The Company has
the right pursuant to resolution of its Board of Directors to suspend its
contribution hereunder for any period of time or to terminate this Plan by
delivering to the Trustee and the Committee written notice of such suspension
of contributions or termination.
In the event of termination of the Plan the Company shall direct the
Trustee with respect to providing for the expenses of the Plan and allocating
assets in the manner prescribed by ERISA. Upon the termination or partial
termination of the Plan or upon complete discontinuance of contributions
hereunder by the Company, the amounts credited to the Participants' accounts as
of such date shall be nonforfeitable.
30
<PAGE> 34
ARTICLE 11
Coverage of Employees of Subsidiaries
and Newly Acquired Facilities
The Committee shall have the power to authorize participation in the
Plan by any subsidiary corporation affiliated with the Company within the
meaning of Section 1504 of the Internal Revenue Code. Subject to receipt of
written authorization and approval from the Committee, any such subsidiary by
resolution of its own Board of Directors may adopt the Plan and Trust hereby
created. From and after the date as of which such subsidiary shall adopt this
Plan, it shall be included within the meaning of the word "Company" for all
purposes hereunder, except that the provisions of Article 1 (pertaining to the
appointment of the Committee), Article 8 (pertaining to the Trustee), and
Article 10 (pertaining to amendments to or termination of the Plan and Trust),
shall apply only to Acme Metals Incorporated unless expressly provided therein
to the contrary. Certified copies of resolutions of the adopting subsidiary
shall be filed with the Committee and the Trustee.
The Committee shall also have the power to designate which groups of
employees of any subsidiary described in the preceding paragraph or any newly
acquired facility are to be considered "employees" within the meaning of
Section 2.2 and to designate the periods of continuous service recognized under
Sections 2.1 and 7.8 for employees of subsidiaries or newly acquired facilities
who become covered by this Plan.
The Committee shall also have the power to accept rollovers from plans
sponsored by a subsidiary which becomes a participating employer in this Plan
pursuant to this Article 11.
Actions by the Committee pursuant to this Article 11 shall be taken on
a non-discriminatory basis and shall be consistent with the requirements of
Sections 401(a) and 410(b) of the Internal Revenue Code and regulations
thereunder.
ARTICLE 12
Miscellaneous Provisions
12.1 Participants' Rights, Acquittance. Neither the creation of this
Plan, nor the establishment of the Trust pursuant to this Plan, nor any
modification of either, nor the creation of any fund or account, nor the
payment of any benefits, shall be construed as giving to any Participant or
other person any legal or equitable right against the Company, or any officer
or employee thereof or against the Committee or the Trustee, except as herein
provided. Under no circumstances shall the terms of employment of any
Participant be modified or in any way affected hereby.
31
<PAGE> 35
12.2 Spendthrift Clause. The benefits, payments, proceeds, claims or
privileges of any Participant or his beneficiaries hereunder shall not be
subject to attachment or garnishment or other legal process by any creditor of
any such Participant or beneficiary, nor shall any such Participant or
beneficiary have any right to alienate, anticipate, commute, pledge, encumber,
or assign any of the benefits or payments or proceeds which he may expect to
receive, contingently or otherwise, under this Plan, provided, however, that
such restriction on alienation shall not apply in the case of a qualified
domestic relations order as defined in Section 414(p) of the Internal Revenue
Code. A domestic relations order entered before January 1, 1985 shall be
treated as qualified if payment of benefits pursuant to such order has
commenced as of such date. Such an order may nevertheless be treated as
qualified, in the sole discretion of the Committee, if payments of benefits
have not commenced as of such date, even though such order does not comply with
Section 414(p) of the Internal Revenue Code.
12.3 Delegation of Authority by the Company. Whenever the Company
under the terms of this Agreement is permitted or required to do or perform any
act it shall be done or performed by an officer thereunto duly authorized by
the Board of Directors of the Company.
12.4 Construction of Plan. This Plan shall be construed according
to the laws of the State of Illinois, and all provisions hereof shall be
administered according to, and its validity shall be determined under, the laws
of such state to the extent such laws are not preempted by ERISA.
12.5 Gender and Number; Headings. Wherever any words are used herein
in the masculine gender they shall be construed as though they were also used
in the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
Headings of sections and subsections of the Plan are inserted for convenience
of reference and are not part of the Plan and are not to be considered in the
construction hereof.
12.6 Limitation of Liability; Exhaustion of Remedies. Except for
willful misconduct or fraud and except as provided by ERISA, neither the
Company, the Committee, nor the Trustee shall be subject to any liability in
connection with this Plan. No proceeding for the purpose of obtaining a
determination by a court with respect to any question affecting this Plan or
any rights hereunder may be commenced unless such question has been presented
in writing to the Committee, accompanied or supplemented by such supporting
information as the Committee may reasonably require, and the Committee has had
an opportunity to render a decision and, if requested, to conduct a full and
fair review of such decision rendered, all in accordance with Section 1.5
hereof. The Committee shall have sole discretion in the interpretation of the
Plan and its decisions
32
<PAGE> 36
shall be final and binding on all persons. On review, decisions of the
Committee shall be upheld unless determined to be arbitrary or capricious.
In any action or proceeding involving Plan assets or any property
constituting part or all thereof, or the administration thereof, employees or
former employees of the Company or their beneficiaries or any other person
having or claiming to have an interest in the Trust shall not be necessary
parties and shall not be entitled to any notice of process.
Any final judgment which is not appealed or appealable that may be
entered in any such action or proceeding shall be binding and conclusive on the
parties hereto and all persons having or claiming to have any interest in this
Trust.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officers on this 16th day of November, 1995, to
be effective as of September 1, 1995.
ACME METALS INCORPORATED
By: /s/ Jerry F. Williams
--------------------------
Its: Vice President
-------------------------
ATTEST:
By: /s/ Martha M. Hosp
------------------------
Its: Assistant Secretary
-----------------------
33
<PAGE> 1
ACME METALS INCORPORATED
SUBSIDIARY LISTING
AS OF MARCH 3, 1997
<TABLE>
<CAPTION>
SUBSIDIARY NAME, d/b/a, STATE OR COUNTRY OF
AND ITS SUBSIDIARIES INCORPORATION TYPE OF BUSINESS
- ---------------------------------------- ---------------------- ---------------------------------
<S> <C> <C>
ACME STEEL COMPANY Delaware Integrated steel producer
Alabama Metallurgical Washington Inactive
Corporation
ACME PACKAGING CORPORATION Delaware Manufacture and sale of steel
(d/b/a Acme Steel Packaging Corporation, strapping and related tools
State of California)
(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
(d/b/a Walbridge Steel, States of carbon steel tubing
Michigan and Ohio)
Alta Slitting Corporation Delaware Slitting and processing of steel
products
UNIVERSAL TOOL & STAMPING Indiana Manufacture and sale of auto
COMPANY, INC. and truck jacks
</TABLE>
<PAGE> 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
24, 1997 appearing on page 34 in this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Chicago, Illinois
March 17, 1997
<TABLE> <S> <C>
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11,611
0
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