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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NO. 1-13394
CHASE BRASS INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 51-0328047
(State of Incorporation) (I.R.S. Employer
Identification No.)
14212 COUNTY ROAD M-50
MONTPELIER, OHIO 43543
(Address of principal executive offices) (Zip Code)
(419) 485-3193
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405) of this chapter) 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]
<TABLE>
<S> <C>
AGGREGATE MARKET VALUE OF OUTSTANDING COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT,
AS OF MARCH 18, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $93,101,364
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 18, 1997 . . . . . . . . . . . . . 5,982,521
NUMBER OF SHARES OF NONVOTING COMMON STOCK OUTSTANDING AS OF MARCH 18, 1997 . . . . . . . . 4,100,079*
</TABLE>
- -----------
* The Registrant's Nonvoting Common Stock is convertible, on a
share-for-share basis, into Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A involving the election of directors at the 1997 annual
stockholders' meeting is incorporated by reference in Part III hereof.
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PART I
ITEM 1. BUSINESS
GENERAL
Chase Brass Industries, Inc. (the "Company"), through its wholly owned
subsidiaries Chase Brass & Copper Company, Inc. ("CBCC"), and Leavitt Tube
Company, Inc. ("Leavitt"), is a leading manufacturer of free-machining and
forging brass rod and structural and mechanical steel tubing. The Company's
principal executive offices are located at 14212 County Road M-50, Post Office
Box 152, Montpelier, Ohio 43543, and its telephone number is (419) 485-3193.
The Company's business strategy is to increase profitability through
capital investment and continuous productivity improvement programs, maintain
its low-cost position while retaining high standards of quality, on-time
delivery and service and expand its product offerings into complementary as
well as other industries through acquisitions and joint ventures that
capitalize on the Company's operating strengths, management experience and
entrepreneurial philosophy. The objectives of the Company's strategy are to
enable the Company to maximize operating profitability, respond to increased
demand for its products, strengthen its leading industry position and enhance
and capitalize on its strong reputation for high-quality products and extensive
customer service.
CBCC. CBCC is an ISO 9002 certified manufacturer and supplier of
free-machining and forging brass rod in the United States and Canada.
Free-machining and forging brass rod, which CBCC estimates represent
approximately 80% and 12%, respectively, of annual copper alloy rod shipments
by U.S. mills, are the two primary types of copper alloy rod used in the United
States and Canada. CBCC is one of the largest manufacturers and suppliers in
the United States and Canada of free-machining brass rod, which accounted for
approximately 95% of the Company's total shipments and net sales in 1996 and
1995. Its diverse customer base of more than 250 companies uses Chase's "Blue
Dot" trademark brass rod to produce a variety of products, such as faucets,
plumbing fittings, heating and air conditioning components, industrial valves,
automotive parts, and numerous hardware components.
CBCC traces its roots to a brass button-making business started in
1837 in Waterbury, Connecticut ("Old Chase"), which began brass rod operations
in 1917. The Company was formed in 1990 by Martin V. Alonzo, the Company's
Chairman, President and Chief Executive Officer, and Citicorp Venture Capital
Ltd. ("CVC") and certain affiliates of CVC for the purpose of acquiring the
assets and operations of the brass rod division of Old Chase, then a subsidiary
of BP America, Inc. (the "CBCC Acquisition"). The CBCC Acquisition was
consummated August 24, 1990, at which time the Company began operations.
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Leavitt. On August 30, 1996, the Company acquired, through Leavitt,
the assets and operations of the steel tube division ("Old Leavitt") of UNR
Industries, Inc. ("UNR"), (the "Leavitt Acquisition"). Upon consummation of
the Leavitt Acquisition, Leavitt continued operations in the manufacture and
sale of structural and mechanical steel tubing and is a leading producer and
supplier in the United States. Structural steel tubing is used in farm
equipment, non-residential construction and other structural applications.
The mechanical steel tubing is used in a broad range of consumer and commercial
products, including furniture and fixtures, lawn-care products, storage racks,
exercise equipment, bicycles and machine tools.
PRODUCTS
CBCC. CBCC principally produces round and hexagonal shaped brass rod
in sizes ranging from 5/16 inch to 4 inches in diameter, which are the primary
shapes and sizes used by consumers of free-machining and forging brass rod.
The main attributes of copper alloy rod are its excellent corrosion resistance,
the ease with which it can be machined or forged into a variety of shapes and
its moderate strength. Free-machining brass rod is used to produce brass
products, such as valves and fittings, by a machining process during which the
brass rod is formed, drilled and cut. Forging brass is used to produce brass
products by a process during which a heated slug cut from a rod is pressed into
an impression die and then machined.
Leavitt. Leavitt produces structural and mechanical electric
resistance welded steel tubing in round, square and rectangular shapes in sizes
ranging from 3/8 inch to 12 3/4 inches in outer diameter for round sizes and
1/2 inch to 10 inch squares and equivalent rectangles. Leavitt's structural
steel tubing is used in farm equipment, non- residential construction and other
structural applications. The advantages of structural steel tubing over other
structural products such as beams and channels include its high
strength-to-weight ratio, low surface area, low wind resistance, hollow
interior, good aesthetics and ease of fabrication. The mechanical steel tubing
is used in a broad range of consumer and commercial products, including
furniture and fixtures, lawn-care products, storage racks, exercise equipment,
bicycles and machine tools.
BUSINESS STRATEGY
The Company's business strategy is to increase profitability and
shareholder value through internal growth as well as through acquisitions.
Internal growth strategies focus on capital investment and continuous
productivity improvement programs and maintaining the Company's low-cost
position while retaining high standards of quality, on-time delivery and
service. The Company's acquisition strategy focuses on continually expanding
its product offerings into complementary as well as other industries through
acquisitions and joint ventures that capitalize on the Company's operating
strengths, management experience and entrepreneurial philosophy in becoming an
engineered materials company.
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Capital Investment and Continuing Productivity Improvement Programs
CBCC. CBCC is committed to identifying and implementing programs
designed to increase plant utilization, productivity and profitability. Since
the CBCC Acquisition, certain aspects of the manufacturing process have been
improved through reallocation of employee responsibilities and in-house
modifications of the manufacturing operations. The Company also has spent more
than $16.9 million for capital improvements which have improved the reliability
and enhanced the production capacity and productivity of CBCC's manufacturing
facility. The most significant project, a $2.7 million foundry expansion, was
completed in December 1995.
CBCC recently launched a proposed capital project to begin in 1997
referred to as "Project 400." The project would increase foundry, extrusion
and finishing capabilities with an ultimate goal of increasing finished brass
rod shipments to approximately 400 million pounds annually by the year 2000, a
one-third increase over current production levels. The first phase of the
project, which is expected to be completed near the end of 1997, has a total
cost of approximately $12 million. The Company anticipates that this capital
project will be paid for with cash flow provided by operating activities.
Leavitt. Since acquiring Leavitt in August 1996, approximately
$500,000 has been spent on capital improvements. Leavitt's 1997 capital
investment plan includes approximately $5 million for replacement of older
manufacturing equipment, purchase of new material handing equipment and various
maintenance projects. Additionally, management intends to review the
manufacturing processes at each plant in order to identify capital improvement
projects that will improve the efficiency and productivity of the facilities
and the operations of Leavitt as a whole.
ISO 9002 Certification
CBCC has significant quality procedures and controls in place in all
aspects of its operations. Effective February 11, 1996, CBCC became the first
U.S. brass rod mill to receive an ISO 9002 quality system certification. ISO
9002 is a quality system standard for manufacturers that has been adopted by at
least 74 nations. The ISO 9002 quality system certification signifies that
CBCC's quality system adheres to the internationally recognized ISO standards.
Since the Leavitt Acquisition, management has been evaluating Leavitt's control
processes and is taking the necessary steps to obtain ISO 9002 quality system
certification by mid-1998.
Acquisitions
The Leavitt Acquisition was the Company's first step in its strategy
to further grow earnings by becoming an engineered materials company. The
Company has reviewed and continues to search for additional acquisition
opportunities that will further increase its product offerings and capitalize
on the Company's management skills. The Company intends to pursue acquisitions
and joint ventures within its current as well as related products manufacturing
industries, as well as in other
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manufacturing industries, that utilize the Company's operating strengths,
management experience and entrepreneurial philosophy. In recent years the
Company has investigated several domestic and international acquisition
opportunities. However, future acquisitions will be consummated only if the
opportunities investigated have the specific operating and financial
characteristics which management believes are essential to further the
Company's business strategy and increase shareholder value.
MARKETING AND DISTRIBUTION
The Company markets its products through a direct sales force whose
territory covers the United States and Canada. Management believes that its
experienced sales force provides an important link with its customers and
increases the quality of its service. The Company distributes its products to
a diverse customer base of over 700 companies in the United States and Canada.
The Company's customers include original equipment manufacturers, independent
fabricators, distributors and service centers. CBCC's original equipment
manufacturing customers primarily are in the construction and remodeling,
industrial machinery and equipment, electrical and electronic, transportation
and consumer durable goods industries. Leavitt's original equipment
manufacturing customers are in the farm equipment, non-residential construction
and consumer and commercial products industries. Independent fabricators
produce products for sale to original equipment manufacturers, while
distribution and service centers supply products to original equipment
manufacturers and independent fabricators. The Company's products are
distributed either by direct shipment from the manufacturing facilities or by
shipment from the Company's warehouse. See "Item 2. Properties."
COMPETITION
The industry in which the Company operates is highly competitive.
Based on available industry data, the Company estimates that it supplied
approximately 34% of copper alloy rod and 9% of structural steel tubing shipped
by U.S. mills in 1996. In addition to CBCC, there currently are six U.S.
companies operating a total of seven U.S. copper alloy rod mills, all of which
produce both free-machining and forging brass rod. These competitors are Cerro
Metal Products Company, Inc., Mueller Brass Co., Inc., Extruded Metals Inc.,
Chicago Extruded Metals Company, Ansonia Copper & Brass, Inc., and Olin
Corporation. The steel tubing industry's capacity exceeds demand, primarily
due to the many new market entrants in recent years. Leavitt's primary
competitors in steel tubing include Welded Tube of America, Copperweld
Corporations' Tube Division and Bull Moose Tube Company. Although the Company
competes with other manufacturers, the Company is unable to determine the
extent to which its competitors' product lines compete directly with the
Company's products because the competitors also produce products that the
Company does not produce.
The Company also is subject to competition from imported products and
alternative materials, such as, with respect to CBCC, ceramics, plastics and
steel and, with respect to Leavitt, steel I-beams, channels and pre-cast
concrete. The principal competitive factors in the Company's business are
price, quality, on-time delivery and service. The Company believes that it is
an industry
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leader as a result of its ability to consistently provide a broad range of
high-quality products, on-time delivery and superior service at competitive
prices. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General Economic and Industry
Conditions."
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company are brass scrap and
carbon steel coils. The Company believes adequate supplies of these raw
materials are available to the Company. The Company does not rely on any one
supplier of raw materials and it does not believe that the loss of any one
source would have a material impact on its business. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General -- Operations."
CUSTOMERS
Neither CBCC nor Leavitt depends on any single customer or group of
customers, the loss of any one or more of which would have a material adverse
effect on CBCC or Leavitt, respectively. Also, during 1996, no customer or any
affiliated group of customers accounted for more than 10% of the Company's net
sales, and the Company does not anticipate that any customer or affiliated
group of customers will account for more than 10% of the Company's net sales in
1997.
BACKLOG ORDERS
As of March 18, 1997, the Company had backlog orders totaling $57.1
million. As of March 18, 1996, the Company had backlog orders totaling $33.3
million. The increase from March 1996 to March 1997 is attributed primarily to
the acquisition of Leavitt, which had backlog orders totaling $16.5 million as
of the Leavitt Acquisition date, August 30, 1996. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General -- General Economic and Industry Conditions." The Company anticipates
that all current backlog orders will be filled during 1997, but is unable to
estimate the amount of backlog that will exist as of year end 1997.
TRADEMARKS
The Company owns the registered trademarks CHASE and a centaur design
(which is CBCC's logo) in the United States and Canada, and the registered
trademark "BLUE DOT" and its design in the United States and Mexico, for use in
connection with CBCC's products. The Company also owns the registered
trademarks CHASE BRASS & COPPER CO. and a centaur design in Mexico. Because of
the recognition of these trademarks in the marketplace, the Company considers
these intellectual property rights important to its business.
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EMPLOYEES
At December 31, 1996, the Company had approximately 700 full-time
employees, of whom approximately 250 were salaried and approximately 450 were
hourly. The Company believes that its relations with its employees are good
and currently does not anticipate any work stoppages.
REGULATION
Regulation of Lead in Drinking Water
Effective August 6, 1996, amendments to the Safe Drinking Water Act
were enacted to regulate lead leachate and the lead content of plumbing
fittings and fixtures. The legislation calls for the establishment of a
voluntary lead leaching standard within one year of the effective date of the
statute. In the event that a voluntary standard is not established, the
legislation mandates that the U.S. Environmental Protection Agency (the "U.S.
EPA") promulgate such standards within two years after the effective date of
the statute, with such standards to become effective five years from the date
of their final promulgation. Should the U.S. EPA fail to promulgate standards
within five years of the effective date, lead content levels in new brass
plumbing fittings and fixtures used for dispensing water intended for human
consumption cannot exceed 4% lead by dry weight on the fifth anniversary of the
effective date.
The American Society for Testing and Materials' current standards for
lead content in free-machining brass rod allow a range of 2.5% to 3.7%, with
1.5% to 2.5% for forging brass rod. Current CBCC production of free-machining
brass rod has a lead content between 2.5% and 3.0%, while the forging alloy rod
has a lead content between 1.5% and 2.1%. CBCC also has demonstrated the
capability of manufacturing brass rod with a lower lead content. Based on the
above, the Company does not believe that such legislation will have a material
adverse effect on its business.
Environmental Regulation
The Company's operations are subject to federal, state and local
pollution control laws and regulations relating to the discharge of hazardous
or regulated materials into the environment, the transport and sale of
hazardous materials and the disposal of certain materials and wastes. These
laws and related regulations are changing constantly and, as a consequence, are
subject to differing interpretations by the agencies that administer them.
Moreover, increasingly stringent regulations often result in the mandatory
implementation of additional and/or modified pollution control procedures and
processes which may result in material increases in compliance costs.
For the above reasons, the Company cannot predict with certainty its
aggregate future capital expenditures for pollution control. However, the
Company currently estimates that it will incur capital expenditures for
pollution control of approximately $500,000 in 1997, a portion of which may be
subject to reimbursement by certain affiliates of BP America, Inc., as the
owners of the assets of the brass rod division of Old Chase prior to the CBCC
Acquisition (collectively, "BP") under the Remediation Agreement and the CBCC
Purchase Agreement discussed below. In
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addition, in connection with the implementation of phase one of the proposed
capacity expansion project at CBCC (see Business Strategy - Capital Investment
and Continuing Productivity Improvement Programs - CBCC), the Company may be
required to spend an additional approximately $200,000 for related pollution
control devices. Estimates of capital expenditures for pollution control
purposes beyond 1997 are even more uncertain. However, assuming no significant
manufacturing process changes and no significant changes in applicable laws or
regulations, the Company currently anticipates that its capital expenditures
for pollution control purposes for 1998 will be approximately $500,000, and
during the period of 1999-2001 will aggregate approximately $1 million. These
estimates are exclusive of expenditures associated with on-site remediation
activities, which the Company anticipates will be paid for by BP as more fully
discussed below, and pollution control devices that may be required in
connection with additional phases of the capacity expansion program. The
Company believes that expenditures for pollution control equipment will
continue to be required in the future for continued compliance with applicable
environmental laws and regulations.
Any capital expenditures for pollution control will affect earnings to
some degree since funds expended for this purpose generally provide minimal, if
any, monetary return on investment and may divert capital from income-
producing activities. However, the Company does not believe that the current
anticipated capital expenditures for this purpose will have a material impact
on the Company's earnings or consolidated financial position.
CBCC. In connection with the CBCC Acquisition, the Company and BP
entered into the Remediation Agreement. The Remediation Agreement provides
for, among other things, BP to fund certain post-closing activities, including
the investigation and remediation of on-site contamination that existed as of
the CBCC Acquisition date at the location on which CBCC's manufacturing
facility is located and the construction of a new waste water treatment plant
to enable CBCC to comply with its waste water discharge permit (the "Permit").
In addition, under the Asset Purchase Agreement (the "CBCC Purchase Agreement")
pursuant to which the CBCC Acquisition was consummated, BP is obligated to
indemnify the Company for liabilities arising out of certain environmental
conditions that existed as of the CBCC Acquisition date.
While CBCC's waste water treatment plant has been in operation since
May 1993, CBCC is still experiencing exceedances to certain limitations
contained in the Permit, resulting in violations of the Clean Water Act. The
Ohio Environmental Protection Agency ("Ohio EPA") has not initiated any
enforcement action against CBCC for prior exceedances, but has indicated that
it may do so if violations of the Permit limits continue after January 31,
1997. In February 1997, CBCC completed a control project designed to eliminate
exceedances to the Permit limits and currently is monitoring its waste water
discharge to determine if the exceedances have been eliminated.
Preliminary studies conducted immediately prior to the CBCC
Acquisition indicated that the site upon which CBCC's manufacturing facility is
located has been contaminated by certain volatile organic compounds, including
trichloroethylene, as well as total petroleum hydrocarbons and certain metals
from historical operating practices. BP has conducted initial site
investigation activities to
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determine the extent of contamination and appropriate cleanup methods. CBCC
and BP are working together, with their respective consultants, to identify
additional sampling that is necessary to fully delineate the extent and
magnitude of contamination and to determine appropriate cleanup standards.
Until the completion of additional investigatory activities that are necessary
and the development of a remediation plan for the site, the Company will be
unable to estimate with any degree of certainty the extent of contamination or
the amount of cleanup costs associated therewith.
Leavitt. Prior to the Leavitt Acquisition, five underground storage
tanks ("UST's") were removed from Leavitt's facility in Hammond, Indiana. It
is the Company's understanding that these UST's were used to contain waste oil,
waste oil residue and sludge, phenol and metals when the property was utilized
by prior owners as a bus barn. Prior to removal, one or more of the UST's
released petroleum and other chemical constituents into the environment. Some
contamination of groundwater and soil at the Hammond facility remains in place.
Prior to the Leavitt Acquisition, Old Leavitt had conducted sampling and had
requested the Indiana Department of Environment Management ("IDEM") to "close"
the UST removal project. The IDEM has not yet issued a "closed" letter, and,
in February 1997, notified Leavitt that additional groundwater sampling will be
required prior to the IDEM considering closure. Leavitt intends to begin
additional groundwater sampling in second quarter 1997. Until such sampling is
conducted, and the results thereof provided to Leavitt, the Company is unable
to determine the current extent of contamination or what, if any, remedial
activities may be required.
The Company is involved in certain environmental legal proceedings as
described in "Item 3. Legal Proceedings" and Note 14 of Notes to Consolidated
Financial Statements.
The Company does not believe that costs that may be incurred in
connection with the investigation and cleanup associated with the environmental
matters discussed above will have a material adverse effect on the Company's
financial position, results of operations or liquidity. For additional
information regarding the environmental matters referenced above, see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Environmental Matters" and Note 14 of Notes to Consolidated
Financial Statements.
ITEM 2. PROPERTIES
The Company owns all of its facilities except as indicated below. The
Company believes its plants are suitable for their purposes, are well
maintained and are adequately insured.
CBCC. CBCC's manufacturing facility and the Company's executive and
general offices are located on a 55-acre site owned by the Company in
Montpelier, Ohio, near the Indiana and Michigan borders. CBCC's manufacturing
facility in Montpelier consists of one plant of approximately 134,000 square
feet. The plant was constructed in 1965 expressly for the purpose of producing
free-machining brass rod and the Company believes that it is the most modern
brass rod facility in the United States.
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CBCC also leases a warehouse in Los Angeles, California, that contains
approximately 47,000 square feet of storage space. The Los Angeles warehouse
lease expires in 2001. The Los Angeles warehouse lease does not contain any
express renewal provisions, but the Company believes that the lease can be
renewed or comparable facilities can be obtained on terms acceptable to the
Company.
CBCC manufactures substantially all of the brass rod it ships. CBCC's
manufacturing facility has operated seven days a week, 24 hours a day, since
1981 (except for downtime relating to regular maintenance, capital improvements
and minor mechanical failures). CBCC completed a $2.7 million foundry
expansion in December 1995. CBCC has proposed a capital improvements project
to begin in 1997 that would further increase finished brass rod capacity
one-third to 400 million pounds annually. See "Item 1. Business - Business
Strategy - Capital Investment and Continuing Productivity Improvement Programs
- - CBCC."
Leavitt. Leavitt operates four manufacturing facilities, two in
Chicago, Illinois, one in Hammond, Indiana, and one in Jackson, Mississippi.
The four facilities have a total of over one million square feet of
manufacturing and office space. The facilities contain a total of 16 tube
mills and four steel coil slitters. Leavitt's production capacity is in excess
of 1 billion pounds annually. Leavitt's facilities are currently operating
between one and three shifts daily with utilization at approximately forty-five
percent of capacity. All of Leavitt's facilities are owned except for the
Jackson facility which is leased. The following table sets forth information
concerning size, location, use and nature of the principal manufacturing
facilities owned or leased by Leavitt.
<TABLE>
<CAPTION>
Location Square Feet No. of Mills No. of Slitters Owned/Leased
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<S> <C> <C> <C> <C>
Chicago, IL 450,000 4 mechanical 2 owned
North Plant 2 structural
Chicago, IL 240,000 1 structural 1 owned
South Plant
Hammond, IN 70,000 5 mechanical -- owned
Jackson, MS 256,000 4 mechanical 1 leased
</TABLE>
The Chicago South Plant also contains a 100,000 square foot production
tube finishing facility. The Jackson leases expire in 2001. Under the leases,
Leavitt may purchase the land and facility based on the appraised value of the
land at the time of purchase and a scheduled payout for the facility and the
improvements. Upon expiration of the leases, the scheduled payout for the
facility and improvements (but not the land) is reduced to one dollar.
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain claims and litigation arising in
the ordinary course of business which involve, in the aggregate, claims for
damages in amounts not in excess of 10% of the Company's current assets.
Management believes that the ultimate disposition of these matters will not
have a material effect on the Company's financial position, results of
operations or liquidity.
CBCC and/or other entities named "Chase Brass & Copper Co." (which may
include Old Chase or divisions of Old Chase) have been named by governmental
agencies and/or private parties as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA") and/or analogous state laws with respect to two sites, and
may have been identified as a PRP at one additional site, as discussed in the
following paragraphs.
CBCC has been named one of over 130 defendants in a CERCLA Section 107
action styled Ashland Oil, Inc. v. Acme Scrap Iron & Metal Corp., et. al. (Case
No. I:94 CV 1592), which seeks recovery of response costs previously spent and
proposed to be spent by the plaintiff Ashland Oil at the Huth Oil Services
Company site located in Cleveland, Ohio. A waste oil reclamation facility was
operated at the site from 1938 until 1990. Beginning in 1983, and at various
other times until 1990, both the U.S. EPA and the Ohio EPA conducted
inspections and sampling at this site. In October 1990, the U.S. EPA ordered
the plaintiffs, Ashland Chemical Company (a division of Ashland Oil, Inc.), The
Cleveland Electric Illuminating Company and Huth Oil Services Company, to
remediate the site. As a result thereof, the plaintiff has alleged that between
1990 and 1993 it and the other ordered parties have incurred response costs in
excess of $10 million. The complaint alleges that the defendants are each
strictly, as well as jointly and severally, liable. The Company believes,
however, that CBCC has had no contact with the site and has no knowledge as to
what, if any, share of response costs has been allocated to CBCC. BP has been
notified of the institution of this suit and has assumed the defense thereof
because alleged events giving rise to CERCLA liability occurred prior to the
CBCC Acquisition.
CBCC has been notified by a group of private parties of its potential
identification as a PRP at a site in Tifton, Georgia, commonly known as the
"SoGreen" site. According to the notice, a flue dust and flyash recycling
facility was operated at the site from approximately 1976 until 1993. Pursuant
to a consent order entered into between Atlantic Steel Industries, Inc.,
Florida Steel Corporation, Georgetown Steel Corporation, Owen Electric Steel
Company of South Carolina and U.S. Foundry & Manufacturing Corporation
(collectively, the "Steel Companies") and the Georgia Department of Natural
Resources -- Environmental Protection Division, the Steel Companies have been
engaged in removing a flue dust pile, and also have undertaken an assessment of
groundwater, at this site. In addition, pursuant to a U.S. EPA unilateral
order, the Steel Companies apparently are engaged in a removal action to
remediate contaminated soils, and are undertaking the cleanup of non-metal
contaminants, at the site. The notice also indicates that the Steel Companies
settled, for approximately $3 million, a class action brought by residents of
the area near the site alleging
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property damage due to the proximity of the residents' neighborhood to the
site. The notice alleges that CBCC may be liable for contribution with respect
to prior cleanup costs incurred by the Steel Companies and may be required to
participate in funding future cleanup costs at the site. According to the
notice, the Steel Companies currently have expended or are committed to expend
approximately $17 million (including settlement of the class action) on matters
related to the site. The Company believes that CBCC has had no contact with
this site and that this site received waste materials from an entity named
"Chase Brass & Copper Co.," which may have been a division of Old Chase (not
related to the brass rod division acquired by the Company), located in North
Carolina. BP has been notified and has assumed defense of this matter.
The Jack's Creek, or Sitkin Smelting & Refining, site located in
Mifflin County, Pennsylvania, was placed on the U.S. EPA's National Priorities
List in 1989. While CBCC has not received any formal notification from the
U.S. EPA or any third party, the Company believes that Old Chase has been
identified by the U.S. EPA as a PRP. To the Company's knowledge, however,
neither CBCC nor the brass rod division of Old Chase directly disposed of
hazardous wastes at this site. Nevertheless, BP has been notified by the
Company of CBCC's (or Old Chase's) apparent identification as a PRP and BP's
responsibility for any liability associated with this site as it relates to
periods prior to the date of the CBCC Acquisition. Based on information
available to the Company, it appears that if CBCC or Old Chase were determined
to be liable, liability would be allocated on the basis of 0.5828% of cleanup
costs (or approximately $376,000).
The Company believes that it has no liability for the cleanup costs
related to the sites described above because (a) such liability is attributable
to an entity that had the same or similar name to that of CBCC, such as a
division or subsidiary of BP (other than the brass rod division of Old Chase),
or (b) such liability arose from acts that occurred prior to the CBCC
Acquisition and, therefore, BP retained such liability under the CBCC Purchase
Agreement and is contractually obligated to indemnify the Company for such
liabilities. To the extent CBCC incurs any cleanup costs with respect to these
sites, it intends to enforce its rights under the CBCC Purchase Agreement to
recover such amounts from BP. In the event CBCC is entitled to recovery from
BP pursuant to the CBCC Purchase Agreement, or otherwise, but is unable to
collect such amounts from BP, the Company may elect to offset the amounts of
such recoveries against amounts payable under the $20 million promissory note
issued to BP in conjunction with the CBCC Acquisition to the extent it legally
is entitled to do so.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year ended December 31, 1996.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED MATTERS
The Company completed its initial public offering of Common Stock on
November 10, 1994 (the "Offering"), pursuant to which the Company sold
3,200,000 shares of Common Stock at a price to the public of $10.00 per share.
As of March 18, 1997, the Company had outstanding 5,982,521 shares of Common
Stock and 4,100,079 shares of Nonvoting Common Stock exchangeable on a
share-for-share basis into shares of Common Stock at the option of the holder
thereof. There is no established public trading market for the Company's
Nonvoting Common Stock, all of which currently is held of record by CVC.
The Company's Common Stock is listed and traded on the New York Stock
Exchange (the "NYSE") under the symbol "CSI." The Common Stock began trading
on the NYSE on November 4, 1994.
The following table sets forth, for the periods shown, the high and
low sales prices for the Common Stock as reported by the NYSE. No cash
dividends were paid or declared with respect to such periods.
<TABLE>
<CAPTION>
1996 1995
---- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First quarter $ 14 3/4 $ 10 3/4 $ 11 1/2 $ 9 1/4
Second quarter $ 20 3/8 $ 13 1/2 $ 12 3/8 $ 10 3/8
Third quarter $ 18 7/8 $ 16 1/8 $ 15 $ 11 3/4
Fourth quarter $ 19 7/8 $ 17 1/4 $ 14 1/2 $ 11 3/4
</TABLE>
As of March 18, 1997, the last reported sales price of the Company's
Common Stock, as reported by the NYSE, was $21.50 per share.
The Company's Common Stock was held of record by approximately 133
persons on March 18, 1997.
The Company has not paid or declared any dividends on shares of its
Common Stock. The Company does not anticipate paying cash dividends on its
Common Stock in the foreseeable future and anticipates that future earnings
will be retained to finance operations, expansion and acquisitions. The
payment of future cash dividends will be at the sole discretion of the
Company's Board of Directors and will depend upon the Company's profitability,
financial condition, cash requirements, future earnings prospects and other
factors deemed relevant by the Company's Board of Directors.
The Bank Credit Facility (as hereinafter defined) entered into by the
Company in conjunction with the Leavitt Acquisition also contains certain
restrictions on the Company's ability to pay
13
<PAGE> 14
dividends. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Bank
Credit Facility."
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, for the periods and at the dates
indicated, selected consolidated financial data for the Company. Financial
data for each of the years ended December 31, 1996 to 1992, and at December 31,
1996 to 1992, has been derived from the Company's audited financial statements.
The following selected financial data should be read in conjunction with "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere
herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales . . . . . . . . . . . . . . . 366,991 313,097 $260,096 $212,341 $222,512
Cost of goods sold (exclusive of
depreciation and amortization
shown separately below) . . . . . . . . 311,345 270,022 224,532 189,144 200,336
------- ------- -------- -------- --------
Gross profit . . . . . . . . . . . . . 55,646 43,075 35,564 23,197 22,176
Selling, general and administrative
expenses (a) . . . . . . . . . . . . . 12,121 8,264 6,193 5,863 5,285
Depreciation and amortization . . . . . 6,710 5,537 5,795 5,555 6,170
------- ------- -------- -------- --------
Operating income . . . . . . . . . . . 36,815 29,274 23,576 11,779 10,721
Interest expense . . . . . . . . . . . . 2,612 1,530 3,911 5,412 7,891
------- ------- -------- -------- --------
Income before income taxes and
extraordinary items . . . . . . . . . 34,203 27,744 19,665 6,367 2,830
Provision for income taxes . . . . . . . 13,564 11,043 7,111 1,131 975
------- ------- -------- -------- --------
Income before extraordinary items . . 20,639 16,701 12,554 5,236 1,855
Extraordinary items (b) . . . . . . . . -- -- -- 814 825
------- ------- -------- -------- --------
Net income . . . . . . . . . . . . . . 20,639 16,701 12,554 6,050 2,680
Preferred stock dividends and
accretion (C) -- -- 2,244 1,293 1,121
------- ------- -------- -------- --------
Net income available for
common stock . . . . . . . . . . . . $20,639 $16,701 $ 10,310 $ 4,757 $ 1,559
======= ======= ======== ======== ========
Per share information (d):
Income before extraordinary items
available for common stock . . . . . . $ 2.05 $ 1.66 $ 1.40 $ .58 $ .11
Extraordinary items . . . . . . . . . . -- -- -- .12 .12
------- ------- -------- -------- --------
Net income available for
common stock . . . . . . . . . . . . . $ 2.05 $ 1.66 $ 1.40 $ .70 $ .23
======= ======= ======== ======== =======
BALANCE SHEET DATA (AT YEAR END):
Working capital . . . . . . . . . . . . $48,649 $36,798 $ 16,786 $ 7,858 $ 14,862
Total assets . . . . . . . . . . . . . . 204,751 103,003 81,542 78,845 87,230
Cash and cash equivalents . . . . . . . 9,763 16,973 173 920 1,019
Total debt . . . . . . . . . . . . . . . 70,762 18,784 17,018 53,402 66,525
Redeemable Preferred Stock . . . . . . . -- -- -- 7,111 5,818
Stockholders' equity (deficit) . . . . . 74,333 53,645 36,944 (2,179) (6,936)
OTHER DATA:
EBITDA (e) . . . . . . . . . . . . . . . $43,525 $34,811 $ 29,371 $17,334 $ 16,891
Free cash flow (f) . . . . . . . . . . . 23,257 17,773 12,714 8,140 5,362
Capital expenditure (g) . . . . . . . . 4,092 4,465 3,391 2,172 2,367
</TABLE>
______
(a) Selling, general and administrative expenses for 1995, 1994 and 1993
included due diligence expenses related to proposed acquisitions that were
not consummated. See note (e) below.
14
<PAGE> 15
(b) Extraordinary items include an $814,000 net gain on repurchase of
subordinated debt in 1993 and a $825,000 tax benefit of net operating loss
carryforward in 1992.
(c) Includes accretion to redemption value for the Company's 15% Exchangeable
Preferred Stock of $1,043,000 in 1994 (including $912,000 in accretion in
excess of historical levels in connection with the November 1994 $5.0
million redemption), $152,000 in 1993 and $126,000 in 1992.
(d) Based on 10,063,252 average shares of Common Stock outstanding for the year
ended December 31, 1996, 10,060,800 average shares of Common Stock
outstanding for the year ended December 31, 1995, 7,369,363 average shares
of Common Stock outstanding for the year ended December 31, 1994, and
6,777,806 average shares of Common Stock outstanding for all other periods
reported.
(e) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
is presented as a measure of the Company's ability to meet its cash
requirements. EBITDA should not be considered in isolation from, or as a
substitute for, net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of the Company's
profitability or liquidity.
(f) Free cash flow is calculated as net income plus depreciation and
amortization less capital expenditures.
(g) Capital expenditures exclude expenditures made by the Company since August
1990 totaling $1.2 million, which the Company believes are recoverable from
BP and, therefore, are recorded in the receivable from BP. In addition to
the capital expenditures reported for 1993, a waste water treatment plant,
constructed and fully funded by BP under the terms of a Remediation
Agreement entered into in connection with the CBCC Acquisition, began
operating in 1993 and, in connection therewith, $1,790,000 was transferred
from the receivable from BP to property, plant and equipment.
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Leavitt Acquisition
On August 30, 1996, the Company acquired, through Leavitt, the assets
and operations of the steel tube division of UNR Industries, Inc. ("UNR"), (the
"Leavitt Acquisition"). Upon consummation of the Leavitt Acquisition, Leavitt
continued operations in the manufacture and sale of structural and mechanical
steel tubing and is a leading producer and supplier in the United States. See
"Item 1. Business - General" and Note 2 of Notes to Consolidated Financial
Statements.
The Offering
On November 10, 1994, the Company completed its initial public
offering (the "Offering") by selling 3,200,000 shares of Common Stock for
$10.00 per share to the public. Net proceeds to the Company after deducting
commissions, fees and expenses totaled $28.8 million. The net proceeds were
used to repay $21.0 million of bank debt and redeem all 5,000 shares of the
Company's outstanding 15% Exchangeable Preferred Stock (the "Redeemable
Preferred Stock") at an aggregate redemption price of $7.8 million
(representing the $5.0 million face value plus $2.8 million of unpaid accrued
dividends). See Notes 3, 11 and 12 of Notes to Consolidated Financial
Statements.
As a result of the Offering, the capital structure of the Company, its
interest and tax expense, and Redeemable Preferred Stock dividends and
accretion to liquidation value are not comparable to that of the Company as a
private company. Therefore, the Company's net income prior to the Offering is
not comparable to net income following the Offering.
Operations
The Company, through its wholly owned subsidiaries CBCC and Leavitt,
is a leading manufacturer of free-machining and forging brass rod and
structural and mechanical steel tubing.
CBCC. CBCC's net sales represent gross sales of brass rod less sales
discounts and freight charges. The gross sales price of brass rod consists of
a metal price charged to customers and a fabrication price as separate
components. Cost of goods sold includes the cost of brass scrap, which is the
principal raw material used in the manufacturing process and the primary
component of cost of goods sold, as well as the costs of labor, energy and
other materials and supplies used in fabricating the brass scrap into finished
rod. Therefore, CBCC's profit levels depend primarily on the amount of
finished rod shipped, fabrication prices, and the difference between the metal
price charged to customers and CBCC's cost of brass scrap.
16
<PAGE> 17
CBCC obtains approximately 80% of the brass scrap used in its
operations from its customers through purchase and tolling arrangements. The
metal price charged to customers (the "Metal Selling Price") has been four cents
per pound higher than the price at which brass scrap is purchased from customers
(the "Metal Buying Price") since December 1994. CBCC also purchases
approximately 20% of its brass scrap from scrap dealers at prevailing
free-market prices. Free-market prices of brass scrap fluctuate based on the
supply of and demand for brass scrap and the prices for copper and zinc (the
major components of brass), and generally are less than the Metal Buying Price.
Since 1990, free-market prices, as compared to Metal Buying Prices, have been
favorable to CBCC by historical standards and the supply of brass scrap in the
United States has increased in excess of demand as a result of increased imports
of brass rod. Although the increased supply of brass scrap has resulted in
continued favorable free-market scrap prices during first quarter 1997, there
can be no assurance that such discounts will continue. Decreasing imports of
brass rod and increasing demand for brass scrap could cause free-market brass
scrap prices to increase, and increased pressure from customers to purchase
brass scrap directly from them at the Metal Buying Price could reduce CBCC's
ability to take advantage of free-market discounts.
As noted above, CBCC's pricing structure consists of the Metal Selling
Price and the fabrication price as separate components. The Metal Selling
Price is determined at the time of shipment based on the then-current Metal
Buying Price and is not directly affected by fluctuations in free-market brass
scrap prices. As a result of this pricing structure, increases and decreases
in the Metal Selling Price will affect net sales levels and gross profit as a
percentage of sales, even in the absence of an increase or decrease in
shipments or the fabrication prices charged to customers, but will have little
impact on gross profit levels. However, the quantity of free-market brass
scrap purchased by CBCC and changes in the difference between the free-market
prices paid for brass scrap and the Metal Buying Price will affect gross
profit, even in the absence of an increase or a decrease in shipments or net
sales levels.
In addition to sales made under the pricing structure described above,
some sales are made on a tolling basis, where the customer consigns brass scrap
to CBCC and is charged a fabrication price for processing the brass scrap into
finished rod. Tolling transactions affect net sales by the Metal Selling Price
that otherwise would be charged to the customer in a sale of finished brass
rod. To a lesser extent, tolling transactions also affect gross profit to the
extent CBCC is unable to take advantage of the pricing differential on brass
scrap purchased and sold. To partially offset the effect of tolling
transactions on gross profit, CBCC requires tolling customers to deliver 1.04
pounds of brass scrap in exchange for each pound of finished rod shipped.
Leavitt. Leavitt's financial performance may be impacted by changes
in the price it pays for flat-rolled steel, the primary cost component of
Leavitt's finished product, based on the market conditions in the domestic and
international flat-rolled steel industry. Based on the then-current market
conditions in the steel tubing industry, the level of capacity utilization and
the pricing policies of Leavitt's competitors, Leavitt may or may not be able
to pass the economic impact of steel price changes on to its customers through
changes in the selling price. The steel tubing
17
<PAGE> 18
industry is highly fragmented and suppliers may reduce prices or fail to
increase prices as a result of steel coil price increases, depending on their
individual financial and operational motivation.
General Economic and Industry Conditions
The demand for the Company's products in the United States and Canada
generally is dependent upon business conditions in the industries which use
products made from copper alloy rod and structural and mechanical steel tubing.
Manufacturers of products used in building and construction and manufacturers
of industrial machinery and equipment are the primary users of copper alloy
rod. Primary users of steel tubing are non-residential construction, farm
equipment and steel tube commercial products manufacturers.
Therefore, the Company's operating results during any given period
depend significantly on business conditions in its industry. These activities,
in turn, are sensitive to fluctuations in overall economic activity, movement
in interest rates and availability of short- and long-term financing. The
Company's operating results also depend on its manufacturing capacity, as well
as industry production levels and other market factors.
CBCC. During 1996, United States and Canadian apparent consumption of
copper alloy rod was approximately 978 million pounds, which included industry
shipments of approximately 893 million pounds plus net imports of approximately
85 million pounds. Industry shipments increased 4% over 1995, effectively
displacing a 32% decline in net imports. Although industry shipments,
excluding CBCC's shipments, remained flat, CBCC increased shipments 10% to
record levels in 1996. Over the past ten years, apparent consumption has
fluctuated based on demand, while over the same period CBCC's shipments have
increased both in total pounds and as a percentage of apparent consumption.
Although net imports have declined in 1996, foreign suppliers continue to
aggressively attack the domestic copper alloy rod industry by offering lower
prices than the domestic mills, resulting in CBCC expecting net import levels
to continue to exceed historical levels.
The strong 1996 industry demand was predominantly in the industry's
largest end use market, building and construction. CBCC targeted specific
plumbing customers for growth in this segment, which now represents over 50% of
CBCC's shipments and is expected to remain strong through 2000. The building
and construction segment continues to be impacted by the high level of new
homes built, a higher use of brass plumbing fixtures per home and a high level
of home remodeling, which has increased plumbing fixture demand.
Leavitt. The structural steel tubing has substantially more capacity
than demand in a highly competitive environment. Leavitt believes its share of
this industry is approximately 9%. Use of structural steel tubing in
construction is increasing and Leavitt is working to increase its share of
industry shipments. Leavitt has taken a leading role in the North American
Steel Tube Institute's hollow-structural sections committee, whose objective is
to grow the usage of structural steel tubing in the United States. The goal of
the Institute is to educate construction companies, architects and industry
executives on the benefits of the use of structural steel in lieu of other
products.
18
<PAGE> 19
1997 Outlook. As a result of the above factors, the Company believes
that its shipments will increase in 1997. Management believes that its ability
to increase shipments despite fluctuations in demand results from our quality
products and emphasis on customer service. However, forecasts of future
industry consumption, future levels of imports and future shipments by the
Company are forward-looking and are subject to risks and uncertainties,
including without limitation those identified below, which could cause actual
results to differ materially from historical results or those anticipated.
There can be no assurance that 1997 industry consumption will be similar to
1996 levels or the Company's 1997 shipments will increase as anticipated.
Actual results and developments in these areas will be affected by the general
economic and industry conditions discussed above. Foreign economic activity
and the relationship of the U.S. dollar to other currencies also affects import
levels and exports of U.S. manufactured products containing parts made from
brass rod and steel tube. The Company's 1997 shipments also will be affected
by its ability to maintain manufacturing operations at its current levels
without significant interruption.
Inventories
At the time of the CBCC and Leavitt Acquisitions, assets purchased,
including inventory, were valued at net realizable value in accordance with
purchase accounting rules and the Company elected the last-in, first-out
("LIFO") method of inventory accounting for financial reporting purposes. If
the first-in, first-out ("FIFO") method for determining cost had been used, at
December 31, 1996, inventories would have been approximately $2.0 million
higher. Inventories have been written down to lower of cost-or-market and such
reduced amounts are considered cost for subsequent periods.
RESULTS OF OPERATIONS
The following table is derived from the Company's Consolidated
Statement of Income for the periods indicated and presents the results of
operations as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . 84.8 86.2 86.3 89.1 90.0
----- ----- ----- ----- -----
Gross profit . . . . . . . . . . . . . . . . . 15.2 13.8 13.7 10.9 10.0
Selling, general and administrative expenses* . . . 3.3 2.6 2.4 2.7 2.4
Depreciation and amortization . . . . . . . . . . . 1.8 1.8 2.2 2.6 2.8
----- ----- ----- ----- -----
Operating income . . . . . . . . . . . . . . . 10.1 9.4 9.1 5.6 4.8
Interest expense . . . . . . . . . . . . . . . . . .7 .5 1.5 2.6 3.5
----- ----- ----- ----- -----
Income before income taxes and
extraordinary item . . . . . . . . . . . . . 9.4 8.9 7.6 3.0 1.3
Provision for income taxes . . . . . . . . . . . . 3.7 3.6 2.7 0.5 0.5
----- ----- ----- ----- -----
Income before extraordinary item . . . . . . . 5.7% 5.3% 4.9% 2.5% .8%
===== ===== ===== ===== =====
</TABLE>
- ------------
*See "Item 6. Selected Financial Data."
19
<PAGE> 20
The following graphs illustrate trends in profitability since 1992
(dollars in millions for years ended December 31):
[Net Income Available
[Gross Profit Chart] [Operating Income Chart] for Common Stock Chart]
FYE 12/31/92 22.2 FYE 12/31/92 10.7 FYE 12/31/92 1.6
FYE 12/31/93 23.2 FYE 12/31/93 11.8 FYE 12/31/93 4.8
FYE 12/31/94 35.6 FYE 12/31/94 23.6 FYE 12/31/94 10.3
FYE 12/31/95 43.1 FYE 12/31/95 29.3 FYE 12/31/95 16.7
FYE 12/31/96 55.6 FYE 12/31/96 36.8 FYE 12/31/96 20.6
1996 Compared with 1995
Net sales increased $53.9 million, or 17%, to $367 million in 1996.
Gross profit increased $12.6 million, or 29%, to $55.6 million, principally due
to record brass rod shipments and the impact of the Leavitt Acquisition.
Record brass rod shipments were attained despite a flat copper alloy rod
industry, which, excluding CBCC, increased only 1% in 1996 compared with 1995,
as discussed above in this Item 7 under "General Economic and Industry
Conditions."
Selling, general and administrative ("SG&A") expenses increased $3.9
million, or 47%, to $12.1 million, due primarily to $2.6 million of SG&A
expenses at Leavitt. Depreciation and amortization increased $1.2 million, or
21%, due to the Leavitt Acquisition and increased depreciation on CBCC capital
additions, partially offset by elimination of CBCC amortization as intangibles
became fully amortized in 1995.
As a result of the above factors, operating income increased $7.5
million, or 26%, to $36.8 million in 1996.
Net interest expense increased $1.1 million, or 71%, to $2.6 million
due to interest expense incurred on the Leavitt Acquisition debt, partially
offset by lower average levels of bank debt in 1996 prior to the Leavitt
Acquisition compared with 1995. Additionally, the Company earned interest
income in 1996 totaling $720,000 compared with $390,000 in 1995.
Income tax expense increased $2.5 million, or 23%, to $13.6 million in
1996 as a result of a $6.5 million, or 23%, increase in pretax income.
20
<PAGE> 21
As a result of the above factors, net income available for common
stock increased $3.9 million, or 24%, to $20.6 million in 1996. Earnings per
share increased to $2.05 from $1.66 in 1995.
1995 Compared with 1994
Net sales increased $53.0 million, or 20%, to $313.1 million in 1995,
principally due to a 16% increase in Metal Selling Prices and record brass rod
shipments. The shipment increase was attained despite a decline in industry
shipments, excluding CBCC, of 44 million pounds, or 7%.
Gross profit increased $7.5 million, or 21%, to $43.1 million in 1995,
principally due to higher fabrication charges.
SG&A expenses increased $2.1 million, or 33%, to $8.3 million, due
primarily to a $770,000 increase in public company expenses, a $430,000
increase in accrued incentive compensation, and a $240,000 increase in rental
expense principally due to the lease of a new computer system. Depreciation
and amortization decreased $258,000, or 4%, due to reduced amortization as
intangible assets became fully amortized in 1995, partially offset by increased
depreciation on capital additions.
As a result of the above factors, operating income increased $5.7
million, or 24%, to $29.3 million in 1995.
Net interest expense decreased $2.4 million, or 61%, to $1.5 million
due to lower levels of bank debt in 1995 compared with 1994 as a result of the
repayment of all outstanding bank debt in conjunction with the Offering and no
borrowings on the bank credit facility after first quarter 1995. Additionally,
the Company earned interest income in 1995 totaling $390,000.
Income tax expense increased $3.9 million, or 55%, to $11.0 million in
1995 as a result of an $8.1 million, or 41%, increase in pretax income and an
increase in the Company's effective tax rate to 40% from 36% in 1994. In 1994,
the lower tax rate was due primarily to the utilization of federal income tax
net operating loss ("NOL") carryforwards and current recognition of deferred
income tax assets which had not been realized in prior years. The Company's
1994 current federal income tax provision was calculated using the Alternative
Minimum Tax ("AMT") provisions as required by the Internal Revenue Code. The
Company completed utilization of its federal income tax NOL in second quarter
1994 and, accordingly, recognized income tax expense in second half 1994 and
1995 at a higher effective tax rate based primarily upon the federal statutory
rate of 35%.
As a result of the above factors, net income increased $4.1 million,
or 33%, to $16.7 million in 1995.
Dividends and accretion to liquidation value on the Company's
Redeemable Preferred Stock, which was redeemed in November 1994 in conjunction
with the Offering, totaled $2.2 million in 1994.
21
<PAGE> 22
As a result of the above factors, net income available for common
stock increased $6.4 million, or 62%, to $16.7 million in 1995. Earnings per
share increased to $1.66 from $1.40 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
General
At December 31, 1996, increases in assets and liabilities compared
with year end 1995 were due predominately to the Leavitt Acquisition. The most
significant impact was on long-term debt, which increased to $70.8 million from
$18 million at year end 1995. The long-term debt balance at December 31, 1996,
is after prepaying $12 million of Leavitt Acquisition debt in fourth quarter
1996. Cash and cash equivalents of $17.0 million at year end 1995 declined to
$9.8 million as a result of funding a portion of the Leavitt purchase price
with cash on hand.
Free cash flow (net income plus depreciation and amortization less
capital expenditures) increased 31% to $23.3 million in 1996 compared with
1995. Free cash flow will be applied to reduce bank debt and also will be
available to fund future acquisitions and capital expenditures. Net interest
expense increased to $2.6 million from $1.5 million in 1995, reflecting the
Leavitt Acquisition debt. The Company currently is meeting its operational and
liquidity needs with cash on hand, internally generated funds and amounts
available under the Bank Credit Facility (as hereinafter defined).
Working Capital
Increases in assets and liabilities in 1996 compared with year end
1995 were predominately due to the Leavitt Acquisition, which increased working
capital $22.5 million. At December 31, 1996, working capital was $48.6
million, $11.8 million, or 32%, over 1995. The decrease in cash and cash
equivalents of $7.2 million, or 42%, was the result of funding a portion of the
Leavitt purchase price with cash on hand. There was no significant change in
working capital from the Leavitt Acquisition date through December 31, 1996.
The Company's current ratio follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Current ratio 1.94 2.43
Current ratio excluding cash 1.75 1.77
</TABLE>
22
<PAGE> 23
Cash Flow Provided by Operating Activities
For the years ended December 31, 1992 through 1996, the following
graphs illustrate trends in net cash provided by operating activities and free
cash flow (dollars in millions). See "Item 6. Selected Financial Data".
[Net Cash Provided by
Operating Activities Chart] [Free Cash Flow Chart]
FYE 12/31/92 14.1 FYE 12/31/92 5.4
FYE 12/31/93 15.2 FYE 12/31/93 8.1
FYE 12/31/94 21.2 FYE 12/31/94 12.7
FYE 12/31/95 21.3 FYE 12/31/95 17.8
FYE 12/31/96 39.5 FYE 12/31/96 23.3
In 1996, net cash provided by operating activities increased $18.2
million to $39.5 million compared with 1995. The primary sources of cash from
operating activities in 1996 were net income of $20.6 million, depreciation and
amortization of $6.7 million, accretion of discount on the BP Note (as
hereinafter defined) of $1.2 million, and a decrease in working capital,
excluding cash, of $11 million.
In 1995, net cash provided by operating activities of $21.3 million
was flat compared with 1994. The primary sources of cash from operating
activities in 1995 were net income of $16.7 million, depreciation and
amortization of $5.5 million and accretion of discount on the BP Note of $1.8
million, partially offset by an increase in working capital, excluding cash, of
$3.2 million.
In 1994, net cash provided by operating activities increased $6.0
million to $21.2 million compared with 1993. The primary sources of cash from
operating activities in 1994 were net income of $12.6 million, depreciation and
amortization of $5.8 million and deferred income taxes of $2.3 million.
Cash Flow Used in Investing Activities
Cash used in investing activities in 1996 includes $91.7 million for
the acquisition of Leavitt. Capital expenditures were $4.1 million, $4.5
million and $3.4 million in 1996, 1995 and 1994,
23
<PAGE> 24
respectively. Capital additions included improvements to the extrusion press
system and finishing lines in 1996 and the $2.7 million foundry expansion in
1995.
Cash Flow Provided by Financing Activities
The Company received proceeds from issuance of the Term Loan (as
hereinafter defined) totaling $60 million during 1996 to fund the Leavitt
Acquisition, of which $10 million was prepaid prior to year end.
Other than revolving credit borrowings under the bank credit facility
in first quarter 1995, the Company had no financing activities in 1995.
The Company used $47.3 million in cash to repay debt and Redeemable
Preferred Stock (including dividends) in 1994. Debt repaid in 1994 included
$15.0 million of revolving credit facility borrowings, $21.7 million on bank
term loans and $1.25 million of loans to certain stockholders who had provided
financing for the Company's repurchase of certain outstanding indebtedness in
1992. Additionally, the Company redeemed the Redeemable Preferred Stock at an
aggregate redemption price of $7.8 million, representing the $5.0 million
redemption value plus $2.8 million in unpaid accrued dividends. Redeemable
Preferred Stock dividends of $1.6 million also were paid in 1994. The debt was
repaid through a combination of cash generated from operations and $28.8
million in Offering proceeds, net of fees. See Note 3 of Notes to Consolidated
Financial Statements.
Capital Resources
The Company is launching a proposed capital project referred to as
"Project 400". The project includes potential expansion of CBCC's foundry,
extrusion system and finishing capability with an ultimate goal of increasing
finished brass rod shipments to approximately 400 million pounds annually, a
one-third increase over current production levels. The first phase of the
project, which is expected to be completed near the end of 1997, has a total
cost of approximately $12 million. It is anticipated that capital projects
will be paid for with cash flow provided by operating activities.
Bank Credit Facility
In connection with the Leavitt Acquisition, the Company entered into a
new credit facility (the "Bank Credit Facility") of $100 million agented by PNC
Bank, National Association. The Bank Credit Facility replaced the Company's
existing $33 million bank credit facility, which was terminated August 30,
1996. The Bank Credit Facility includes a $60 million term loan ("Term Loan")
and a $40 million revolving credit facility ("Revolving Credit Facility"). In
December 1996, the Company prepaid $10 million on the Term Loan, including all
amounts originally due in 1997. The remaining balance on the Term Loan is
payable in quarterly installments in amounts ranging from $775,000 in April
1998 to $3,025,000 due July 2003. The total borrowing capacity
24
<PAGE> 25
under the Revolving Credit Facility is determined monthly by a formula based on
levels of inventory and accounts receivable, up to a maximum of $40 million.
The Revolving Credit Facility commitment expires August 30, 2001, and the
Company can request a one-year extension of the expiration date at any time
after December 31, 1997.
Advances under the Bank Credit Facility will bear interest, at the
Company's option, at a rate per annum equal to (i) the higher of (a) PNC Bank's
prime rate or (b) the Federal funds rate plus 1/2%, or (ii) LIBOR for the
applicable borrowing period plus 1/2%, 5/8%, 3/4%, 7/8%, 1 1/8%, or 1 3/8%
depending on the Company's ratio of total debt to earnings before interest,
taxes, depreciation and amortization, with interest payable quarterly or as of
the end of each LIBOR borrowing period, whichever is shorter.
The Bank Credit Facility contains certain covenants that, among other
things, limit the Company's ability to incur additional debt, make capital
expenditures or pay dividends. The covenants also require the Company to
maintain a minimum interest coverage ratio and level of net worth and restrict
the Company from exceeding a maximum ratio of debt to cash flow from
operations. The Bank Credit Facility also requires the Company to maintain
CBCC and Leavitt as wholly-owned subsidiaries.
As of December 31, 1996, $50 million was outstanding under the Term
Loan and there were no borrowings outstanding under the Revolving Credit
Facility and the amount of total availability under the Revolving Credit
Facility was $40 million.
Average Revolving Credit Facility Borrowings
The average outstanding balance under the Revolving Credit Facility in
1996 was $684,000. However, the only borrowings under the Revolving Credit
Facility were during the three-month period immediately following the Leavitt
Acquisition, during which time the average outstanding balance was $2.7
million. The average outstanding balance under the prior revolving credit
facility in 1995 was $391,000. The Company's only 1995 borrowings were in the
first quarter, and in that quarter the outstanding balance averaged $1.9
million. As of March 18, 1997, the Company had available $25 million under the
Revolving Credit Facility. In March 1997, the Company converted $15 million of
Term Loan debt to Revolving Credit Facility borrowings. For a discussion of
long-term borrowings under the Bank Credit Facility, see Note 7 of Notes to
Consolidated Financial Statements.
CONTINGENCIES
In connection with the CBCC Acquisition, the Company issued a
promissory note to BP in the original principal amount of $20.0 million (the
"BP Note"). The BP Note was recorded at the CBCC Acquisition date at a
discount using a 10.4% effective interest rate. The BP Note initially matured
in August 1996, and the Company, at its option, extended the maturity date for
three additional years to August 1999 with interest payable annually at 9.29%.
The BP Note contained
25
<PAGE> 26
a contingent interest payment based upon average Company earnings (as defined
in the BP Note) for the years ended December 31, 1990 through 1995. The
contingent interest, totalling $254,000 and due August 1996, was offset against
the receivable from BP. See Note 14 of Notes to Consolidated Financial
Statements.
ENVIRONMENTAL MATTERS
CBCC. Preliminary studies conducted immediately prior to the CBCC
Acquisition indicated that the site upon which CBCC's manufacturing facility is
located has been contaminated by certain volatile organic compounds, including
trichloroethylene, as well as total petroleum hydrocarbons and certain metals
from historical operating practices. In connection with the CBCC Acquisition,
BP agreed to retain liability for certain on-site contamination. BP has
conducted initial site investigation activities to determine the extent of
contamination and appropriate cleanup methods. The results of the initial site
investigation activities were provided to CBCC in second quarter 1996, which
results identified the presence and location of certain contaminants. BP also
provided to CBCC a draft remediation plan with respect to certain areas of the
facility based on the results of the initial sampling. CBCC has reviewed the
initial sampling results and draft remediation plan provided to it and has
determined that additional sampling is necessary to fully delineate the extent
and magnitude of contamination and to determine appropriate cleanup standards.
CBCC and BP are working together, with their respective consultants, to
identify additional sampling that is required. Upon completion of a plan for
such additional sampling, CBCC intends to meet with BP and the Ohio EPA to
identify available remedial methods and potential regulatory constraints
related to specific remedial methodologies. The results of the initial
sampling, the additional sampling to be conducted, and input from the Ohio EPA
will be used to develop a comprehensive remediation plan for the site. The
investigation is being conducted on a voluntary basis with the concurrence of
the Ohio EPA. Until the completion of additional investigatory activities that
are necessary and the development of a remediation plan for the site, the
Company will be unable to estimate with any degree of certainty the extent of
contamination or the amount of cleanup costs associated therewith.
The cleanup costs associated with the environmental conditions
described above may be material and, in the event CBCC were determined to be
solely responsible or liable for site cleanup activities (due to the inability
or unwillingness of other responsible parties to perform or pay for such
activities), such expenditures could have a material adverse effect on the
Company's earnings and financial condition. Notwithstanding this potential
(although uncertain) material liability, because of BP's contractual
obligations to fund investigatory and cleanup costs of this site under the
Remediation Agreement, the Company does not believe that the cleanup costs or
other liabilities associated with such conditions will have a material adverse
effect on the Company's financial position, results of operations or liquidity
and the Company has not made any related accrual of all or any part of such
costs. To the extent CBCC or the Company incurs any liability with respect to
the environmental conditions discussed above, the Company intends to enforce
its rights under the Remediation Agreement and the CBCC Purchase Agreement to
recover such amounts from BP.
26
<PAGE> 27
CBCC and/or other entities named "Chase Brass & Copper Co." (which may
include Old Chase or divisions of Old Chase) have been named by governmental
agencies and/or private parties as a PRP under CERCLA and/or state laws with
respect to two sites, and may have been identified as a PRP at one additional
site. The Company believes that it has no liability for the cleanup costs
related to these sites because (a) such liability is attributable to an entity
that had the same or similar name to that of CBCC, such as a division or
subsidiary of BP (other than the brass rod division of Old Chase), or (b) such
liability arose from acts that occurred prior to the CBCC Acquisition and,
therefore, BP retained such liability under the CBCC Purchase Agreement and is
contractually obligated to indemnify the Company for such liabilities.
Leavitt. Prior to the Leavitt Acquisition, five underground storage
tanks ("UST's") were removed from Leavitt's facility in Hammond, Indiana. It
is the Company's understanding that these UST's were used to contain waste oil,
waste oil residue and sludge, phenol and metals when the property was utilized
by prior owners as a bus barn. Prior to removal, one or more of the UST's
released petroleum and other chemical constituents into the environment. Some
contamination of groundwater and soil at the Hammond facility remains in place.
Prior to the Leavitt Acquisition, Old Leavitt had conducted sampling and had
requested the Indiana Department of Environment Management ("IDEM") to "close"
the UST removal project. The IDEM has not yet issued a "closed" letter, and,
in February 1997, notified Leavitt that additional groundwater sampling will be
required prior to the IDEM considering closure. Leavitt intends to begin
additional groundwater sampling in second quarter 1997. Until such sampling is
conducted, and the results thereof provided to Leavitt, the Company is unable
to determine the current extent of contamination or what, if any, remedial
activities may be required.
The cleanup costs associated with the environmental conditions
described above may be material and, in the event Leavitt were determined to be
solely responsible or liable for site cleanup activities (due to the inability
or unwillingness of other responsible parties to perform or pay for such
activities), such expenditures could have a material adverse effect on the
Company's earnings and financial condition. Notwithstanding this potential
(although uncertain) material liability, UNR is obligated under the Leavitt
Acquisition Agreement to indemnify Leavitt for 90% of losses related to certain
environmental conditions, including costs incurred with respect to contaminants
released at Leavitt's properties prior to the Leavitt Acquisition, to the
extent such losses exceed $400,000 in the aggregate. In addition, to the
extent the contamination at the Hammond facility is attributed to actions of
prior owners, the Company may be entitled to recover from the prior owners
costs incurred by Leavitt at the Hammond site. Therefore, the Company does not
believe that costs that may be incurred by Leavitt in connection with the
investigation and cleanup associated with the groundwater and soil
contamination at the Hammond facility will have a material adverse effect on
the Company's financial position, results of operations or liquidity and the
Company has not made any accrual of all or part of such costs.
For additional discussion of the environmental matters discussed
above, see "Item 1. Business - Regulation - Environmental Regulation,"
"Item 3. Legal Proceedings" and Note 14 of Notes to Consolidated Financial
Statements.
INFLATION
The Company does not believe that its operations have been
significantly affected by inflation.
27
<PAGE> 28
QUARTERLY INFORMATION
The table set forth below presents selected unaudited quarterly
financial data for the years ended December 31, 1996 and 1995. The Company
believes that the financial information presented below reflects all
adjustments necessary, consisting only of normal recurring adjustments, for a
fair presentation of such financial information. The Company's quarterly
results are not indicative of annual results or continuing trends. The
financial data set forth below should be read in conjunction with "Item 6.
Selected Consolidated Financial Data" and the notes thereto.
<TABLE>
<CAPTION>
1996
--------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
FINANCIAL DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . $ 89,917 $ 82,095 $ 88,253 $ 106,726 $ 366,991
Gross profit . . . . . . . . 12,634 11,797 14,349 16,866 55,646
Operating income . . . . . . 9,012 8,588 8,952 10,263 36,815
Net income . . . . . . . . . 5,240 5,040 5,034 5,325 20,639
Average shares outstanding . 10,061 10,063 10,064 10,065 10,063
Earnings per share . . . . . $ .52 $ .50 $ .50 $ .53 $ 2.05
Cash and cash equivalents . $ 21,461 $ 27,243 $ 1,516 $ 9,763
Accounts receivable . . . . 40,177 31,760 44,571 34,514
Inventories . . . . . . . . 11,493 13,683 44,119 52,050
Working capital . . . . . . 43,237 49,341 52,212 48,649
Total assets . . . . . . . . 114,366 113,185 201,672 204,751
Stockholders' equity . . . . 58,864 63,949 68,995 74,333
OTHER DATA:
Free cash flow . . . . . . . $ 5,969 $ 5,638 $ 6,157 $ 5,493 $ 23,257
Capital expenditures . . . . 486 645 635 2,326 4,092
</TABLE>
<TABLE>
<CAPTION>
1995
----------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
FINANCIAL DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . $ 86,137 $ 82,994 $ 68,672 $ 75,294 $ 313,097
Gross profit . . . . . . . . 12,276 11,248 9,306 10,245 43,075
Operating income . . . . . . 8,386 7,765 6,053 7,070 29,274
Net income . . . . . . . . . 4,738 4,432 3,422 4,109 16,701
Average shares outstanding . 10,061 10,061 10,061 10,061 10,061
Earnings per share . . . . . $ .47 $ .44 $ .34 $ .41 $ 1.66
Cash and cash equivalents . $ 609 $ 5,331 $ 12,385 $ 16,973
Accounts receivable . . . . 37,151 30,850 27,934 28,071
Inventories . . . . . . . . 10,097 9,604 9,978 15,975
Working capital . . . . . . 23,067 28,092 32,078 36,798
Total assets . . . . . . . . 89,754 87,179 91,493 103,003
Stockholders' equity . . . . 41,682 46,114 49,536 53,645
OTHER DATA:
Free cash flow . . . . . . . $ 5,816 $ 4,584 $ 3,517 $ 3,856 $ 17,773
Capital expenditures . . . . 385 1,389 1,289 1,402 4,465
</TABLE>
28
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHASE BRASS INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Balance Sheet as of December 31, 1996 and 1995 . . . . . . . . . . . . . 31-32
Consolidated Statement of Income for the Years Ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 33
Consolidated Statement of Changes in Preferred Stock and
Stockholders' Equity (Deficit) for the Years Ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 34
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 35
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 36-53
Unaudited Quarterly Financial Information . . . . . . . . . . . . . . . . . . . . . . 54
FINANCIAL STATEMENT SCHEDULES:
Schedule I - Condensed Financial Information of Parent Company . . . . . . . . . . . . S-1-S-2
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . S-3
</TABLE>
29
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Chase Brass Industries, Inc.:
We have audited the consolidated financial statements and financial
statement schedules of Chase Brass Industries, Inc. listed in Item 8 of this
Form 10-K. These financial statements and financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statements
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Chase
Brass Industries, Inc. as of December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedules taken as whole, present fairly, in all material respects, the
information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
- -----------------------------
Detroit, Michigan
February 3, 1997
30
<PAGE> 31
CHASE BRASS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,763 $ 16,973
Receivables, net of allowance for
doubtful accounts and claims of
$1,236 and $1,036 in 1996 and 1995, respectively 34,514 28,071
Inventories 52,050 15,975
Prepaid expenses 1,131 733
Deferred income taxes 2,897 850
-------- --------
Total current assets 100,355 62,602
Property, plant and equipment, net 97,628 38,445
Other assets 6,768 --
-------- --------
Total assets $204,751 $103,003
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
31
<PAGE> 32
CHASE BRASS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 36,134 $ 18,900
Accrued compensation and benefits 5,598 2,490
Accrued income taxes 3,685 3,310
Other accrued liabilities 6,158 1,104
Current portion of long-term debt 131 --
----------- ----------
Total current liabilities 51,706 25,804
Long-term debt 70,631 18,784
Deferred income taxes 8,081 4,770
----------- ----------
Total liabilities 130,418 49,358
----------- ----------
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $.01 par value, 25,000,000 shares
authorized; 5,965,621 and 5,960,721 shares issued and
outstanding in 1996 and 1995, respectively 60 60
Nonvoting common stock, $.01 par value, 5,000,000
shares authorized; 4,100,079 shares issued and
outstanding in 1996 and 1995 41 41
Additional paid-in capital 30,039 29,990
Retained earnings 44,193 23,554
----------- ----------
Total stockholders' equity 74,333 53,645
----------- ----------
Total liabilities and stockholders' equity $ 204,751 $ 103,003
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
32
<PAGE> 33
CHASE BRASS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C>
Net sales $ 366,991 $ 313,097 $ 260,096
Cost of goods sold (exclusive of depreciation
and amortization shown separately below) 311,345 270,022 224,532
----------- ----------- -----------
Gross profit 55,646 43,075 35,564
Selling, general and administrative expenses 12,121 8,264 6,193
Depreciation and amortization 6,710 5,537 5,795
----------- ----------- -----------
Operating income 36,815 29,274 23,576
Interest expense 2,612 1,530 3,911
----------- ----------- -----------
Income before income taxes 34,203 27,744 19,665
Provision for income taxes 13,564 11,043 7,111
----------- ----------- -----------
Net income 20,639 16,701 12,554
Dividends on preferred stock and
accretion to liquidation value -- -- 2,244
----------- ----------- -----------
Net income available for common stock $ 20,639 $ 16,701 $ 10,310
=========== =========== ===========
Average shares outstanding 10,063,252 10,060,800 7,369,363
=========== =========== ===========
Net income available for common stock per share $ 2.05 $ 1.66 $ 1.40
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
33
<PAGE> 34
CHASE BRASS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Stockholders' Equity (Deficit)
-----------------------------------------------------------
Additional
Preferred Common Paid-In Treasury Earnings
Stock Stock Capital Stock* (Deficit) Total
---------- --------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1993 $ 7,111 $ 68 $ 2,253 $ (4,500) $ (2,179)
Net income 12,554 12,554
Preferred stock dividends 1,201 (1,201) (1,201)
Preferred stock dividends paid (4,355)
Accretion to redemption value 1,043 (1,043) (1,043)
Preferred stock redemption (5,000)
Exercised stock options 1 11 12
Proceeds from Offering,
net of fees 32 28,769 28,801
--------- ---------- --------- -------- ---------- ---------
Balances, December 31, 1994 -- 101 29,990 -- 6,853 36,994
--------- ---------- --------- -------- ---------- ---------
Net income 16,701 16,701
--------- ---------- --------- -------- ---------- ---------
Balances, December 31, 1995 -- 101 29,990 -- 23,554 53,645
Net income 20,639 20,639
Exercised stock options 49 49
--------- ---------- --------- -------- ---------- ---------
Balances, December 31, 1996 $ -- $ 101 $ 30,039 $ -- $ 44,193 $ 74,333
========= ========== ========= ======== ========== =========
</TABLE>
________________
* Zero at December 31, 1996, 1995 and 1994. Less than $1,000 at December 31,
1993.
The accompanying notes are an integral part of the consolidated financial
statements.
34
<PAGE> 35
CHASE BRASS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $ 20,639 $ 16,701 $ 12,554
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,710 5,537 5,795
Accretion of discount on BP Note 1,216 1,766 1,601
Deferred income tax expense (benefit) (142) 131 2,304
Changes in assets and liabilities:
(Increase) decrease in receivables 7,034 (4,723) (5,194)
(Increase) in inventories (6,874) (1,919) (1,634)
(Increase) in prepaid expenses (325) (570) (78)
Decrease (increase) in receivable from BP 362 168 (161)
Increase (decrease) in accounts payable 7,692 (407) 5,127
Increase in accrued liabilities 3,219 3,096 857
Decrease in deferred income taxes, net -- 1,485 --
---------- ---------- ----------
Net cash provided by operating activities 39,531 21,265 21,171
---------- ---------- ----------
Investing activities:
Purchase of Leavitt Tube Company, Inc. (91,665) -- --
Additions to property, plant and equipment (4,092) (4,465) (3,391)
(Increase) in intangibles (1,005) -- --
Decrease in deferred income taxes, net -- 1,485 --
---------- ---------- ----------
Net cash (used in) investing activities (96,762) (4,465) (3,391)
---------- ---------- ----------
Financing activities:
Revolving credit loan repayments, net -- -- (15,000)
Principal payments on bank term loans (10,000) -- (21,735)
Proceeds from issuance of a bank term loan 60,000 -- --
Preferred stock dividends and redemption -- -- (9,355)
Proceeds from Offering, net of fees -- -- 28,801
Other, net 21 -- (1,238)
---------- ---------- ----------
Net cash (used in) financing activities 50,021 -- (18,527)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (7,210) 16,800 (747)
Cash and cash equivalents, beginning of period 16,973 173 920
---------- ---------- ----------
Cash and cash equivalents, end of period $ 9,763 $ 16,973 $ 173
========== ========== ==========
Supplemental cash flow information:
Cash flow data:
Interest paid $ 2,291 $ 157 $ 2,706
Income taxes paid $ 13,088 $ 7,037 $ 4,105
Non-cash investing activity:
Liabilities assumed in connection
with the acquisition of Leavitt $ 20,190 -- --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
35
<PAGE> 36
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION AND ORGANIZATION
The consolidated balance sheet as of December 31, 1996 and 1995, and
the consolidated statements of income, changes in preferred stock and
stockholders' equity (deficit), and cash flows for the years ended December 31,
1996, 1995 and 1994, include the accounts of Chase Brass Industries, Inc. (the
"Company"), a Delaware corporation, and its wholly-owned subsidiaries, Chase
Brass & Copper Company, Inc. ("CBCC"), a Delaware corporation, Leavitt Tube
Company, Inc. ("Leavitt"), a Delaware corporation, and Holco Corporation
("Holco"), an Illinois corporation and wholly-owned subsidiary of Leavitt. See
Note 2 for a discussion of the Leavitt Acquisition.
On August 24, 1990, the Company acquired, through CBCC, the assets and
income of a Delaware corporation formerly named Chase Brass & Copper Company,
Incorporated ("Old Chase"), pursuant to the Asset Purchase Agreement ("CBCC
Purchase Agreement") dated May 10, 1990, by and between the Company, CBCC, Old
Chase, BP Exploration (Alaska) Inc. ("BPE") and The Standard Oil Company (the
"CBCC Acquisition"). BPE and The Standard Oil Company (collectively referred
to as "BP") own all of the stock of Old Chase. The CBCC Acquisition was
accounted for as a purchase.
NATURE OF OPERATIONS
The Company, through its wholly-owned subsidiaries CBCC and Leavitt,
is a leading manufacturer of free- machining and forging brass rod and
structural and mechanical steel tubing.
CBCC, employing more than 300 people at its Montpelier, Ohio, plant,
is an ISO 9002 certified manufacturer and supplier of free-machining and
forging brass rod in the United States and Canada. Its diverse customer base
of more than 250 companies uses CBCC's "Blue Dot" trademark rod to produce a
variety of products, such as plumbing fixtures, heating and air conditioning
components, industrial valves, automotive parts, and numerous hardware
components.
Leavitt is a leading producer of structural and mechanical steel
tubing with plants in Chicago, IL, Hammond, IN, and Jackson, MS, employing more
than 400 people. Leavitt's structural steel tubing is used in farm equipment,
non- residential construction and other structural applications. The
mechanical steel tubing is used in a broad range of consumer and commercial
products, including furniture and fixtures, lawn-care products, storage racks,
exercise equipment, bicycles and machine tools.
36
<PAGE> 37
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
USE OF 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.
INVENTORIES
Inventories are stated at the lower of cost-or-market, with cost
determined on the last-in, first-out (LIFO) basis. Inventories have been
written down to lower of cost-or-market and such reduced amounts are considered
cost for subsequent periods.
If the first-in, first-out (FIFO) method for determining cost had been
used, inventories would have been approximately $2.0 million and $4.3 million
higher at December 31, 1996 and 1995, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is
computed by the straight-line method based on estimated useful lives of the
assets. Upon retirement or disposal, the cost and accumulated depreciation are
removed from the accounts, and any gain or loss is included in income.
Maintenance and repair costs are charged to expense as incurred.
INTANGIBLES
Intangible assets are amortized on a straight-line basis over their
estimated economic lives.
CASH FLOWS
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. The carrying value of all financial
instruments approximates market value.
37
<PAGE> 38
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RISK CONCENTRATION
Accounts receivable is the principal financial instrument which
subjects the Company to concentration of credit risk. As of December 31, 1996
and 1995, receivables from customers represent substantially all of the
Company's net trade receivables. Credit is extended based upon an evaluation
of the customer's financial condition and, generally, collateral is not
required. Concentrations of credit risk with respect to receivables are
somewhat limited due to the Company's large number of customers, the diversity
of these customers' businesses and the dispersion of such customers throughout
the continental United States and parts of Canada. The Company maintains an
allowance for doubtful accounts and claims based upon the expected
collectibility of all trade receivables.
COMMON STOCK AND EARNINGS PER SHARE
Common shares outstanding during the periods presented have been
adjusted to reflect a 691.6129-for-1 stock split (the "Stock Split"), and
historical common shares authorized have been adjusted to reflect an increase
in authorized shares, each of which occurred in conjunction with the Company's
initial public offering of Common Stock (the "Offering") in November 1994.
Earnings per share is computed based upon the average number of common shares
and common share equivalents outstanding during the periods presented, adjusted
to give effect to the Stock Split. Net income available for common stock is
determined by deducting dividends on preferred stock and accretion to
liquidation value.
2. LEAVITT ACQUISITION:
On August 30, 1996, the Company acquired, through Leavitt, the assets
and operations of the steel tube division of UNR Industries, Inc., including
all the outstanding stock of Holco (the "Leavitt Acquisition"). Upon
consummation of the Leavitt Acquisition, Leavitt continued operations in the
manufacture and sale of structural and mechanical steel tubing. The net
purchase price was approximately $91.7 million after post-closing adjustments,
of which $62 million was financed with the Bank Credit Facility (as hereinafter
defined) and the remainder with cash. Leavitt's results of operations for the
period since the Leavitt Acquisition date are included in the Company's 1996
results of operations. The Leavitt Acquisition was accounted for as a
purchase.
38
<PAGE> 39
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of the Leavitt Acquisition date, the value of Leavitt's property,
plant and equipment was increased $31.3 million over its then-current book
value to reflect the estimated fair value of the assets purchased. Assets
totaling $4.4 million were recorded as of the Leavitt Acquisition date to
reflect a non-compete agreement, a supply agreement with an affiliate of UNR
Industries, Inc. and to reflect the actual purchase price in excess of the fair
value of the assets acquired. The Company also incurred certain closing and
financing costs in connection with the Leavitt Acquisition approximating $1
million.
The pro forma data outlined below reflects pro forma adjustments to
the statement of income for the years ended December 31, 1996 and 1995, as if
the Leavitt Acquisition occurred as of the beginning of each period presented.
The pro forma adjustments reflect the impact of additional depreciation and
amortization expenses. The pro forma adjustments also reflect the impact of
additional interest expense resulting from the Leavitt Acquisition debt and the
elimination of the Company's interest income partially offset by the
elimination of interest expense on the portion of Leavitt debt not assumed by
the Company. The income tax effect of the pro forma adjustments is based on an
effective income tax rate of 40%. Pro forma results for the years ended
December 31 follow (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $ 468,881 $ 469,430
Net income $ 23,020 $ 22,025
Earnings per share $ 2.29 $ 2.19
</TABLE>
3. INITIAL PUBLIC OFFERING:
On November 10, 1994, the Company sold 3,200,000 shares of Common
Stock, par value $.01 per share, for $10.00 per share to the public. Net
proceeds to the Company totaled $28.8 million after deducting underwriting
discounts and commissions and offering expenses. The net proceeds were used to
repay bank debt and redeem all 5,000 shares of outstanding 15% Exchangeable
Preferred Stock (the "Redeemable Preferred Stock") at an aggregate redemption
price of $7.8 million (representing the $5 million face value plus $2.8 of
unpaid accrued dividends).
39
<PAGE> 40
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVENTORIES:
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 14,547 $ 6,641
Work in progress 21,124 4,903
Finished goods 18,613 7,952
---------- ----------
54,284 19,496
Tolling metal due customers (2,234) (3,521)
---------- ----------
$ 52,050 $ 15,975
========== ==========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment and the related depreciable lives
consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Land and land improvements (15-20 years) $ 3,331 $ 246
Buildings and improvements (10-39 years) 21,834 7,279
Machinery and equipment (2-15 years) 92,530 46,140
Construction in progress 1,925 1,226
---------- ----------
119,620 54,891
Accumulated depreciation (21,992) (16,446)
---------- ----------
$ 97,628 $ 38,445
========== =========
</TABLE>
40
<PAGE> 41
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. OTHER ASSETS:
Intangibles. There were no intangible assets at December 31, 1995.
Intangible assets recorded in conjunction with the Leavitt Acquisition and the
related period of amortization consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Covenant not-to-compete (5 years) $ 500
Supply agreement (5 years) 560
Deferred financing costs (5 years) 450
Acquisition costs (5 years) 555
Excess of cost over net assets acquired (15 years) 3,321
---------
5,386
Accumulated amortization (211)
---------
$ 5,175
=========
</TABLE>
Receivable from BP. At December 31, 1996, the receivable from BP
totaled $1.6 million and included $1.3 million resulting from certain
post-closing adjustments under the CBCC Purchase Agreement and $1.2 million in
environmental-related capital expenditures for which the Company expects
reimbursement under the terms of the CBCC Purchase Agreement and a Remediation
Agreement (herein so called) dated August 24, 1990, entered into by and among
BPE, The Standard Oil Company, the Company and CBCC concerning the performance
of remedial and certain other environmental matters by the parties thereto.
Were the Company not to receive payment on the receivable balance due from BP,
the Company intends to offset any such amounts against amounts payable under
the $20 million Subordinated Promissory Note issued to BP as partial
consideration for the Acquisition (the "BP Note").
At December 31, 1996, the receivable from BP reflects a reduction of
$254,000 of contingent interest which was payable August 1996 under the BP Note
as the Company offset the amount against certain post-closing adjustments. At
December 31, 1996, the receivable from BP also reflects a reduction of $661,000
of interest payable August 1997 as it is the Company's intent to offset the
amount against certain post-closing adjustments.
41
<PAGE> 42
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FINANCING ARRANGEMENTS:
Debt consisted of the following at December 31, (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
BP Note $20,000 $18,784
Term loan 50,000 --
Other 762 --
------- -------
70,762 18,784
Current portion of long-term debt 131 --
------- -------
Long-term debt $70,631 $18,784
======= =======
</TABLE>
In connection with the CBCC Acquisition, the Company issued the BP
Note in the original principal amount of $20.0 million. The BP Note was
recorded at the CBCC Acquisition date at a discount using a 10.4% effective
interest rate. The BP Note initially matured in August 1996, and the Company,
at its option, extended the maturity date for three additional years to August
1999 with interest payable annually at 9.29%. The BP Note contained a
contingent interest payment based upon average Company earnings (defined in the
BP Note) for the years ended December 31, 1990 through 1995. The contingent
interest, totaling $254,000 and due August 1996, was offset against the
receivable from BP.
In connection with the Leavitt Acquisition, the Company entered into a
new credit facility (the "Bank Credit Facility") of $100 million. The Bank
Credit Facility replaced the Company's existing $33 million bank credit
facility which was terminated August 30, 1996. The Bank Credit Facility
includes a $60 million term loan ("Term Loan") and a $40 million revolving
credit facility ("Revolving Credit Facility"). Total borrowing capacity under
the Revolving Credit facility is determined monthly by a formula based on
levels of inventory and accounts receivable up to a maximum of $40 million.
The Revolving Credit Facility commitment expires August 30, 2001, and the
Company can request a one-year extension of the expiration date any time after
December 31, 1997. The Term Loan is payable quarterly and matures October
2003. The Company prepaid $10 million on the Term Loan in December 1996,
including all amounts originally due in 1997.
42
<PAGE> 43
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Advances under the Bank Credit Facility will bear interest, at the
Company's option, at a rate per annum equal to (i) the higher of (a) the bank's
prime rate or (b) the Federal funds rate plus 1/2%, or (ii) LIBOR for the
applicable borrowing period plus 1/2%, 5/8%, 3/4%, 7/8%, 1 1/8%, or 1 3/8%
depending on the Company's ratio of total debt to earnings before interest,
taxes, depreciation and amortization, with interest payable quarterly or at of
the end of each LIBOR borrowing period, whichever is shorter. At December 31,
1996, the weighted average interest rate on the Term Loan was 6.3%.
The Bank Credit Facility contains certain covenants that, among other
things, limit the Company's ability to incur additional debt, make capital
expenditures or pay dividends. The covenants also require the Company to
maintain a minimum interest coverage ratio and level of net worth and restrict
the Company from exceeding a maximum ratio of debt to cash flow from
operations. The Bank Credit Facility also requires the Company to maintain
CBCC and Leavitt as wholly-owned subsidiaries.
Aggregate maturities of long-term debt are as follows: $131,000 in
1997, $3 million in 1998, $24.4 million in 1999, $8.6 million in 2000, $12.2
million in 2001, and $22.5 million thereafter.
8. RETIREMENT PLANS:
The Company provides various contributory and noncontributory benefit
plans covering substantially all of its employees, including profit sharing
plans, employee savings plans under Section 401(k) of the Internal Revenue
Code, and defined benefit pension plans.
For plans to which the Company contributes, the contributions become
fully vested after five years of service. The amount of Company contributions
to the employee savings plans are based on formulas outlined in the plans.
Company contributions under the noncontributory qualified profit sharing plans
are based on a percentage of eligible employees' compensation. Contributions
to the trust fund of the profit sharing plans are discretionary, and the
Company has the right to amend, modify or terminate the plans, but in no event
will any portion of vested contributions revert to the Company. Charges to
expense under the defined contribution plans, for the years ended December 31,
1996, 1995 and 1994, were $588,000, $353,000 and $299,000, respectively.
The defined benefit retirement plans provide benefits based on a
participant's years of service and stated monthly benefit amounts based on the
date of retirement. The Company's policy is to make periodic contributions as
required by contract or applicable regulations. Increases in 1996 in the
funded status and net periodic pension expense of the defined benefit
retirement plans was primarily the result of the Leavitt Acquisition.
43
<PAGE> 44
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The defined benefit retirement plans' funded status was as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Vested benefits $ 8,374 $ 1,828
Nonvested benefits 219 136
----------- ----------
Projected benefit obligation (which equals
the accumulated benefit obligation) 8,593 1,964
Funded status at fair value (8,244) (1,919)
----------- ----------
Assets less than the projected benefit obligation 349 45
Unrecognized prior service cost (251) (224)
Unrecognized net loss (269) (223)
----------- ----------
Prepaid pension expense $ (171) $ (402)
=========== ==========
</TABLE>
For the year ended December 31, 1996, discount rates used in
determining the projected benefit obligation ranged from 7.25% to 7.5% and the
expected long-term rate of return on assets ranged from 7.5% to 8.5%. For the
year ended December 31, 1995, the discount rate used in determining the
projected benefit obligation was 7.5% and the expected long-term rate of return
on assets was 8.0%.
The defined benefit retirement plans' net periodic pension expense was
as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost $ 156 $ 87 $ 82
Interest cost 308 131 117
Return on plan assets (340) (88) (42)
Net amortization and deferral 55 (26) (43)
------ ------ ------
Net periodic pension expense $ 179 $ 104 $ 114
====== ====== ======
</TABLE>
44
<PAGE> 45
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES:
The consolidated provision for income taxes consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C>
Current taxes:
Federal $ 11,327 $ 8,885 $ 3,823
State 2,379 2,027 984
--------- --------- ---------
Total current taxes 13,706 10,912 4,807
--------- --------- ---------
Deferred taxes:
Federal and state (142) 131 2,646
Reversal of tax valuation allowance -- -- (342)
--------- --------- ---------
Total deferred taxes (142) 131 2,304
--------- --------- ---------
Provision for income taxes $ 13,564 $ 11,043 $ 7,111
========= ========= =========
</TABLE>
Deferred income taxes are recorded to reflect the tax consequences on
future years of differences between the financial statement and tax bases of
assets and liabilities and were composed of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Net current deferred tax asset:
Allowance for doubtful accounts and claims $ 519 $ 363
Accrued employee benefits 1,254 422
Other, net 1,124 65
---------- ---------
$ 2,897 $ 850
========== =========
Net long-term deferred tax liability:
Depreciation and basis differences $ 7,893 $ 4,414
Other, net 188 356
---------- ---------
$ 8,081 $ 4,770
========== ==========
</TABLE>
45
<PAGE> 46
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the provision for income taxes compared with the
amounts at the federal statutory tax rate follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Tax provision at statutory rate of 35% $ 11,971 $ 9,711 $ 6,883
State taxes 1,547 1,318 640
Change in tax valuation allowance -- -- (342)
Other, net 46 14 (70)
---------------------------------------
Provision for income taxes $ 13,564 $ 11,043 $ 7,111
========== ========== ==========
Effective tax rate 39.7% 39.8% 36.2%
</TABLE>
10. STOCK OPTIONS:
In November 1994, the Company implemented its 1994 Long-Term Incentive
Plan (the "Plan") for key employees and non-employee directors. In connection
with the Plan, 1,000,000 shares of Common Stock were reserved for option
grants. Stock options granted become exercisable over five years from the date
of the grant and expire after 10 years. The exercise price of options granted
approximates the fair market value at the grant date.
46
<PAGE> 47
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------------- ----------------- --------
<S> <C> <C> <C>
Options outstanding at beginning of year 544,000 490,000 --
Options granted 318,300 60,000 490,000
Exercise price per share $16.75 to $18.88 $11.25 to $11.73 $10.00
Weighted average exercise price $17.32 $11.33 $10.00
Options exercised 4,900 -- --
Exercise price per share $10.00 -- --
Weighted average exercise price $10.00 -- --
Options canceled/forfeited 62,300 6,000 --
Exercise price per share $10.00 to $17.00 $10.00 --
Weighted average exercise price $11.03 $10.00 --
Options outstanding at end of year 795,100 544,000 490,000
Exercise price per share $10.00 to $18.88 $10.00 to $11.73 $10.00
Weighted average exercise price $12.95 $10.37 $10.00
Weighted average remaining life (years) 8.60 8.89 9.86
Options exercisable at end of year 196,300 96,800 --
Exercise price per share $10.00 to $11.23 $10.00 --
Weighted average exercise price $10.08 $10.00 --
</TABLE>
Stock options outstanding at December 31, 1996, totaling 795,100
shares include 478,800 shares and 316,300 shares with weighted average exercise
prices of $10.06 and $17.32 per share, respectively, and remaining weighted
average contractual lives of 7.9 years and 9.7 years, respectively.
Effective January 1, 1996, the Company adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). However, as permitted
under SFAS 123, the Company has elected to continue accounting for the Plan in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25), which is an intrinsic value based method
of accounting.
47
<PAGE> 48
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of each stock option grant was estimated as of the
grant date using the Black-Scholes option- pricing model with the following
assumptions used for stock options granted in:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Estimated fair value per share of options
granted during the year $8.43 $5.74
Assumptions:
Annualized dividend yield -- --
Common stock price volatility (peer index) 37.6% 39.6%
Risk-free rate of return 6.7% 7.1%
Expected option term (in years) 6 6
</TABLE>
The Company has elected to continue applying the provisions of APB 25
and, accordingly, no stock option compensation cost is included in the results
of operations. Had stock option compensation for the Plan been determined
based on the fair value of the stock options on the respective grant dates
consistent with the methodology of SFAS 123, the impact on the Company's net
income and earnings per share would not have been material.
11. PREFERRED STOCK:
At December 31, 1996 and 1995, the Company had no preferred stock
issued or outstanding. In conjunction with the Offering, the Company
authorized 1,000,000 shares of preferred stock, none of which has been issued.
The preferences and rights of such preferred stock may be determined by the
Board of Directors at any time prior to issuance.
In conjunction with the Offering, the Company redeemed all 5,000
outstanding shares of its Redeemable Preferred Stock on November 10, 1994, at
the redemption price of $1,000 per share plus accumulated unpaid dividends.
The difference between the fair value of the Redeemable Preferred
Stock at issuance and the mandatory redemption value was recorded through
periodic accretions, using the effective interest method with a related charge
to additional paid-in capital. Additional accretion of $912,000 was recorded
in conjunction with the Offering to increase the redemption value to $5
million.
48
<PAGE> 49
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMON STOCK:
The Company's Common Stock consisted of the following:
<TABLE>
<CAPTION>
Shares issued as of December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Common Stock 5,965,621 5,960,721 5,960,721
Nonvoting Common Stock 4,100,079 4,100,079 4,100,079
----------- ----------- -----------
10,065,700 10,060,800 10,060,800
========== ========== ==========
</TABLE>
All shares of Common Stock and Nonvoting Common Stock are identical,
except that holders of Nonvoting Common Stock have no voting rights. Shares of
Nonvoting Common Stock may be converted, at the option of the holder, into
Common Stock on a share-for-share basis, except to the extent that the holder
of Nonvoting Common Stock is restricted from obtaining certain ownership levels
in the Company pursuant to the Small Business Investment Act of 1958 and the
Bank Holding Company Act of 1956.
On November 2, 1994, all outstanding common shares in all classes were
converted into 6,860,800 shares of Common Stock. One stockholder then
exchanged 4,100,079 shares of Common Stock for Nonvoting Common Stock on a
share-for-share basis. As part of the Offering, the Company issued 3,200,000
shares of Common Stock at a price to the public of $10.00 per share.
13. OPERATING LEASE OBLIGATIONS:
Rental expense under operating leases was $648,000, $658,000 and
$501,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
As of December 31, 1996, the minimum rental commitments under long-term
operating leases were as follows: $314,000 in 1997, $194,000 in 1998, $174,000
in 1999 and 2000, and $87,000 in 2001.
49
<PAGE> 50
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. COMMITMENTS AND CONTINGENCIES:
CBCC. In connection with the CBCC Acquisition, the Company and BP
entered into a remediation agreement (the "Remediation Agreement"). Under the
terms of the Remediation Agreement, BP is responsible for certain remediation
activities attributable to environmental releases which occurred prior to the
CBCC Acquisition at CBCC's manufacturing facility and the construction of a
waste water treatment plant to enable CBCC to comply with its waste water
discharge permit (the "Permit"). BP also is obligated under the CBCC Purchase
Agreement to indemnify the Company for liabilities arising out of certain
environmental conditions that existed as of the CBCC Acquisition date. BP has
performed certain activities in this regard and has acknowledged liability for
certain releases of regulated substances into the environment which occurred
prior to the CBCC Acquisition.
While CBCC's waste water treatment plant has been in operation since
May 1993, CBCC is still experiencing exceedances to certain limitations
contained in the Permit, resulting in violations of the Clean Water Act. BP
and CBCC have identified several conditions contributing to the exceedances and
are actively working to correct the problems that have precluded CBCC's routine
compliance with the Permit. The Ohio Environmental Protection Agency ("Ohio
EPA") is kept apprised as to the status of the parties' activities concerning
the elimination of exceedances and concurs with the proposals for corrective
measures, and the Ohio EPA has not initiated any enforcement action against
CBCC for prior exceedances, but has indicated that it may do so if violations
of the Permit limits continue after January 31, 1997. In February 1997, CBCC
completed a control project designed to eliminate exceedances to the Permit
limits and currently is monitoring its waste water discharge to determine if
the exceedances have been eliminated.
CBCC and/or other entities named "Chase Brass & Copper Co." (which may
include Old Chase or divisions of Old Chase) have been named by governmental
agencies and/or private parties as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (CERCLA) and/or state laws with respect to two sites, and may have been
identified as a PRP at one additional site.
In connection with one of the two sites, located in Cleveland, Ohio,
CBCC has been named as one of over 130 defendants in a CERCLA Section 107
action which seeks recovery of response costs previously spent and proposed to
be spent by the plaintiff. The plaintiff has alleged that between 1990 and
1993 it and the other ordered parties have incurred response costs in excess of
$10 million. The Company believes that CBCC has had no contact with the site
and has no knowledge
50
<PAGE> 51
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
as to what, if any, share of response costs has been allocated to CBCC. BP has
been notified of this suit and has assumed the defense thereof because alleged
events giving rise to the CERCLA liability occurred prior to the CBCC
Acquisition.
With respect to the second site, located in Tifton, Georgia, CBCC has
been notified by a group of private parties of its potential identification as
a PRP. The notice alleges that CBCC may be liable for contribution with
respect to prior cleanup costs incurred by third parties at this site and may
be required to participate in funding future cleanup costs at this site. The
Company believes that CBCC has had no contact with the site and has no
knowledge as to what, if any, share of response costs would be allocated to
CBCC if it is determined that CBCC or Old Chase had any contact with this site.
BP has been notified and has assumed the defense of this matter.
The additional site, located in Mifflin County, Pennsylvania, was
placed on the United States Environmental Protection Agency's (the "EPA")
National Priorities List in 1989. While CBCC has not received any formal
notification from the EPA or any third party, the Company believes that Old
Chase has been identified by the EPA as a PRP. To the Company's knowledge,
however, neither CBCC nor the brass rod division of Old Chase directly disposed
of hazardous wastes at this site. Nevertheless, BP has been notified by the
Company of CBCC's (or Old Chase's) apparent identification as a PRP and BP's
responsibility for any liability associated with this site as it relates to
periods prior to the date of the CBCC Acquisition. Based on information
available to the Company, it appears that if CBCC or Old Chase were determined
to be liable, liability would be allocated on the basis of 0.5828% of cleanup
costs (or approximately $376,000).
The Company believes that CBCC has no liability for the cleanup costs
related to these sites because (a) such liability is attributable to an entity
that had the same or similar name to that of CBCC, such as a division or
subsidiary of BP (other than the brass rod division of Old Chase), or (b) such
liability arose from acts that occurred prior to the CBCC Acquisition and,
therefore, BP retained such liability under the CBCC Purchase Agreement and is
contractually obligated to indemnify the Company for such liabilities. To the
extent CBCC incurs any cleanup costs with respect to these sites, it intends to
enforce its rights under the CBCC Purchase Agreement to recover such amounts
from BP.
Preliminary studies conducted immediately prior to the CBCC
Acquisition indicated that the site upon which CBCC's manufacturing facility is
located has been contaminated with certain volatile organic compounds,
including trichlorethylene, as well as total petroleum hydrocarbons and certain
metals from historical operating practices. BP has conducted initial site
investigation activities to determine the extent of contamination and
appropriate cleanup methods. The results of the initial site investigation
activities were provided to CBCC in second quarter 1996, which results
identified the presence and location of certain contaminants. BP also provided
to CBCC a draft remediation plan with respect to certain areas of the facility
based on the results of the initial sampling. CBCC has reviewed the initial
sampling results and draft remediation plan provided to
51
<PAGE> 52
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
it and has determined that additional sampling is necessary to fully delineate
the extent and magnitude of contamination and to identify appropriate cleanup
standards. CBCC and BP are working together, with their respective
consultants, to identify additional sampling that is required. Upon completion
of a plan for such additional sampling, CBCC intends to meet with BP and the
Ohio EPA to identify available remedial methods and potential regulatory
constraints related to specific remedial methodologies. The results of the
initial sampling, the additional sampling to be conducted, and input from the
Ohio EPA will be used to develop a comprehensive remediation plan for the site.
The investigation is being conducted on a voluntary basis with the concurrence
of the Ohio EPA.
Because the site investigatory activities related to CBCC's facility
are not yet complete, the Company presently is unable to estimate with any
degree of certainty the extent of contamination or the amount of site cleanup
costs associated therewith, although such costs may be material. However,
because BP has acknowledged its obligations with respect to site contamination
attributable to Old Chase's operations, the probability that CBCC would be
required to make material expenditures related to site cleanup appears to be
remote. Accordingly, no reserves have been established regarding the
aforementioned matters. Additionally, the Company expects no material impact
on its financial position, results of operations or liquidity as a result of
the existence of any other environmental conditions.
To the extent CBCC incurs cleanup costs with respect to CBCC's site,
it intends to enforce its rights under the CBCC Purchase Agreement to recover
such amounts from BP. However, to the extent CBCC is required to fund cleanup
costs related to the remediation of contamination at its manufacturing facility
as a result of BP's refusal to implement remediation activities acceptable to
CBCC, such costs could have a material adverse effect on the Company's
financial condition and results of operations pending the recovery of such
amounts from BP. In the event the Company is entitled to recovery from BP
pursuant to the Remediation Agreement, the CBCC Purchase Agreement, or
otherwise, but is unable to collect such amounts from BP, the Company may elect
to offset the amounts of such recoveries against amounts payable under the $20
million BP Note to the extent it legally is entitled to do so.
Leavitt. Prior to the closing of the Leavitt Acquisition, five
underground storage tanks ("USTs") were removed from Leavitt's facility in
Hammond, Indiana. It is the Company's understanding that these USTs were used
to contain waste oil, waste oil residue and sludge, phenol and metals when the
property was utilized by prior owners as a bus barn. Prior to removal, one or
more of the USTs released petroleum and other chemical constituents into the
environment. Some contamination of groundwater and soil at the Hammond
facility remains in place. Prior to the Leavitt Acquisition, Old Leavitt had
conducted sampling and had requested the Indiana Department of Environmental
Management ("IDEM") to "close" the UST removal project. The IDEM has not yet
issued a "closed" letter, and in February 1997, notified Leavitt that
additional groundwater
52
<PAGE> 53
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
sampling will be required prior to the IDEM considering closure. Leavitt
intends to begin additional groundwater sampling in second quarter 1997. Until
such sampling is conducted, and the results thereof provided to Leavitt, the
Company is unable to determine the current extent of contamination or what, if
any, remedial activities may be required. However, because UNR Industries,
Inc. is obligated with respect to site contamination attributable to Old
Leavitt's operations, the probability that Leavitt would be required to make
material expenditures relating to site cleanup appears to be remote.
The cleanup costs associated with the environmental conditions
described above may be material and, in the event Leavitt were determined to be
solely responsible or liable for site cleanup activities (due to the inability
or unwillingness of other responsible parties to perform or pay for such
activities), such expenditures could have a material adverse effect on the
Company's earnings and financial condition. Notwithstanding this potential
(although uncertain) material liability, UNR Industries, Inc. is obligated
under the Leavitt Acquisition Agreement to indemnify Leavitt for 90% of losses
related to certain environmental conditions, including costs incurred with
respect to contaminants released at Leavitt's properties prior to the Leavitt
Acquisition, to the extent such losses exceed $400,000 in the aggregate. In
addition, to the extent the contamination at the Hammond facility is attributed
to actions of prior owners, the Company may be entitled to recover from prior
owners costs incurred by the Company at the Hammond site. Therefore, the
Company does not believe that costs that may be incurred by Leavitt in
connection with investigation and cleanup associated with the groundwater and
soil contamination at the Hammond facility will have a material adverse effect
on the Company's financial position, results of operations or liquidity and the
Company has not made any accrual of all or any part of such costs.
53
<PAGE> 54
CHASE BRASS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
15. QUARTERLY FINANCIAL INFORMATION (unaudited; in thousands, except share
amounts):
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER*
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 89,917 $ 82,095 $ 88,253 $ 106,726
Gross profit $ 12,634 $ 11,797 $ 14,349 $ 16,866
Net income available for
common stock $ 5,240 $ 5,040 $ 5,034 $ 5,325
Average shares outstanding 10,061 10,063 10,064 10,065
Net income available for
common stock per share $ .52 $ .50 $ .50 $ .53
</TABLE>
____________
* Significant increase in the fourth quarter
reflects the Leavitt Acquisition
<TABLE>
<CAPTION>
1995
----------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 86,137 $ 82,994 $ 68,672 $ 75,294
Gross profit $ 12,276 $ 11,248 $ 9,306 $ 10,245
Net income available for
common stock $ 4,738 $ 4,432 $ 3,422 $ 4,109
Average shares outstanding 10,061 10,061 10,061 10,061
Net income available for
common stock per share $ .47 $ .44 $ .34 $ .41
</TABLE>
54
<PAGE> 55
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference herein from the Registrant's Proxy
Statement for its Annual Meeting of Stockholders to be held in
1997.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference herein from the Registrant's Proxy
Statement for its Annual Meeting of Stockholders to be held in
1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference herein from the Registrant's Proxy
Statement for its Annual Meeting of Stockholders to be held in
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference herein from the Registrant's Proxy
Statement for its Annual Meeting of Stockholders to be held in
1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. For a list of Financial Statements filed as a part of this
Annual Report, see "Item 8. Financial Statements and
Supplementary Data."
2. For a list of Financial Statement Schedules filed as a part of
this Annual Report, see "Item 8. Financial Statements and
Supplementary Data."
3. Exhibits.
Exhibits followed by an (*) constitute management contracts or
compensatory plans or arrangements.
55
<PAGE> 56
EXHIBIT
NUMBER DESCRIPTION
2.1 -- Sale and Purchase Agreement dated May 15, 1996, among Chase
Brass Industries, Inc. (the "Company"), Leavitt Structural
Tubing Co. and UNR Industries, Inc. (incorporated by reference
to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996).
2.2 -- Amendment No. 1 to Sale and Purchase Agreement dated July 1,
1996, by and among the Company, Leavitt Tube Company, Inc., a
Delaware corporation and a wholly owned subsidiary of the
Company, Leavitt Structural Tubing Co., and UNR Industries,
Inc. (incorporated by reference to Exhibit 2.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996).
2.3 -- Amendment No. 2 to Sale and Purchase Agreement dated as of
August 29, 1996, among the Company, Leavitt Tube Company,
Inc., Leavitt Structural Tubing Co. and UNR Industries, Inc.
(incorporated by reference to Exhibit 2.4 to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 13, 1996).
2.4 -- Assignment and Assumption Agreement dated June 27, 1996, by
and between the Company and Leavitt Tube Company, Inc.
(incorporated by reference to Exhibit 2.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
3.1 -- Restated Certificate of Incorporation of Chase Brass
Industries, Inc., a Delaware corporation (incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
3.2 -- By-Laws of the Company (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on November
3, 1994, Registration No. 33-83178).
4.1 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
November 3, 1994, Registration No. 33-83178).
4.2 -- Exchange Agreement dated November 4, 1994, between the Company
and Citicorp Venture Capital Ltd. ("CVC") (incorporated by
reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
56
<PAGE> 57
4.3 -- Voting Agreement dated November 4, 1994, between the Company,
CVC and Martin V. Alonzo ("Mr. Alonzo") (incorporated by
reference to Exhibit 4.5 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
10.1 -- Credit Agreement by and among the Company, the banks referred
to therein and PNC Bank, National Association, as Agent, dated
as of August 30, 1996 (incorporated by reference to Exhibit
99.1 to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on September 13, 1996).
10.2* -- Employment Agreement dated November 10, 1994, between the
Company and Mr. Alonzo (incorporated by reference to Exhibit
10.3 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
+10.3* -- Employment Agreement dated October 28, 1996, between Chase
Brass & Copper Company, Inc., a wholly owned subsidiary of the
Company, and Duane R. Grossett.
+10.4* -- Chase Brass Industries, Inc., 1994 Long-Term Incentive Plan,
as amended effective as of October 21, 1996.
10.5 -- Indemnification Agreement dated November 10, 1994, between the
Company and Mr. Alonzo (incorporated by reference to Exhibit
10.6 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
+10.6 -- Schedule identifying additional documents substantially
identical to the Indemnification Agreement included as Exhibit
10.5 and setting forth the material details in which those
documents differ from that document.
10.7 -- Registration Rights Agreement dated November 10, 1994, by and
among the Company, CVC and Mr. Alonzo (incorporated by
reference to Exhibit 10.7 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.8 -- Asset Purchase Agreement dated May 10, 1990, as amended, by
and among the Company, CBC Acquisition Corporation (a
wholly-owned subsidiary of the Company now named Chase Brass &
Copper Company, Inc. ("CBCC"), Chase Brass & Copper Company,
Incorporated, a Delaware corporation now named Ken-Chas
Reserve Co. ("Old Chase"), BP Exploration (Alaska), Inc.
("BP") and The Standard Oil Company ("Standard") (incorporated
by reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on November 3, 1994, Registration No.
33-83178).
57
<PAGE> 58
10.9 -- Subordinated Promissory Note dated August 24, 1990, between
the Company and CBCC (incorporated by reference to Exhibit
10.8 to the Company's Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on November
3, 1994, Registration No. 33-83178).
10.10 -- Remediation Agreement dated August 24, 1990, by and among the
Company, CBCC, BP and Standard (incorporated by reference to
Exhibit 10.10 to the Company's Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
November 3, 1994, Registration No. 33-83178).
10.11 -- Tolling Agreement dated May 4, 1994, by and among the Company,
CBCC, Old Chase, BP and Standard (incorporated by reference to
Exhibit 10.13 to the Company's Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
November 3, 1994, Registration No. 33-83178).
+10.12 -- Lease Agreement dated October 14, 1985, between UNR
Industries, Inc., UNR-Leavitt Division, as lessee, and Madison
Country Economic Development Authority (formerly known as
Industrial Development Authority of Madison County), as
lessor, regarding certain real property and improvements
located in Madison County, Mississippi ("Madison Lease
(1985)").
+10.13 -- Assignment and Consent Agreement dated August 28, 1996,
assigning the Madison Lease (1985) from UNR Industries, Inc.
to Leavitt Tube Company, Inc. ("Leavitt").
+10.14 -- Lease Agreement dated October 14, 1988, between UNR
Industries, Inc., UNR-Leavitt Division, as lessee, and Madison
Country Economic Development Authority (formerly known as
Industrial Development Authority of Madison County), as
lessor, regarding certain real property and improvements
located in Madison County, Mississippi ("Madison Lease
(1988)").
+10.15 -- Assignment and Consent Agreement dated August 28, 1996,
assigning the Madison Lease (1988) from UNR Industries, Inc.
to Leavitt.
+10.16* -- CBCC Benefit Restoration Plan
+10.17* -- Leavitt Supplemental Executive Retirement Plan.
+21 -- List of Subsidiaries of the Company.
+23.1 -- Consent of Coopers & Lybrand L.L.P.
+27 -- Financial Data Schedule
_________________
+ Filed herewith
58
<PAGE> 59
(b) REPORTS ON FORM 8-K
On November 13, 1996, the Company filed a Current Report on
Form 8-K/A, dated November 13, 1996, regarding the
consummation of the Acquisition of the UNR-Leavitt Division of
UNR Industries, Inc. The items reported on such Current
Report were Item 2 (Acquisition or Disposition of Assets) and
Item 7 (Exhibits).
(c) EXHIBITS
The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) FINANCIAL STATEMENT SCHEDULES
The response to this portion of Item 14 is submitted as a
separate section of this report.
59
<PAGE> 60
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.
CHASE BRASS INDUSTRIES, INC.
Date: March 18, 1997 By: /s/ MARTIN V. ALONZO
--------------------------------------
Martin V. Alonzo
Chairman of the Board, President and
Chief Executive Officer
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>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C> <C>
/s/ MARTIN V. ALONZO Chairman of the Board, March 18, 1997
- ----------------------- President, Chief Executive
Martin V. Alonzo Officer and Director (Principal
Executive Officer, Principal
Financial Officer and Principal
Accounting Officer)
/s/ RAYMOND E. CARTLEDGE Director March 18, 1997
- ---------------------------
Raymond E. Cartledge
/s/ CHARLES E. CORPENING Director March 18, 1997
- ---------------------------
Charles E. Corpening
/s/ DONALD J, DONAHUE Director March 18, 1997
- ---------------------------
Donald J. Donahue
/s/ JOHN R. KENNEDY Director March 18, 1997
- ---------------------------
John R. Kennedy
/s/ THOMAS F. MCWILLIAMS Director March 18, 1997
- ---------------------------
Thomas F. McWilliams
/s/ WILLIAM R. TOLLER Director March 18, 1997
- ---------------------------
William R. Toller
</TABLE>
60
<PAGE> 61
CHASE BRASS INDUSTRIES, INC.
(PARENT COMPANY ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
The following condensed financial statements reflect the parent
company only, Chase Brass Industries, Inc., accounting for its wholly-owned
subsidiaries Chase Brass & Copper Company, Inc., and Leavitt Tube Company,
Inc., on the equity method of accounting. All footnote disclosures have been
omitted since information has been included in the Chase Brass Industries, Inc.
consolidated financial statements included elsewhere in this Form 10-K.
CONDENSED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents $ 9,704 $ --
Other current assets 3,381 --
Investment in subsidiary 82,166 39,995
Intercompany receivable 70,834 32,499
-------- -------
Total assets $166,085 $72,494
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 13,671 $ --
Long-term debt 70,000 18,784
Deferred income tax liability 8,081 65
-------- -------
Total liabilities 91,752 18,849
-------- -------
Commitments and contingencies -- --
Stockholder's equity:
Common stock 60 60
Non-voting common stock 41 41
Additional paid-in capital 30,039 29,990
Retained earnings 44,193 23,554
-------- -------
Total stockholders' equity 74,333 53,645
-------- -------
Total liabilities and stockholders' equity $166,085 $72,494
======== =======
S-1
</TABLE>
<PAGE> 62
CHASE BRASS INDUSTRIES, INC.
(PARENT COMPANY ONLY)
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY--(Continued)
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Equity in earnings of wholly-owned subsidiaries $23,627 $17,795 $13,487
Interest expense 3,158 1,766 1,673
------- ------- -------
Income before income taxes 20,469 16,029 11,814
(Benefit) for income taxes (170) (672) (740)
-------- ------- -------
Net income $20,639 $16,701 $12,554
======= ======= =======
</TABLE>
S-2
<PAGE> 63
CONDENSED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $20,639 $16,701 $12,554
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Equity in earnings of wholly-owned subsidiaries (23,627) (17,795) (13,487)
Accretion of discount on subordinated
promissory note due seller 1,216 1,766 1,601
Deferred income tax expense (benefit) 8,016 (96) 1,325
Changes in assets and liabilities:
(Increase) in intercompany receivable (38,335) (576) (20,148)
Increase (decrease) in accounts payable and
accrued liabilities 13,671 -- (53)
(Increase) in current assets (3,381) -- --
-------- ------- -------
Net cash (used in) operating activities (21,801) -- (18,208)
------- ------- -------
Investing activities:
Purchase of Leavitt (18,544) -- --
------- ------- -------
Net cash (used in) investing activities (18,544) -- --
------- ------- -------
Financing activities:
Principal payments of bank term loans (10,000) -- --
Proceeds from issuance of bank term loan 60,000 -- --
Proceeds from Offering, net of fees -- -- 28,801
Preferred stock dividends and redemption -- -- (9,355)
Other 49 -- (1,238)
-------- ------- -------
Net cash provided by financing activities 50,049 -- 18,208
-------- ------- -------
Net increase in cash 9,704 -- --
Cash and cash equivalents, beginning of period -- -- --
-------- ------- -------
Cash and cash equivalents, end of period $ 9,704 $ -- $ --
======== ======= =======
</TABLE>
S-3
<PAGE> 64
CHASE BRASS INDUSTRIES, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS CHARGED TO
BALANCE AT -------------------- BALANCE AT
BEGINNING COST AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
--------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts
and claims $1,036 $201 $-- $ 1 $1,236
====== ==== === ====== ======
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts
and claims $1,036 $ 2 $-- $ 2 $1,036
====== ====== === ====== ======
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts
and claims $1,112 $ 67 $-- $143 $1,036
====== ===== === ==== ======
</TABLE>
S-4
<PAGE> 65
INDEX TO EXHIBITS
Exhibits followed by an (*) constitute management contracts or
compensatory plans or arrangements.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C?
2.1 -- Sale and Purchase Agreement dated May 15, 1996, among Chase
Brass Industries, Inc. (the "Company"), Leavitt Structural
Tubing Co. and UNR Industries, Inc. (incorporated by reference
to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996).
2.2 -- Amendment No. 1 to Sale and Purchase Agreement dated July 1,
1996, by and among the Company, Leavitt Tube Company, Inc., a
Delaware corporation and a wholly owned subsidiary of the
Company, Leavitt Structural Tubing Co., and UNR Industries,
Inc. (incorporated by reference to Exhibit 2.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996).
2.3 -- Amendment No. 2 to Sale and Purchase Agreement dated as of
August 29, 1996, among the Company, Leavitt Tube Company,
Inc., Leavitt Structural Tubing Co. and UNR Industries, Inc.
(incorporated by reference to Exhibit 2.4 to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 13, 1996).
2.4 -- Assignment and Assumption Agreement dated June 27, 1996, by
and between the Company and Leavitt Tube Company, Inc.
(incorporated by reference to Exhibit 2.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
3.1 -- Restated Certificate of Incorporation of Chase Brass
Industries, Inc., a Delaware corporation (incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
3.2 -- By-Laws of the Company (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on November
3, 1994, Registration No. 33-83178).
</TABLE>
<PAGE> 66
4.1 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
November 3, 1994, Registration No. 33-83178).
4.2 -- Exchange Agreement dated November 4, 1994, between the Company
and Citicorp Venture Capital Ltd. ("CVC") (incorporated by
reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
4.3 -- Voting Agreement dated November 4, 1994, between the Company,
CVC and Martin V. Alonzo ("Mr. Alonzo") (incorporated by
reference to Exhibit 4.5 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
10.1 -- Credit Agreement by and among the Company, the banks referred
to therein and PNC Bank, National Association, as Agent, dated
as of August 30, 1996 (incorporated by reference to Exhibit
99.1 to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on September 13, 1996).
10.2* -- Employment Agreement dated November 10, 1994, between the
Company and Mr. Alonzo (incorporated by reference to Exhibit
10.3 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
+10.3* -- Employment Agreement dated October 28, 1996, between Chase
Brass & Copper Company, Inc., a wholly owned subsidiary of the
Company, and Duane R. Grossett.
+10.4* -- Chase Brass Industries, Inc., 1994 Long-Term Incentive Plan,
as amended effective as of October 21, 1996.
10.5 -- Indemnification Agreement dated November 10, 1994, between the
Company and Mr. Alonzo (incorporated by reference to Exhibit
10.6 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
+10.6 -- Schedule identifying additional documents substantially
identical to the Indemnification Agreement included as
Exhibit 10.5 and setting forth the material details in which
those documents differ from that document.
<PAGE> 67
10.7 -- Registration Rights Agreement dated November 10, 1994, by and
among the Company, CVC and Mr. Alonzo (incorporated by
reference to Exhibit 10.7 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.8 -- Asset Purchase Agreement dated May 10, 1990, as amended, by
and among the Company, CBC Acquisition Corporation (a
wholly-owned subsidiary of the Company now named Chase Brass &
Copper Company, Inc. ("CBCC"), Chase Brass & Copper Company,
Incorporated, a Delaware corporation now named Ken-Chas
Reserve Co. ("Old Chase"), BP Exploration (Alaska), Inc.
("BP") and The Standard Oil Company ("Standard") (incorporated
by reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on November 3, 1994, Registration No.
33-83178).
10.9 -- Subordinated Promissory Note dated August 24, 1990, between
the Company and CBCC (incorporated by reference to Exhibit
10.8 to the Company's Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on November
3, 1994, Registration No. 33-83178).
10.10 -- Remediation Agreement dated August 24, 1990, by and among the
Company, CBCC, BP and Standard (incorporated by reference to
Exhibit 10.10 to the Company's Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
November 3, 1994, Registration No. 33-83178).
10.11 -- Tolling Agreement dated May 4, 1994, by and among the Company,
CBCC, Old Chase, BP and Standard (incorporated by reference to
Exhibit 10.13 to the Company's Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
November 3, 1994, Registration No. 33-83178).
+10.12 -- Lease Agreement dated October 14, 1985, between UNR
Industries, Inc., UNR-Leavitt Division, as lessee, and Madison
Country Economic Development Authority (formerly known as
Industrial Development Authority of Madison County), as
lessor, regarding certain real property and improvements
located in Madison County, Mississippi ("Madison Lease
(1985)").
<PAGE> 68
+10.13 -- Assignment and Consent Agreement dated August
28, 1996, assigning the Madison Lease (1985)
from UNR Industries, Inc. to Leavitt Tube
Company, Inc. ("Leavitt").
+10.14 -- Lease Agreement dated October 14, 1988, between UNR
Industries, Inc., UNR-Leavitt Division, as lessee, and Madison
Country Economic Development Authority (formerly known as
Industrial Development Authority of Madison County), as
lessor, regarding certain real property and improvements
located in Madison County, Mississippi ("Madison Lease
(1988)").
+10.15 -- Assignment and Consent Agreement dated August 28, 1996,
assigning the Madison Lease (1988) from UNR Industries, Inc.
to Leavitt.
+10.16* -- CBCC Benefit Restoration Plan
+10.17* -- Leavitt Supplemental Executive Retirement Plan.
+21 -- List of Subsidiaries of the Company.
+23.1 -- Consent of Coopers & Lybrand L.L.P.
+27 -- Financial Data Schedule
- ---------
+ Filed herewith
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
by and between
CHASE BRASS & COPPER COMPANY, INC.
and
DUANE R. GROSSETT
dated effective as of
OCTOBER 28, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties and Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Duties as Employee of the Company . . . . . . . . . . . . . . . . . 1
(b) Other Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Non-Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Compensation and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Bonus Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Expenses and Other Benefits . . . . . . . . . . . . . . . . . . . . 3
(d) Vacations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Perquisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(g) Relocation Expenses . . . . . . . . . . . . . . . . . . . . . . . . 3
(h) Temporary Living Expenses . . . . . . . . . . . . . . . . . . . . . 4
(i) Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Death/Disability . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Termination by Executive . . . . . . . . . . . . . . . . . . . . . 5
5. Compensation Upon Termination Prior to a Change in Control of the Company . . . . . 6
(a) Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Breach by the Company or for Good Reason . . . . . . . . . . . . . 7
6. Compensation Upon Termination After a Change in Control of the Company . . . . . . . 8
7. Other Provisions Relating to Termination . . . . . . . . . . . . . . . . . . . . . . 8
(a) Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Date of Termination . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
8. Successors and Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Specific Enforcement . . . . . . . . . . . . . . . . . . . . . . . 12
11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13. Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
(ii)
<PAGE> 4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is effective as of the
28th day of October 1996, by and between Chase Brass & Copper Company, Inc., a
Delaware corporation (the "Company"), and Duane R. Grossett (the "Executive").
1. Employment. The Company hereby employs Executive as its
President and Chief Operating Officer, and Executive hereby accepts such
employment, on the terms and conditions set forth herein, for the period
commencing on the date hereof and expiring on January 4, 2000 (unless sooner
terminated as hereinafter set forth) (the "Term").
2. Duties and Restrictions.
(a) Duties as Employee of the Company. Executive shall,
subject to the authority and supervision of the Chief Executive Officer of the
Company, have general powers of supervision and management of the business,
affairs and property of the Company in the ordinary course of its business
usually vested in a President and Chief Operating Officer, with all such powers
with respect to such general management as may be reasonably incident to such
responsibilities, and shall have such additional or substitute duties as from
time to time designated by the Chief Executive Officer. Executive will devote
his full time, attention, and energies to the business of the Company and shall
not, without the consent of the Chief Executive Officer, either directly or
indirectly, engage in any other business or activity which would necessitate
Executive giving an appreciable portion of his time to such activity.
(b) Other Duties. Executive agrees to serve as a
director of the Company, and of any Subsidiary of the Company or Chase Brass
Industries, Inc. ("CBI"), and in one or more executive offices of any such
Subsidiary, in each case if elected or appointed to any such positions;
provided, however, that Executive is indemnified for serving in any and all
such capacities in a manner acceptable to the Company and Executive. Executive
agrees that he shall not be entitled to receive any compensation for serving as
a director of the Company, or in any capacity with respect to any Subsidiary of
CBI, other than the compensation to be paid to Executive pursuant to this
Agreement or any other written agreement between the Company or any of its
Subsidiaries and Executive.
(c) Non-Compete. Executive agrees that he will not, for
a period of one year following the termination of his employment with the
Company, (i) employ, associate in any business relationship with, endeavor to
entice away from the Company, CBI or any Subsidiary or otherwise interfere with
any person who was an employee of or consultant to the Company, CBI or any
Subsidiary of CBI during the three (3) month period preceding such termination
or (ii) be employed by, associated with or have any interest in, directly or
indirectly (whether as principal, director, officer, employee, consultant,
partner, stockholder, trustee, manager or otherwise), any company in the
business of manufacturing or producing copper alloy rod which is directly
competitive with the Company or any of its Subsidiaries, or any company which
otherwise is directly competitive with the Company or any of its Subsidiaries,
in any geographical area in which the Company or its Subsidiaries engage in
business at the time of such termination or in which any of them, prior to
termination of Executive's employment, evidenced in writing, at any time during
the six month period prior to such termination, its intention to engage in such
business (any such company, a "Competing Business"); provided,
<PAGE> 5
however, that the provisions of this Section 2(c) shall not apply in the event
(i) the Company terminates Executive's employment with the Company other than
for "Cause" (as herein defined) or otherwise in violation of this Agreement or
(ii) Executive terminates this Agreement for Good Reason (as hereinafter
defined). Notwithstanding the foregoing, Executive shall not be prohibited
from owning one percent or less of the outstanding equity securities of any
Competing Business whose equity securities are listed on a national securities
exchange or publicly traded in any over-the-counter market.
(d) Confidentiality. Executive shall not, directly or
indirectly, at any time during or following termination of his employment with
the Company, reveal, divulge or make known to any person or entity, or use for
Executive's personal benefit (including without limitation for the purpose of
soliciting business, whether or not competitive with any business of the
Company or any of its Subsidiaries), any information acquired during the course
of employment hereunder with regard to the financial, business or other affairs
of the Company, CBI or any Subsidiary of CBI (including without limitation any
list or record of persons or entities with which the Company, CBI or any
Subsidiary of CBI has any dealings), other than (i) information already in the
public domain, (ii) information of a type not considered confidential by
persons engaged in the same business or a business similar to that conducted by
the Company, CBI, or any Subsidiary of CBI, (iii) information that Executive is
required to disclose under the following circumstances: (A) at the express
direction of any authorized governmental entity; (B) pursuant to a subpoena or
other court process; (C) as otherwise required by law or the rules,
regulations, or orders of any applicable regulatory body; or (D) as otherwise
necessary, in the opinion of counsel for Executive, to be disclosed by
Executive in connection with any legal action or proceeding involving Executive
and the Company, CBI or any Subsidiary of CBI in his capacity as an employee,
officer, director, or stockholder of the Company, CBI or any Subsidiary of CBI,
or (iv) during the period of his employment hereunder, Executive may disclose
such confidential information to another employee of the Company, CBI or any
Subsidiary of CBI or to representatives or agents of the Company, CBI or any
Subsidiary of CBI (such as independent accountants and legal counsel) when such
disclosure is reasonably necessary or appropriate in connection with the
performance by Executive of his duties as an executive officer of the Company.
Executive shall, at any time requested by the Company (either during or within
one year after the termination of his employment with the Company), promptly
deliver to the Company all memoranda, notes, reports, lists and other documents
(and all copies thereof) relating to the business of the Company, CBI or any
Subsidiary of CBI which he may then possess or have under his control.
3. Compensation and Related Matters.
(a) Base Salary. Executive shall receive a base salary
paid by the Company ("Base Salary") at the annual rate of $190,000 during each
calendar year of the Term, payable in substantially equal monthly installments
(or such other more frequent times as executives of the Company normally are
paid). The Base Salary shall be reviewed by the Compensation Committee of the
Board of Directors of CBI (the "Compensation Committee") at least as often as
the compensation of other senior officers of the Company is reviewed, and may
be increased (but not decreased) at any time in the sole discretion of the
Compensation Committee, provided
2
<PAGE> 6
that the first review of Executive's Base Salary shall occur in 1998 with
respect to Base Salary for 1998.
(b) Bonus Payments. Executive shall be entitled to
receive, in addition to the Base Salary, such bonus payments, if any, as the
Compensation Committee may specify; provided, that Executive shall first be
entitled to receive a bonus payment in 1998 for services rendered during 1997.
(c) Expenses and Other Benefits. Executive shall be (i)
reimbursed for all reasonable expenses incurred by him in performing services
hereunder, provided that Executive properly accounts therefor in accordance
with Company policy, and (ii) entitled to participate in or receive benefits
under any employee benefit plan or other arrangement made available by the
Company now or in the future to its senior executive officers and key
management employees, other than the Company's Chief Executive Officer, subject
to and on a basis consistent with the terms, conditions, and overall
administration of such plan or arrangement.
(d) Vacations. Executive shall be entitled to 20 paid
vacation days during each year of the Term. For purposes of this Section 3(d),
weekends shall not count as vacation days and Executive shall also be entitled
to all paid holidays given by the Company to its senior executive officers.
(e) Perquisites. Executive shall be entitled to receive
the perquisites and fringe benefits appertaining to the offices of President
and Chief Operating Officer of the Company in accordance with any practice
established by the Company. Notwithstanding, and in addition to, any
perquisites to which Executive is entitled pursuant to the preceding sentence,
during the Term the Company shall pay for Executive's membership at one country
club, located within 60 miles of Executive's principal residence (as relocated
as contemplated in Section 3(g) below) or the Company's operating headquarters,
to which Executive is or may become a member as of or after the date hereof;
provided that in the event Executive terminates his membership in any such
country club, either during the Term or thereafter, the Company shall be
entitled to any amounts that may be payable as a refund of Executive's
initiation fee or monthly dues paid by the Company.
(f) Proration. Any payments or benefits payable to
Executive hereunder in respect of any calendar year during which Executive is
employed by the Company for less than the entire year, unless otherwise
provided in the applicable plan or arrangement, shall be prorated in accordance
with the number of days in such calendar year during which he is so employed.
(g) Relocation Expenses. The Company shall reimburse
Executive for all moving expenses incurred by Executive in connection with the
relocation of Executive's current principal residence to a location within 60
miles of the Company's operating headquarters in Montpelier, Ohio, including
the expenses incurred by Executive in moving the personal property of Executive
and his immediate family to Executive's new principal residence. The Company
also will reimburse Executive for (i) any loss, up to $25,000, realized on the
sale of his current principal residence in connection with such relocation,
computed as the amount, if any, by which (A) Executive's aggregate investment
in such residence exceeds (B) the actual sales price of the
3
<PAGE> 7
residence (without reduction for any broker's or agent's commissions or any
other expenses of the sale), (ii) all reasonable and customary closing expenses
incurred or paid by Executive in connection with the purchase of a new
principal residence in connection with such relocation; and (iii) all broker's
and agent's commissions and other expenses incurred by Executive in connection
with the sale of such residence ("Expenses"); provided, however, that if no
reimbursement is required under clause (i) of this Section 3(g), then the
reimbursement provided under this clause (iii) shall be limited to the amount,
if any, by which (A) Executive's aggregate investment in such residence exceeds
(B) the net sales proceeds received by Executive after deducting all Expenses.
If, as a result of providing the reimbursement provided for under this Section
3(g), Executive shall incur any federal income tax liability that otherwise
would not have been incurred, then, in addition to the amounts otherwise
payable to Executive under this Section 3(g), the Company shall pay to
Executive cash in an amount necessary to discharge any additional federal
income tax liability incurred by Executive as a result of the receipt of the
benefits provided for under this Section 3(g) (including the tax gross-up
provided by this sentence).
(h) Temporary Living Expenses. Until Executive Procures
a principal residence within 60 miles of the Company's headquarters, subject to
such period not exceeding a reasonable time for such relocation as determined
by the Company (with a relocation occurring prior to May 15, 1997, hereby
deemed to be reasonable), the Company shall reimburse Executive for all travel,
hotel and related living expenses incurred by Executive as a result of
Executive's not having a principle residence within such proximity.
(i) Stock Options. As of the effective date of this
Agreement, CBI will grant to Executive stock options to purchase 50,000 shares
of common stock of CBI at a per share exercise price equal to the closing price
of CBI's common stock as reported on the New York Stock Exchange on the
effective date of this Agreement (the "Stock Options"). The Stock Options will
be subject to the applicable terms and conditions set forth in the Company's
1994 Long-Term Incentive Plan (the "Plan"), and the Stock Options will vest and
become exercisable with respect to 10,000 shares of CBI common stock on each of
the first five anniversaries of the date of grant, subject to the provisions of
the Plan.
4. Termination. Executive's employment hereunder may be
terminated by the Company or Executive, as applicable, without any breach of
this Agreement only under the following circumstances:
(a) Death/Disability. Executive's employment hereunder
shall terminate (i) automatically upon Executive's death or (ii) upon the good
faith determination by the Board of Directors of CBI (the "CBI Board") that, as
a result of Executive's incapacity due to physical or mental illness, Executive
shall have been unable to perform his material managerial duties and
responsibilities hereunder on a full time basis for 120 consecutive calendar
days, and within 30 days after written notice of termination is given (which
may occur no sooner than 30 days prior to the end of such 120 day period)
Executive shall not have returned to the performance of his material managerial
duties and responsibilities hereunder on a full time basis; provided, however,
that during any period of Executive's disability the Company may assign
Executive's duties to any other employee of the Company or may engage or hire a
third party to perform such duties
4
<PAGE> 8
and any such action shall not be deemed "Good Reason" for Executive to
terminate this Agreement pursuant to Section 4(c)(i) hereof.
(b) Cause. The Company may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate Executive's employment hereunder upon:
(i) the continued failure by Executive to
substantially perform his duties hereunder (other than any
such failure resulting from Executive's incapacity due to
physical or mental illness) after written demand for
substantial performance is delivered by the Company
specifically identifying the manner in which the Company
believes Executive has not substantially performed his duties;
(ii) dishonesty by Executive of a material nature
that relates to the performance of the Executive's duties
hereunder or the commission by Executive of an act of fraud
upon, or willful misconduct toward, the Company, as reasonably
determined by the CBI Board after a hearing following ten
days' notice to Executive of such hearing;
(iii) criminal conduct by Executive (other than
minor infractions and traffic violations) or the conviction of
Executive, by a court of competent jurisdiction, of any felony
(or plea of nolo contendere thereto);
(iv) a material violation by Executive of his duty
of loyalty to the Company which results or may result in
material injury to the Company;
(v) Executive's addiction to alcohol, drugs or
any other controlled substances;
(vi) Executive's material breach of any of the
covenants contained in Sections 2(c) or 2(d) of this
Agreement; or
(vii) the failure of Executive to cease any conduct
determined by the Chief Executive Officer of the Company to be
detrimental to the well-being or morale, or otherwise not in
the best interest, of the Company after written demand
directing Executive to cease such conduct is delivered by the
Company specifically identifying such conduct and demanding
cessation thereof.
If the effect of the occurrence of the event described in clauses (i)
through (vi) of Section 4(b) may be cured, Executive shall have the opportunity
to cure any such effect for a period of 30 days following receipt of the
Company's Notice of Termination.
(c) Termination by Executive. At his option, Executive
may terminate his employment hereunder (i) for Good Reason or (ii) if his
health should become impaired to an extent that makes the continued performance
of his duties hereunder hazardous to his physical or mental health or his life.
5
<PAGE> 9
For purposes of this Agreement, the termination of Executive's
employment hereunder by Executive because of the occurrence of any one or more
of the following events shall be deemed to have occurred for "Good Reason":
(A) a material change in the nature or scope of
Executive's authorities, powers, functions, duties, or
responsibilities that is not consented to or approved by
Executive;
(B) any other failure by the Company to comply with
Section 3 hereof that is not consented to or approved by
Executive; or
(C) failure by the Company to comply with any other
material term or provision hereof.
If the effect of the occurrence of the event described in clauses (A)
through (C) of this Section 4(c) may be cured, the Company shall have the
opportunity to cure any such effect for a period of 30 days following receipt
of Executive's Notice of Termination.
5. Compensation Upon Termination Prior to a Change in Control of
the Company. Prior to the occurrence of a Change in Control of the Company,
Executive shall be entitled to the following compensation from the Company upon
the termination of his employment.
(a) Death. If Executive's employment shall be terminated
by reason of his death, the Company shall pay to such person as shall have been
designated in a notice filed with the Company prior to Executive's death, or,
if no such person shall be designated, to his estate as a death benefit, his
Base Salary to the date of his death in addition to any payments Executive's
spouse, beneficiaries, or estate may be entitled to receive pursuant to any
pension or employee benefit plan or other arrangement or group life insurance
policy maintained by the Company.
(b) Disability. During any period that Executive fails
to perform his material managerial duties and responsibilities hereunder as a
result of incapacity due to physical or mental illness, Executive shall
continue to receive his Base Salary and any bonus payments until Executive's
employment is terminated pursuant to Section 4(a) hereof or until Executive
terminates his employment pursuant to Section 4(c)(ii) hereof, whichever first
occurs. After such termination, Executive shall be entitled to receive, and
the Company agrees to pay, the following compensation:
(i) the remainder, if any, of Executive's Base
Salary which was earned but not paid prior to the Date of
Termination (hereinafter defined); plus
(ii) any disability payments otherwise payable to
Executive by or pursuant to group plans provided by the
Company.
6
<PAGE> 10
(c) Cause. If Executive's employment shall be terminated
for Cause, the Company shall pay Executive his Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given.
Such payments shall fully discharge the Company's obligations hereunder.
(d) Breach by the Company or for Good Reason. If (A) the
Company shall terminate Executive's employment other than for Cause or (B)
Executive shall terminate his employment for Good Reason, then the Company
shall pay Executive:
(i) his Base Salary through the Date of
Termination at the rate in effect at the time Notice of
Termination is given;
(ii) in lieu of any further salary payments to
Executive for periods subsequent to the Date of Termination,
the Company shall (A) pay as severance pay to Executive on or
before the fifteenth day following the Date of Termination, a
lump sum in cash equal to Executive's annual Base Salary at
the rate in effect at the time the Notice of Termination is
given and (B) maintain in full force and effect, for the
continued benefit of Executive (and, if applicable,
Executive's spouse and minor children) for a one-year period
beginning upon the Date of Termination, all medical and dental
insurance coverages as in effect and in which such persons
were participating immediately prior to the Date of
Termination, provided that the continued participation of such
persons is possible under the general terms and provisions of
such plans and arrangements; if the participation of any of
such persons in any such plan or arrangement is barred, the
Company shall arrange to provide such persons with insurance
coverage substantially similar to those which such persons
would otherwise have been entitled to receive under such plans
and arrangements from which such persons' continued
participation is barred; provided, however, that in either
case, to the extent applicable, Executive pays to the Company
an amount equal to the premiums, or portion thereof, that
Executive was required to pay to maintain such insurance
coverage for such persons prior to the Date of Termination;
and provided, further, that any insurance coverage provided
pursuant hereto shall be limited and reduced to the extent
such coverage otherwise is provided by (or available from or
under), at no direct out of pocket cost to the recipient, any
other employer of Executive or Executive's spouse or minor
children, or Social Security, medicare, medicaid or any
similar or substitute plans available to such persons; and
(iii) all benefits payable under the terms of all
employee benefit plans or other arrangements as of the Date of
Termination.
Executive shall not be required to mitigate the amount of any payment provided
for in this Section 5(d) by seeking other employment or otherwise, nor shall
the amount of any payment provided for in this Section 5(d) be reduced by any
compensation earned by Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
7
<PAGE> 11
6. Compensation Upon Termination After a Change in Control of the
Company. If, after the occurrence of a Change in Control of the Company,
Executive's employment is terminated by the Company or by Executive, as the
case may be, for any of the reasons described in Section 4 above, then
Executive shall be entitled to (a) the same compensation benefits from the
Company as set forth in Section 5 above to which he would have been entitled if
the termination of his employment had occurred prior to the occurrence of a
Change in Control of the Company plus (b) in the event the termination occurs
as described in Section 5(d) above within one year after the occurrence of the
Change of Control, then Executive also shall be entitled to a lump sum in cash
equal to the bonus, if any, paid or awarded to Executive for the most recent
calendar year ended prior to the date of the Change in Control or, if bonuses
for such calendar year have not been determined for such calendar year as of
the Date of Termination, the prior calendar year.
7. Other Provisions Relating to Termination; Definitions.
(a) Notice of Termination. Any termination of
Executive's employment by the Company or by Executive (other than termination
because of the death of Executive) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement,
"Date of Termination" shall mean (i) if Executive's employment is terminated by
his death, the date of his death; (ii) if Executive's employment is terminated
because of a disability pursuant to Section 4(a), then 30 days after Notice of
Termination is given (provided that Executive shall not have returned to the
performance of his duties on a full-time basis during such 30 day period);
(iii) if Executive's employment is terminated by the Company for Cause or by
Executive for Good Reason, then the date specified in the Notice of Termination
(which date shall be a date between the date Notice of Termination is given and
30 days thereafter (inclusive)); and (iv) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
(c) Good Reason. If Executive does not give a Notice of
Termination to the Company within 30 days after learning of the occurrence of
an event giving rise to Good Reason, then this Agreement will remain in effect;
provided, however, that the failure of Executive to terminate this Agreement
for Good Reason shall not be deemed a waiver of Executive's right to terminate
his employment for Good Reason upon the occurrence of a subsequent event
described in clauses (A) through (C) of Section 4(c) in accordance with the
terms of this Agreement. Notwithstanding the foregoing, the right of Executive
to terminate his employment for Good Reason under Section 4(c) shall not limit
the Company's right to terminate Executive's employment for Cause under Section
4(b) if Cause is determined to exist prior to the time Good Reason is
determined to exist.
8
<PAGE> 12
(d) Cause. If the Company does not give a Notice of
Termination to Executive within 30 days after learning of the occurrence of an
event giving rise to Cause, then this Agreement will remain in effect;
provided, however, that the failure of the Company to terminate this Agreement
for Cause shall not be deemed a waiver of the Company's right to terminate
Executive's employment for Cause upon the occurrence of a subsequent event
described in clauses (i) through (vi) of Section 4(b) in accordance with the
terms of this Agreement. Notwithstanding the foregoing, the right of the
Company to terminate Executive's employment for Cause under Section 4(b) shall
not limit Executive's right to terminate his employment for Good Reason under
Section 4(c) if Good Reason is determined to exist prior to the time Cause is
determined to exist.
(e) Certain Definitions.
(i) Acquiring Person: shall mean any individual,
group, partnership, corporation, association, trust, or other
entity or organization (a "Person") other than (a) Executive
or any Executive Affiliate, (b) CBI, any of CBI's
Subsidiaries, any employee benefit plan of CBI or of a
Subsidiary of CBI or of a corporation owned directly or
indirectly by the stockholders of CBI in substantially the
same proportions as their ownership of stock of CBI, or any
trustee or other fiduciary holding securities under an
employee benefit plan of CBI or of a Subsidiary of CBI or of a
corporation owned directly or indirectly by the stockholders
of CBI in substantially the same proportions as their
ownership of stock of CBI, or (c) Citicorp Venture Capital,
Ltd., a New York corporation ("CVC"), or any Affiliate of CVC
that is directly controlled by Citicorp or Citibank, N.A., or
otherwise is in the same tier as CVC of Affiliates under the
control of such entities ("Direct Affiliates"), but shall not
include any entities that may be deemed an Affiliate of CVC as
a result of the investment by any Direct Affiliate in such
entity.
(ii) Change in Control: shall be deemed to have
occurred if:
(1) any Acquiring Person is or becomes
the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), directly or indirectly, of
securities of CBI representing fifty percent or more
of the combined voting power of the then outstanding
Voting Securities of the Company; or
(2) a public announcement is made of a
tender or exchange offer by any Acquiring Person for
fifty percent or more of the outstanding Voting
Securities of CBI or the Company, and the Board of
Directors of CBI or the Company, respectively,
approves or fails to oppose that tender or exchange
offer in its statements in Schedule 14D-9 under the
Exchange Act; provided, however, that the benefits
payable to Executive under Section 6(a) hereof shall
not be payable solely as a result of an event
described in this clause (2) unless, within one year
after the occurrence of such event, an event
described in clauses (1), (3) or (4) hereof shall
have
9
<PAGE> 13
occurred, in which case such benefits payable under
Section 6(a) hereof shall be payable within fifteen
days after the occurrence of such event; or
(3) the stockholders of CBI or the
Company approve a merger or consolidation of CBI or
the Company, respectively, with any other corporation
or partnership (or, if no such approval is required,
the consummation of such a merger or consolidation of
CBI or the Company), other than a merger or
consolidation that would result in the Voting
Securities of CBI or the Company, as applicable,
outstanding immediately prior to the consummation
thereof continuing to represent (either by remaining
outstanding or by being converted into Voting
Securities of the surviving entity or of a parent of
the surviving entity) a majority of the combined
voting power of the Voting Securities and Convertible
Voting Securities (on a fully- diluted basis assuming
full conversion thereof) of the surviving entity (or
its parent) outstanding immediately after that merger
or consolidation; or
(4) the stockholders of CBI or the
Company approve a plan of complete liquidation of CBI
or the Company, respectively, or an agreement for the
sale or disposition by CBI or the Company of all or
substantially all of CBI's or the Company's assets,
respectively, (or, if no such approval is required,
the consummation of such a liquidation, sale, or
disposition in one transaction or series of related
transactions) other than a liquidation, sale or
disposition of all or substantially all of CBI or the
Company's assets in one transaction or a series of
related transactions to a Subsidiary of CBI or any
other corporation owned directly or indirectly by the
stockholders of CBI in substantially the same
proportions as their ownership of stock of CBI; or
(5) CBI ceases to be the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the
Company representing at least a majority of the
combined voting power of the then outstanding Voting
Securities of the Company.
(iii) Subsidiary: with respect to any Person, any
corporation or other entity of which a majority of the voting
power of the voting equity securities or equity interest is
owned, directly or indirectly, by that Person.
(iv) Voting Securities: (i) any securities that
vote generally in the election of directors, in the admission
of general partners, or in the selection of any other similar
governing body and (ii) with respect to CBI, all shares of
CBI's nonvoting common stock, par value $.01 per share (all of
which are convertible into shares of common stock, par value
$.01 per share, of the Company).
(f) Affiliate. For purposes of this Agreement, the term
"affiliate" shall mean, with respect to any Person (including an entity), any
other Person that directly or indirectly
10
<PAGE> 14
controls, is controlled by, or is under common control with the Person in
question. As used in this definition of "affiliate," the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of Voting Securities, by contract, or otherwise.
8. Successors and Assignments. This Agreement shall be binding
upon, and inure to the benefit of, the Company, Executive, and their respective
successors, assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.
This Agreement may not be assigned (either voluntarily or involuntarily) by any
party hereto without the express written consent of the other party; provided,
however, that the Company may at any time assign this Agreement to (i) any
Subsidiary of the Company or CBI, (ii) any other corporation, partnership, or
other entity that controls, is controlled by, or is under common control with
the Company or CBI or (iii) any successor (whether direct or indirect, by
purchase of securities, merger, consolidation, sale of assets, or otherwise) to
all or substantially all of the business or assets of the Company. Any
attempted assignment in violation of this Section 8 shall be void and
ineffective for all purposes. In the event of an assignment permitted by this
Section 8, this Agreement shall be binding upon the heirs, successors, and
assigns of the parties hereto.
9. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when (i) delivered personally; (ii) sent by
facsimile or similar electronic device and confirmed; (iii) delivered by
overnight express; or (iv) if sent by any other means, upon receipt. Notices
and all other communications provided for in this Agreement shall be addressed
as follows:
If to Executive:
Duane R. Grossett
Chase Brass & Copper Company, Inc.
State Route 15
Montpelier, Ohio 43543
Facsimile No. 419/485-8150
If to the Company:
Chase Brass & Copper Company, Inc.
State Route 15
Montpelier, Ohio 43543
Attention: Chief Financial Officer
Facsimile No: 419/485-8150
or to such other address as any party may have furnished to the other in
writing in accordance herewith.
11
<PAGE> 15
10. Disputes.
(a) Arbitration. Subject to Section 10(b) below, in the
event any dispute or controversy arises under this Agreement and is not
resolved by the mutual written agreement between Executive and the Company
within 30 days after notice of the dispute is first given, then, upon the
written request of Executive or the Company, such dispute or controversy shall
be submitted to arbitration, which arbitration shall be conducted in accordance
with the rules of the American Arbitration Association. Judgment may be
entered thereon and the results of arbitration will be binding and conclusive
on the parties hereto. Any arbitrator's award or finding or any judgment or
verdict thereon will be final and unappealable. All parties agree that venue
for arbitration will be in Williams County, Ohio, and that any arbitration
commenced in any other venue will be transferred to Williams County, Ohio, upon
the written request of any party to this Agreement. The prevailing party will
be entitled to reimbursement for reasonable attorneys fees, reasonable costs
and other reasonable expenses pertaining to the arbitration and the enforcement
thereof and such attorneys fees, costs and other expenses shall become a part
of any award, judgment or verdict. All arbitrations will have three
individuals acting as arbitrators: one arbitrator will be selected by
Executive, one arbitrator will be selected by the Company, and the two
arbitrators so selected will select a third arbitrator. Any arbitrator
selected by a party will not be affiliated, associated or related to the party
selecting that arbitrator in any matter whatsoever. The decision of the
majority of the arbitrators will be binding on all parties.
(b) Specific Enforcement. Executive acknowledges that
the covenants of Executive contained in Sections 2(c) and 2(d) of this
Agreement are special and unique, that a breach by Executive of any term or
provision of either of Sections 2(c) or 2(d) hereof may cause irreparable
injury to the Company, CBI and/or another Subsidiary of CBI, and that remedies
at law for the breach of any terms or provisions of Sections 2(c) or 2(d)
hereof may be inadequate. Accordingly, notwithstanding the provisions of
Section 10(a), in addition to any other remedies it may have in the event of
breach, the Company shall be entitled to enforce specific performance of the
terms and provisions of Sections 2(c) or 2(d) hereof, to obtain temporary and
permanent injunctive relief to prevent the continued breach of such terms and
provisions without the necessity of posting bond or of proving actual damage,
and to obtain attorneys fees in respect of the foregoing if the Company
prevails in such action or proceeding. For purposes of this Section 10(b) and
Sections 2(c) and 2(d) hereof, CBI and each other Subsidiary of CBI shall be
deemed a third party beneficiary entitled to the benefits of such Sections and
shall be entitled to enforce Sections 2(c) and 2(d) of this Agreement in
accordance with this Section 10(b).
11. Severability. In the event that any provision of this
Agreement, or the application thereof to any person or circumstance, is held by
a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect under present or future laws effective during the effective term of
any such provision, such invalid, illegal or unenforceable provision shall be
fully severable; and this Agreement shall then be construed and enforced as if
such invalid, illegal, or unenforceable provision had not been contained in
this Agreement; and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each such illegal, invalid, or unenforceable provision, there shall
be added automatically as part of this Agreement, a provision as similar in
terms to such illegal, invalid or unenforceable
12
<PAGE> 16
provision as may be possible and be legal, valid and enforceable.
Notwithstanding the above, in the event any such invalidity, illegality or
unenforceability of any portion of Section 2(c) hereof is caused by such
provision being held to be excessively broad as to time, duration, geographical
scope, activity or subject, then such provision shall, at the option of the
Company, remain a part of this Agreement and shall be construed by limiting and
reducing it so as to be enforceable to the extent compatible with the then
applicable law and shall be enforced so as to permit the Company or any of its
Subsidiaries to recover damages for any prior violation of such provision as so
limited and reduced, to the extent permitted under applicable law.
12. Miscellaneous. This Agreement sets forth the entire
understandings of the parties with respect to the subject matter hereof, it
incorporates and merges any and all previous communications and understandings
with respect to the subject matter hereof, oral or written, and no provision of
this Agreement may be modified, waived, or discharged unless such waiver,
modification, or discharge is agreed to in writing signed by Executive and the
Company. No waiver by either party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Ohio, excluding any choice-of-law provisions thereof.
13. Attorney Fees. Except as otherwise provided in Section 10,
the prevailing party in any dispute or controversy under or in connection with
this Agreement shall be entitled to reimbursement from the non-prevailing party
for all costs and reasonable legal fees incurred by such prevailing party.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth below, to be effective as of the date first above written.
THE COMPANY:
CHASE BRASS & COPPER COMPANY,
INC.
a Delaware corporation
Date: January 15, 1997 By: /s/ Martin V. Alonzo
---------------------------------
Martin V. Alonzo
Chief Executive Officer
EXECUTIVE:
---------
Date: January 15, 1997 /s/ Duane R. Grossett
-------------------------------------
Duane R. Grossett
14
<PAGE> 1
EXHIBIT 10.4
CHASE BRASS INDUSTRIES, INC.
1994 LONG-TERM INCENTIVE PLAN
(AS AMENDED EFFECTIVE OCTOBER 21, 1996)
SCOPE AND PURPOSE OF PLAN
Chase Brass Industries, Inc., a Delaware corporation (the
"Corporation"), has adopted this 1994 Long-Term Incentive Plan (the "Plan") to
provide for the granting of:
(a) Incentive Options (hereafter defined) to certain Key Employees
(hereafter defined);
(b) Nonstatutory Options (hereafter defined) to certain Key
Employees and Non-Employee Directors (hereafter defined);
(c) Restricted Stock Awards (hereafter defined) to certain Key
Employees; and
(d) Stock Appreciation Rights (hereafter defined) to certain Key
Employees.
The purpose of the Plan is to provide an incentive for Key Employees
and directors of the Corporation or its Subsidiaries (hereafter defined) to
remain in the service of the Corporation or its Subsidiaries, to extend to them
the opportunity to acquire a proprietary interest in the Corporation so that
they will apply their best efforts for the benefit of the Corporation, and to
aid the Corporation in attracting able persons to enter the service of the
Corporation and its Subsidiaries.
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than (a) the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation, or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation (b)
Citicorp Venture Capital, Ltd., a New York corporation ("CVC"), or (c) any
Affiliate of CVC that is directly controlled by Citicorp or Citibank, N.A., or
otherwise is in the same tier as CVC of Affiliates under the control of such
entities ("Direct Affiliates"),
<PAGE> 2
but shall not include any entities that may be deemed an Affiliate of CVC as a
result of the investment by any Direct Affiliate in such entity.
1.2 "Affiliate" means (a) any Person who is directly or indirectly
the beneficial owner of at least 10% of the voting power of the outstanding
Voting Securities of the Corporation or (b) any Person controlling, controlled
by, or under common control with the Corporation or any Person contemplated in
clause (a) of this Subsection 1.2.
1.3 "Award" means the grant of any form of Option, Restricted
Stock Award, or Stock Appreciation Right under the Plan, whether granted
individually, in combination, or in tandem, to a Holder pursuant to the terms,
conditions, and limitations that the Committee may establish in order to
fulfill the objectives of the Plan.
1.4 "Award Agreement" means the written agreement between the
Corporation and a Holder evidencing the terms, conditions, and limitations of
the Award granted to that Holder.
1.5 "Board of Directors" means the board of directors of the
Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions in the state of Ohio are authorized or
obligated by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have
occurred if:
(a) any Acquiring Person is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing fifty
percent or more of the combined voting power of the then outstanding
Voting Securities of the Corporation; or
(b) a public announcement is made of a tender or exchange
offer by any Acquiring Person for fifty percent or more of the
outstanding Voting Securities of the Corporation, and the Board of
Directors approves or fails to oppose that tender or exchange offer in
its statements in Schedule 14D-9 under the Exchange Act; provided,
however, that the events to occur under Subsection 9.2 hereof shall
not occur solely as a result of an event described in this clause (b)
unless, within one year after the occurrence of such event, an event
described in clauses (a), (c) or (d) hereof shall have occurred, in
which case such events to occur under Subsection 9.2 hereof shall
occur upon the occurrence of such event but shall be deemed to have
been effective as of the time of the occurrence of the event described
in this clause (b); or
(c) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other corporation or
partnership (or, if no such approval is required, the consummation of
such a merger or consolidation of the Corporation), other than a
merger or consolidation that would result in the Voting Securities of
the Corporation outstanding immediately before the consummation
thereof continuing to
2
<PAGE> 3
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity or of a parent of the
surviving entity) a majority of the combined voting power of the
Voting Securities and Convertible Voting Securities (on a
fully-diluted basis assuming full conversion thereof) of the surviving
entity (or its parent) outstanding immediately after that merger or
consolidation; or
(d) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale
or disposition by the Corporation of all or substantially all the
Corporation's assets (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in one
transaction or series of related transactions) other than a
liquidation, sale or disposition of all or substantially all the
Corporation's assets in one transaction or a series of related
transactions to a Subsidiary of the Corporation or any other
corporation owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their ownership
of stock in the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the committee appointed pursuant to Section
3 by the Board of Directors to administer the Plan.
1.10 "Convertible Voting Securities" means any and all options,
warrants, or other rights to purchase, or securities convertible into or
exchangeable or exercisable for, directly or indirectly, Voting Securities of
any Person.
1.11 "Corporation" means Chase Brass Industries, Inc., a Delaware
corporation.
1.12 "Date of Grant" has the meaning given it in Subsection 4.3.
1.13 "Disability" has the meaning given it in Subsection 10.3.
1.14 "Disinterested Person" means a Person that meets the
definition of both a "Non-Employee Director" under Rule 16b-3(b)(3) and an
"outside director" under Section 162(m).
1.15 "Effective Date" means the later of (a) the date the Plan is
adopted by the Board of Directors, (b) the date the Plan is approved by the
stockholders of the Corporation and (c) the closing date of the Initial Public
Offering.
1.16 "Eligible Individuals" means (a) Key Employees, (b)
Non-Employee Directors, and (c) any other Person that the Committee designates
as eligible for an Award (other than for Incentive Options) because the Person
performs, or has performed, bona fide consulting or advisory services for the
Corporation or any of its Subsidiaries (other than services in connection with
the offer or sale of securities in a capital-raising transaction) and the
Committee determines that the Person has a direct and significant effect on the
financial development of the Corporation
3
<PAGE> 4
or any of its Subsidiaries. Notwithstanding the foregoing provisions of this
Subsection 1.16, to ensure that the requirements of the fourth sentence of
Subsection 3.1 are satisfied, the Board of Directors may from time to time
specify individuals who shall not be eligible for the grant of Awards or equity
securities under any plan of the Corporation or its Affiliates. Nevertheless,
the Board of Directors may at any time determine that an individual who has
been so excluded from eligibility shall become eligible for grants of Awards
and grants of such other equity securities under any plans of the Corporation
or its Affiliates so long as that eligibility will not impair the Plan's
satisfaction of the conditions of Rule 16b-3.
1.17 "Employee" means any employee of the Corporation or of any of
its Subsidiaries, including officers and directors of the Corporation who are
also employees of the Corporation or of any of its Subsidiaries.
1.18 "Exchange Act" means the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, or any successor law, as it
may be amended from time to time.
1.19 "Exercise Notice" has the meaning given it in Subsection 5.5.
1.20 "Exercise Price" has the meaning given it in Subsection 5.4.
1.21 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional
securities exchange at the date of determining the Fair Market Value,
then the last reported sale price, regular way, on the composite tape
of that exchange on the last Business Day before the date in question
or, if no such sale takes place on that Business Day, the average of
the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to unlisted trading
privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed
or admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices for shares of Stock of the same class in the
over-the-counter market are reported by the National Association of
Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ")
National Market System (or such other system then in use) at the date
of determining the Fair Market Value, then the last reported sales
price so reported on the last Business Day before the date in question
or, if no such sale takes place on that Business Day, the average of
the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed
or admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices for shares of Stock of the same class are not
reported by the NASDAQ National Market System (or a similar system
then in use) as provided in Subsection 1.21(b), and if bid and asked
prices for
4
<PAGE> 5
shares of Stock of the same class in the over-the-counter market are
reported by NASDAQ (or, if not so reported, by the National Quotation
Bureau Incorporated) at the date of determining the Fair Market Value,
then the average of the high bid and low asked prices on the last
Business Day before the date in question; or
(d) If shares of Stock of the same class are not listed
or admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices or bid and asked prices therefor are not
reported by NASDAQ (or the National Quotation Bureau Incorporated) as
provided in Subsection 1.21(b) or Subsection 1.21(c) at the date of
determining the Fair Market Value, then the value determined in good
faith by the Committee, which determination shall be conclusive for
all purposes; or
(e) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges as provided in Subsection
1.21(a) or sales prices or bid and asked prices therefor are reported
by NASDAQ (or the National Quotation Bureau Incorporated) as provided
in Subsection 1.21(b) or Subsection 1.21(c) at the date of determining
the Fair Market Value, but the volume of trading is so low that the
Board of Directors determines in good faith that such prices are not
indicative of the fair value of the Stock, then the value determined
in good faith by the Committee, which determination shall be
conclusive for all purposes notwithstanding the provisions of
Subsections 1.21(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in
Subsection 9.3(d)(v), Fair Market Value shall have the meaning and shall be
determined as set forth above; provided, however, that the Committee, with
respect to any such redemption, shall have the right to determine that the Fair
Market Value for purposes of the redemption should be an amount measured by the
value of the shares of Stock, other securities, cash, or property otherwise
being received by holders of shares of Stock in connection with the
Restructuring and upon that determination the Committee shall have the power
and authority to determine Fair Market Value for purposes of the redemption
based upon the value of such shares of stock, other securities, cash, or
property. Any such determination by the Committee, as evidenced by a
resolution of the Committee, shall be conclusive for all purposes.
1.22 "Fair Value" means such value as is determined by a majority
of the "disinterested" directors of the Corporation, as evidenced by a
resolution of such disinterested directors, even if the disinterested directors
of the Corporation constitute less than a quorum. If the Corporation does not
have any disinterested directors, the Fair Value shall be such value as is
determined by a nationally recognized investment banking firm selected by the
Corporation, the expenses of which shall be borne by the Corporation.
1.23 "Holder" means an Eligible Individual to whom an outstanding
Award has been granted or a transferee of any Award as permitted under Section
4.7.
1.24 "Incentive Option" means an incentive stock option as defined
under Section 422 of the Code and regulations thereunder.
5
<PAGE> 6
1.25 "Initial Public Offering" means the first public offering of
Stock by the Corporation effected pursuant to an effective registration
statement under the Securities Act.
1.26 "Key Employee" means any Employee whom the Committee
identifies as having a direct and significant effect on the performance of the
Corporation or any of its Subsidiaries.
1.27 "Non-Employee Director" means a director of the Corporation
who while a director is not an Employee or an officer of the Corporation or any
subsidiary of the Corporation.
1.28 "Nonstatutory Option" means a stock option that does not
satisfy the requirements of Section 422 of the Code or that is designated at
the Date of Grant or in the applicable Award Agreement to be an option other
than an Incentive Option.
1.29 "Non-Surviving Event" means an event of Restructuring as
described in either Subsection 1.36(b) or Subsection 1.36(c).
1.30 "Normal Retirement" means the separation of a Holder from
employment with the Corporation and its Subsidiaries on or after the attainment
of age 59 1/2 with the right to receive an immediate benefit under a
tax-qualified retirement plan under Section 401(a) of the Code approved by the
Corporation or any Subsidiary thereof.
1.31 "Option" means either an Incentive Option or a Nonstatutory
Option, or both.
1.32 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of
the Corporation with that Person, shall be deemed a single "Person."
1.33 "Plan" means the Corporation's 1994 Long-Term Incentive Plan,
as it may be amended from time to time.
1.34 "Restricted Stock" means Stock that is nontransferable or
subject to substantial risk of forfeiture until specific conditions are met.
1.35 "Restricted Stock Award" means the grant of or the right to
purchase, on the terms and conditions of Section 7 or that the Committee
otherwise determines, Restricted Stock.
1.36 "Restructuring" means the occurrence of any one or more of the
following:
6
<PAGE> 7
(a) The merger or consolidation of the Corporation with
any Person, whether effected as a single transaction or a series of
related transactions, with the Corporation remaining the continuing or
surviving entity of that merger or consolidation and the Stock
remaining outstanding and not changed into or exchanged for stock or
other securities of any other Person or of the Corporation, cash, or
other property;
(b) The merger or consolidation of the Corporation with
any Person, whether effected as a single transaction or a series of
related transactions, with (i) the Corporation not being the
continuing or surviving entity of that merger or consolidation or (ii)
the Corporation remaining the continuing or surviving entity of that
merger or consolidation but all or a part of the outstanding shares of
Stock are changed into or exchanged for stock or other securities of
any other Person or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or
substantially all of the assets of the Corporation (whether by sale,
merger, consolidation, liquidation, or otherwise) to any Person,
whether effected as a single transaction or a series of related
transactions.
1.37 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act, or any successor rule, as it may be amended from time to time,
and references to paragraphs or clauses of Rule 16b-3 shall refer to the
corresponding paragraphs or clauses of Rule 16b-3 as it exists at the Effective
Date or the comparable paragraph or clause of Rule 16b-3 as it may thereafter
be amended.
1.38 "Section 162(m)" means Section 162(m) of the Code, or any
successor section under the Code, as it may be amended from time to time and as
interpreted by final or proposed regulations promulgated thereunder from time
to time.
1.39 "Securities Act" means the Securities Act of 1933 and the
rules and regulations promulgated thereunder, or any successor law, as it may
be amended from time to time.
1.40 "Stock" means the Corporation's authorized common stock, par
value $.01 per share, or any other securities that are substituted for the
Stock as provided in Section 9.
1.41 "Stock Appreciation Right" means the right to receive an
amount equal to the excess of the Fair Market Value of a share of Stock (as
determined on the date of exercise) over, as appropriate, the Exercise Price of
a related Option or the Fair Market Value of the Stock on the Date of Grant of
the Stock Appreciation Right.
1.42 "Subsidiary" means, with respect to any Person, any
corporation, or other entity of which a majority of the Voting Securities is
owned, directly or indirectly, by that Person.
1.43 "Total Shares" has the meaning given it in Subsection 9.2.
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1.44 "Voting Securities" means (i) any securities that are entitled
to vote generally in the election of directors, in the admission of general
partners or in the selection of any other similar governing body and (ii) with
respect to the Corporation, all shares of the Corporation's nonvoting common
stock, par value $.01 per share (all of which are convertible into shares of
the Corporation's common stock, par value $.01 per share).
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 Maximum Number of Shares. Subject to the provisions of
Subsections 2.2 and 2.5 and Section 9 of this Plan, the aggregate number of
shares of Stock that may be issued, transferred or exercised pursuant to Awards
under the Plan shall be one million (1,000,000) shares of Stock. Except as
provided in Section 8, awards to which shares of such Stock relate may be
awarded to any one Eligible Individual or allocated among the Eligible
Individuals, as determined by the Committee.
2.2 Limitation of Shares. For purposes of the limitations
specified in Subsection 2.1, the following principles shall apply:
(a) the following shall count against and decrease the
number of shares of Stock that may be issued for purposes of
Subsection 2.1: (i) shares of Stock subject to outstanding Options,
outstanding shares of Restricted Stock, and shares subject to
outstanding Stock Appreciation Rights granted independent of Options
(based on a good faith estimate by the Corporation or the Committee of
the maximum number of shares for which the Stock Appreciation Right
may be settled (assuming payment in full in shares of Stock)), and
(ii) in the case of Options granted in tandem with Stock Appreciation
Rights, the greater of the number of shares of Stock that would be
counted if one or the other alone was outstanding (determined as
described in clause (i) above);
(b) the following shall be added back to the number of
shares of Stock that may be issued for purposes of Subsection 2.1: (i)
shares of Stock with respect to which Options, Stock Appreciation
Rights granted independent of Options, or Restricted Stock Awards
expire, are cancelled, or otherwise terminate without being exercised,
converted, or vested, as applicable, and (ii) in the case of Options
granted in tandem with Stock Appreciation Rights, shares of Stock as
to which an Option has been surrendered in connection with the
exercise of a related ("tandem") Stock Appreciation Right, to the
extent the number surrendered exceeds the number issued upon exercise
of the Stock Appreciation Right;
(c) shares of Stock subject to Stock Appreciation Rights
granted independent of Options (calculated as provided in clause (a)
above) that are exercised and paid in cash shall be added back to the
number of shares of Stock that may be issued for purposes of
Subsection 2.1;
(d) shares of Stock that are transferred by a Holder of
an Award (or withheld by the Corporation) as full or partial payment
to the Corporation of the purchase price of
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shares of Stock subject to an Option or the Corporation's or any
Subsidiary's tax withholding obligations shall not be added back to
the number of shares of Stock that may be issued for purposes of
Subsection 2.1 and shall not again be subject to Awards; and
(e) if the number of shares of Stock counted against the
number of shares that may be issued for purposes of Subsection 2.1 is
based upon an estimate made by the Corporation or the Committee as
provided in clause (a) above and the actual number of shares of Stock
issued pursuant to the applicable Award is greater or less than the
estimated number, then, upon such issuance, the number of shares of
Stock that may be issued pursuant to Subsection 2.1 shall be further
reduced by the excess issuance or increased by the shortfall, as
applicable.
Notwithstanding the provisions of this Subsection 2.2, (i) no Stock
shall be treated as issuable under the Plan to Eligible Individuals (A) subject
to Section 16 of the Exchange Act if otherwise prohibited from issuance under
Rule 16b-3 or (B) subject to Section 162(m) if otherwise prohibited from
issuance under Section 162(m) and (ii) the Committee may impose restrictions
which are more limited than set forth herein with respect to shares of stock
subject to Awards that may be added back to the number of shares of stock that
may be issued for purposes of Subsection 2.1.
2.3 Description of Shares. The shares to be delivered under the
Plan shall be made available from (a) authorized but unissued shares of Stock,
(b) Stock held in the treasury of the Corporation, or (c) previously issued
shares of Stock reacquired by the Corporation, including shares purchased on
the open market, in each situation as the Board of Directors or the Committee
may determine from time to time at its sole option.
2.4 Registration and Listing of Shares. From time to time, the
Board of Directors and appropriate officers of the Corporation shall and are
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges, and other appropriate Persons
to make shares of Stock available for issuance pursuant to the exercise of
Awards.
2.5 Reduction in Outstanding Shares of Stock. Nothing in this
Section 2 shall impair the right of the Corporation to reduce the number of
outstanding shares of Stock pursuant to repurchases, redemptions, or otherwise;
provided, however, that no reduction in the number of outstanding shares of
Stock shall (a) impair the validity of any outstanding Award, whether or not
that Award is fully exercisable or fully vested, or (b) impair the status of
any shares of Stock previously issued pursuant to the exercise of an Award or
thereafter issued pursuant to a then-outstanding Award as duly authorized,
validly issued, fully paid, and nonassessable shares.
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SECTION 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Board of Directors may administer the Plan
with respect to all Eligible Individuals or may delegate all or part of that
duty to the Committee; provided that the Committee shall not have the power to
appoint members of the Committee. Except for references in Subsections 3.1,
3.2, and 3.3, and unless the context otherwise requires, references herein to
the Committee shall also refer to the Board of Directors as administrator of
the Plan. The Committee shall be constituted so that, as long as Stock is
registered under Section 12 of the Exchange Act, each member of the Committee
shall be a Disinterested Person and so that the Plan in all other applicable
respects will qualify transactions related to the Plan for the exemptions from
Section 16(b) of the Exchange Act provided by Rule 16b-3 and the exemption from
the deductibility limitation imposed by Section 162(m) provided by the
performance-based compensation exception described in Section 162(m), to the
extent exemptions thereunder may be available. The number of Persons that
shall constitute the Committee shall be determined from time to time by a
majority of all the members of the Board of Directors and, unless that majority
of the Board of Directors determines otherwise or Rule 16b-3 or Section 162(m)
is amended to require otherwise, shall be no less than two Persons.
Notwithstanding the foregoing, the Board of Directors may designate the
Compensation Committee of the Board of Directors to serve as the Committee
hereunder, provided that each member of such Compensation Committee is a
Disinterested Person.
3.2 Duration, Removal, Etc. The members of the Committee shall
serve at the discretion of the Board of Directors, which shall have the power,
at any time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to resign
from membership in the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the remaining members of
the Committee, shall have the power and authority to fill all vacancies on the
Committee. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two or any other number that
Rule 16b-3 or Section 162(m) may require from time to time.
3.3 Meetings and Actions of Committee. The Board of Directors
shall designate which of the Committee members shall be the chairman of the
Committee. If the Board of Directors fails to designate a Committee chairman,
the members of the Committee shall elect one of the Committee members as
chairman, who shall act as chairman until he ceases to be a member of the
Committee or until the Board of Directors elects a new chairman. The Committee
shall hold its meetings at those times and places as the chairman of the
Committee may determine. At all meetings of the Committee, a quorum for the
transaction of business shall be required and a quorum shall be deemed present
if at least a majority of the members of the Committee are present. At any
meeting of the Committee, each member shall have one vote. All decisions and
determinations of the Committee shall be made by the majority vote or majority
decision of all of its members present at a meeting at which a quorum is
present; provided, however, that any decision or determination reduced to
writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made at a meeting that was duly called and held.
The
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Committee may make any rules and regulations for the conduct of its business
that are not inconsistent with the provisions of the Plan, the Certificate of
Incorporation of the Corporation, the by-laws of the Corporation, and Rule
16b-3 and Section 162(m) so long as applicable, as the Committee may deem
advisable.
3.4 Committee's Powers. Subject to the express provisions of the
Plan and Rule 16b-3, the Committee shall have the authority, in its sole and
absolute discretion, to (a) adopt, amend, and rescind administrative and
interpretive rules and regulations relating to the Plan; (b) determine the
Eligible Individuals to whom, and the time or times at which, Awards shall be
granted; (c) determine the amount of cash and the number of shares of Stock,
Stock Appreciation Rights, or Restricted Stock Awards, or any combination
thereof, that shall be the subject of each Award; (d) determine the terms and
provisions of each Award Agreement (which need not be identical), including
provisions defining or otherwise relating to (i) the term and the period or
periods and extent of exercisability of the Options, (ii) the extent to which
the transferability of shares of Stock issued or transferred pursuant to any
Award is restricted, (iii) the effect of termination of employment of a Holder
on the Award, and (iv) the effect of approved leaves of absence (consistent
with any applicable regulations of the Internal Revenue Service); (e)
accelerate, pursuant to Section 8, the time of exercisability of any Option
that has been granted; (f) construe the respective Award Agreements and the
Plan; (g) make determinations of the Fair Market Value of the Stock pursuant to
the Plan; (h) delegate its duties under the Plan to such agents as it may
appoint from time to time, provided that the Committee may not delegate its
duties with respect to making Awards to, or otherwise with respect to Awards
granted to, Eligible Individuals who are subject to Section 16(b) of the
Exchange Act or Section 162(m); (i) subject to ratification by the Board of
Directors, terminate, modify, or amend the Plan; and (j) make all other
determinations, perform all other acts, and exercise all other powers and
authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as the Committee
deems appropriate. Subject to Rule 16b-3 and Section 162(m), the Committee may
correct any defect, supply any omission, or reconcile any inconsistency in the
Plan, in any Award, or in any Award Agreement in the manner and to the extent
it deems necessary or desirable to carry the Plan into effect, and the
Committee shall be the sole and final judge of that necessity or desirability.
The determinations of the Committee on the matters referred to in this
Subsection 3.4 shall be final and conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Awards may be granted pursuant to the
Plan only to persons who are Eligible Individuals at the time of the grant
thereof.
4.2 Grant of Awards. Subject to the express provisions of the
Plan, the Committee shall determine which Eligible Individuals shall be granted
Awards from time to time. In making grants, the Committee shall take into
consideration the contribution that the potential Holder has made or may make
to the success of the Corporation or its Subsidiaries and such other
considerations as the Board of Directors may from time to time specify. The
Committee shall also determine the number of shares subject to each of the
Awards and shall authorize and cause the Corporation to grant Awards in
accordance with those determinations.
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4.3 Date of Grant. Subject to the penultimate sentence of this
Subsection 4.3 and clause (ii) of the first sentence of Subsection 10.9, the
date on which the Committee completes all action resolving to offer an Award to
an individual, including the specification of the number of shares of Stock to
be subject to the Award, shall be the date on which the Award covered by an
Award Agreement is granted (the "Date of Grant"), even though certain terms of
the Award Agreement may not be determined at that time and even though the
Award Agreement may not be executed until a later time. With respect to Awards
granted to Non-Employee Directors under Subsection 8.2(b) or 8.2(c), the Date
of Grant shall be the date identified in the applicable subsection. In no
event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution of the Award Agreement by the Corporation
and the Holder.
4.4 Award Agreements. Each Award granted under the Plan shall be
evidenced by an Award Agreement that is executed by the Corporation
incorporating those terms that the Committee shall deem necessary or desirable.
More than one Award may be granted under the Plan to the same Eligible
Individual and be outstanding concurrently. In the event an Eligible
Individual is granted both one or more Incentive Options and one or more
Nonstatutory Options, those grants shall be evidenced by separate Award
Agreements, one for each of the Incentive Option grants and one for each of the
Nonstatutory Option grants.
4.5 Limitation for Incentive Options. Notwithstanding any
provision contained herein to the contrary, (a) a person shall not be eligible
to receive an Incentive Option unless he is an Employee of the Corporation or a
corporate Subsidiary (but not a partnership Subsidiary) and (b) a Person shall
not be eligible to receive an Incentive Option if, immediately before the time
the Option is granted, that person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total
combined voting power or value of all classes of outstanding stock of the
Corporation or a Subsidiary; provided, however, Subsection 4.5(b) shall not
apply if, at the time the Incentive Option is granted, the Exercise Price of
the Incentive
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Option is at least one hundred ten percent of Fair Market Value and the
Incentive Option is not, by its terms, exercisable after the expiration of five
years from the Date of Grant.
4.6 No Right to Award. The adoption of the Plan shall not be
deemed to give any Person a right to be granted an Award.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Except as otherwise provided in Section 8 with respect to Awards to
Non-Employee Directors, all Options granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include and be subject to,
the terms and conditions set forth in this Section 5 (to the extent each term
and condition applies to the form of Option) and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement that expressly contains terms and
provisions that differ from the terms and provisions set forth in Subsections
9.2, 9.3, and 9.4 and any of the terms and provisions of Section 10 (other than
Subsections 10.5, 10.8 and 10.9).
5.1 Number of Shares. Each Award Agreement shall state the total
number of shares of Stock to which it relates.
5.2 Vesting. Each Award Agreement shall state the time or periods
in which, or the conditions upon satisfaction of which, the right to exercise
the Option or a portion thereof shall vest and the number of shares of Stock
for which the right to exercise the Option shall vest at each such time,
period, or fulfillment of condition.
5.3 Expiration of Options. Options may be exercised during the
term determined by the Committee and set forth in the Award Agreement; provided
that no Incentive Option shall by its terms be exercisable after the expiration
of a period of ten years commencing on the Date of Grant of the Incentive
Option.
5.4 Exercise Price. Each Award Agreement shall state the exercise
price per share of Stock (the "Exercise Price"); provided, however, that the
exercise price per share of Stock subject to an Incentive Option shall not be
less than the greater of (a) the par value per share of the Stock or (b) 100%
of the Fair Market Value per share of the Stock on the Date of Grant of the
Option, and the exercise price per share of Stock subject to a Nonstatutory
Option shall not be less than the par value per share of the Stock (but may be
less than the Fair Market Value of a share of the Stock on the Date of Grant).
5.5 Method of Exercise. The Option shall be exercisable only by
written notice of exercise (the "Exercise Notice") delivered to the Corporation
during the term of the Option, which notice shall (a) state the number of
shares of Stock with respect to which the Option is being exercised, (b) be
signed by the Holder of the Option or, if the Holder is dead or becomes
affected by a Disability, by the person authorized to exercise the Option
pursuant to Subsection 10.3, (c) be accompanied by the Exercise Price for all
shares of Stock for which the Option is
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being exercised, and (d) include such other information, instruments, and
documents as may be required to satisfy any other condition to exercise
contained in the Award Agreement. The Option shall not be deemed to have been
exercised unless all of the requirements of the preceding provisions of this
Subsection 5.5 have been satisfied.
5.6 Incentive Option Exercises. Except as otherwise provided in
Subsection 10.3, during a Holder's lifetime, only the Holder may exercise an
Incentive Option.
5.7 Medium and Time of Payment. The Exercise Price of an Option
shall be payable in full upon the exercise of the Option (a) in cash or by an
equivalent means acceptable to the Committee, (b) on the Committee's prior
consent, with shares of Stock owned by the Holder (including shares received
upon exercise of the Option or shares of Restricted Stock already held by the
Holder) and having a Fair Market Value at least equal to the aggregate Exercise
Price payable in connection with such exercise, or (c) by any combination of
clauses (a) and (b). If the Committee elects to accept shares of Stock in
payment of all or any portion of the Exercise Price, then (for purposes of
payment of the Exercise Price) those shares of Stock shall be deemed to have a
cash value equal to their aggregate Fair Market Value determined as of the date
the certificate for such shares is delivered to the Corporation. If the
Committee elects to accept shares of Restricted Stock in payment of all or any
portion of the Exercise Price, then an equal number of shares issued pursuant
to the exercise shall be restricted on the same terms and for the restriction
period remaining on the shares used for payment.
5.8 Payment with Sale Proceeds. In addition, at the request of a
Holder and to the extent permitted by applicable law, the Committee may (but
shall not be required to) approve arrangements with a brokerage firm under
which that brokerage firm, on behalf of the Holder, shall pay to the
Corporation the Exercise Price of the Option being exercised and the
Corporation shall promptly deliver the exercised shares of Stock to the
brokerage firm. To accomplish this transaction, the Holder must deliver to the
Corporation an Exercise Notice containing irrevocable instructions from the
Holder to the Corporation to deliver the Stock certificates representing the
shares of Stock directly to the broker. Upon receiving a copy of the Exercise
Notice acknowledged by the Corporation, the broker shall sell that number of
shares of Stock or loan the Holder an amount sufficient to pay the Exercise
Price and any withholding obligations due. The broker then shall deliver to
the Corporation that portion of the sale or loan proceeds necessary to cover
the Exercise Price and any withholding obligations due. The Committee shall
not approve any transaction of this nature if the Committee believes that the
transaction would give rise to the Holder's liability for short-swing profits
under Section 16(b) of the Exchange Act.
5.9 Payment of Taxes. The Committee may, in its discretion,
require a Holder to pay to the Corporation (or the Corporation's Subsidiary if
the Holder is an employee of a Subsidiary of the Corporation), at the time of
the exercise of an Option or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising an Option. In connection with the exercise of an
Option requiring tax withholding, a Holder may (a) direct the Corporation to
withhold from the shares of Stock to be issued to the Holder the number of
shares necessary to satisfy the Corporation's obligation to withhold taxes,
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that determination to be based on the shares' Fair Market Value as of the date
of exercise; (b) deliver to the Corporation sufficient shares of Stock (based
upon the Fair Market Value as of the date of such delivery) to satisfy the
Corporation's tax withholding obligation, which tax withholding obligation is
based on the shares' Fair Market Value as of the later of the date of exercise
or the date as of which the shares of Stock issued in connection with such
exercise become includable in the income of the Holder; or (c) deliver
sufficient cash to the Corporation to satisfy its tax withholding obligations.
Holders who elect to use such a Stock withholding feature must make the
election at the time and in the manner that the Committee prescribes. The
Committee may, at its sole option, deny any Holder's request to satisfy
withholding obligations through Stock instead of cash. In the event the
Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of
any tax withholding obligation is insufficient to discharge that tax
withholding obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that deficiency in the
form of payment requested by the Committee.
5.10 Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option. Except as
otherwise provided in Subsection 9.3, with respect to any Incentive Option
granted under the Plan, the aggregate Fair Market Value of shares of Stock
subject to an Incentive Option and the aggregate Fair Market Value of shares of
Stock or stock of any Subsidiary (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Corporation or its Subsidiaries (or a
predecessor corporation of any such corporation) that first become purchasable
by a Holder in any calendar year may not (with respect to that Holder) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the
Code or applicable regulations or rulings from time to time. As used in the
previous sentence, Fair Market Value shall be determined as of the Date of
Grant of the Incentive Option. For purposes of this Subsection 5.10,
"predecessor corporation" means (a) a corporation that was a party to a
transaction described in Section 424(a) of the Code (or which would be so
described if a substitution or assumption under that Section had been effected)
with the Corporation, (b) a corporation which, at the time the new incentive
stock option (within the meaning of Section 422 of the Code) is granted, is a
Subsidiary of the Corporation or a predecessor corporation of any such
corporations, or (c) a predecessor corporation of any such corporations.
Failure to comply with this provision shall not impair the enforceability or
exercisability of any Option, but shall cause the excess amount of shares to be
reclassified in accordance with the Code.
5.11 No Fractional Shares. The Corporation shall not in any case
be required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same
fraction (as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
5.12 Modification, Extension, and Renewal of Options. Subject to
the terms and conditions of and within the limitations of the Plan, Rule 16b-3,
and any consent required by the last sentence of this Subsection 5.12, the
Committee may (a) modify, extend, or renew
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outstanding Options granted under the Plan, (b) accept the surrender of Options
outstanding hereunder (to the extent not previously exercised) and authorize
the granting of new Options in substitution for outstanding Options (to the
extent not previously exercised), and (c) amend the terms of an Incentive
Option at any time to include provisions that have the effect of changing the
Incentive Option to a Nonstatutory Option. Nevertheless, without the consent
of the Holder, the Committee may not modify any outstanding Options so as to
specify a higher or lower Exercise Price or accept the surrender of outstanding
Incentive Options and authorize the granting of new Options in substitution
therefor specifying a higher or lower Exercise Price. In addition, no
modification of an Option granted hereunder shall, without the consent of the
Holder, alter or impair any rights or obligations under any Option theretofore
granted to such Holder under the Plan except, with respect to Incentive
Options, as may be necessary to satisfy the requirements of Section 422 of the
Code or as permitted in clause (c) of this Subsection 5.12.
5.13 Other Agreement Provisions. The Award Agreements authorized
under the Plan shall contain such provisions in addition to those required by
the Plan (including, without limitation, restrictions or the removal of
restrictions upon the exercise of the Option and the retention or transfer of
shares thereby acquired) as the Committee may deem advisable. Each Award
Agreement shall identify the Option evidenced thereby as an Incentive Option or
Nonstatutory Option, as the case may be, and no Award Agreement shall cover
both an Incentive Option and a Nonstatutory Option. Each Award Agreement
relating to an Incentive Option granted hereunder shall contain such
limitations and restrictions upon the exercise of the Incentive Option to which
it relates as shall be necessary for the Incentive Option to which such Award
Agreement relates to constitute an incentive stock option, as defined in
Section 422 of the Code.
5.14 Option Status. To the extent an Incentive Option (or any
portion thereof) fails to constitute an incentive stock option under Section
422 of the Code, such portion of the Incentive Option which fails to so qualify
shall be deemed to be a Nonstatutory Option under this Plan.
SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply
with, and the related Award Agreements shall be deemed to include and be
subject to, the terms and conditions set forth in this Section 6 (to the extent
each term and condition applies to the form of Stock Appreciation Right) and
also the terms and conditions set forth in Sections 9 and 10; provided,
however, that the Committee may authorize an Award Agreement related to a Stock
Appreciation Right that expressly contains terms and provisions that differ
from the terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and
any of the terms and provisions of Section 10 (other than Subsection 10.9).
6.1 Form of Right. A Stock Appreciation Right may be granted to
an Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) independent of an
Option.
6.2 Rights Related to Options. A Stock Appreciation Right granted
pursuant to an Option shall entitle a Holder, upon exercise, to surrender that
Option or any portion thereof, to the extent unexercised, and to receive
payment of an amount computed pursuant to Subsection
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6.2(b). That Option shall then cease to be exercisable to the extent
surrendered. Stock Appreciation Rights granted in connection with an Option
shall be subject to the terms of the Award Agreement governing the Option,
which shall comply with the following provisions in addition to those
applicable to Options:
(a) Exercise and Transfer. Subject to Subsection 10.8, a
Stock Appreciation Right granted in connection with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to
the extent that the related Option is transferable.
(b) Value of Right. Upon the exercise of a Stock
Appreciation Right related to an Option, a Holder shall be entitled to
receive payment from the Corporation of an amount determined by
Multiplying:
(i) The difference obtained by subtracting the
Exercise Price of a share of Stock specified in the related
Option from the Fair Market Value of a share of Stock on the
date of exercise of the Stock Appreciation Right, by
(ii) The number of shares as to which that Stock
Appreciation Right has been exercised.
6.3 Right Without Option. A Stock Appreciation Right granted
independent of an Option shall be exercisable as determined by the Committee
and set forth in the Award Agreement governing the Stock Appreciation Right,
which Award Agreement shall comply with the following provisions:
(a) Number of Shares. Each Award Agreement shall state
the total number of shares of Stock to which the Stock Appreciation
Right relates.
(b) Vesting. Each Award Agreement shall state the time
or periods in which the right to exercise the Stock Appreciation Right
or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Stock Appreciation Right shall vest at
each such time or period.
(c) Expiration of Rights. Each Award Agreement shall
state the date at which the Stock Appreciation Rights shall expire if
not previously exercised.
(d) Value of Right. Each Stock Appreciation Right shall
entitle a Holder, upon exercise thereof, to receive payment of an
amount determined by multiplying:
(i) The difference obtained by subtracting the
Fair Market Value of a share of Stock on the Date of Grant of
the Stock Appreciation Right from the Fair Market Value of a
share of Stock on the date of exercise of that Stock
Appreciation Right, by
(ii) The number of shares as to which the Stock
Appreciation Right has been exercised.
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6.4 Limitations on Rights. Notwithstanding Subsections 6.2(b) and
6.3(d), the Committee may limit the amount payable upon exercise of a Stock
Appreciation Right. Any such limitation must be determined as of the Date of
Grant and be noted on the Award Agreement evidencing the Holder's Stock
Appreciation Right.
6.5 Payment of Rights. Payment of the amount determined under
Subsection 6.2(b) or 6.3(d) and Subsection 6.4 may be made, in the sole
discretion of the Committee, unless specifically provided otherwise in the
Award Agreement, solely in whole shares of Stock valued at Fair Market Value on
the date of exercise of the Stock Appreciation Right, solely in cash, or in a
combination of cash and whole shares of Stock. If the Committee decides to
make full payment in shares of Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.
6.6 Payment of Taxes. The Committee may, in its discretion,
require a Holder to pay to the Corporation (or the Corporation's Subsidiary if
the Holder is an employee of a Subsidiary of the Corporation), at the time of
the exercise of a Stock Appreciation Right or thereafter, the amount that the
Committee deems necessary to satisfy the Corporation's or its Subsidiary's
current or future obligation to withhold federal, state, or local income or
other taxes that the Holder incurs by exercising a Stock Appreciation Right.
In connection with the exercise of a Stock Appreciation Right requiring tax
withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to
be based on the shares' Fair Market Value as of the date of exercise; (b)
deliver to the Corporation sufficient shares of Stock (based upon the Fair
Market Value as of the date of such delivery) to satisfy the Corporation's tax
withholding obligation, which tax withholding obligation is based on the
shares' Fair Market Value as of the later of the date of exercise or the date
as of which the shares of Stock issued in connection with such exercise become
includable in the income of the Holder; or (c) deliver sufficient cash to the
Corporation to satisfy its tax withholding obligation. Holders who elect to
have Stock withheld pursuant to (a) or (b) above must make the election at the
time and in the manner that the Committee prescribes. The Committee may, in
its sole discretion, deny any Holder's request to satisfy withholding
obligation through Stock instead of cash. In the
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event the Committee subsequently determines that the aggregate Fair Market
Value (as determined above) of any shares of Stock withheld or delivered as
payment of any tax withholding obligation is insufficient to discharge that tax
withholding obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that deficiency in the
form of payment requested by the Committee.
6.7 Other Agreement Provisions. The Award Agreements authorized
relating to Stock Appreciation Rights shall contain such provisions in addition
to those required by the Plan (including, without limitation, restrictions or
the removal of restrictions upon the exercise of the Stock Appreciation Right
and the retention or transfer of shares thereby acquired) as the Committee may
deem advisable.
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with
and be subject to, and the related Award Agreements shall be deemed to include,
the terms and conditions set forth in this Section 7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement related to a Restricted Stock Award
that expressly contains terms and provisions that differ from the terms and
provisions set forth in Subsections 9.2, 9.3, and 9.4 and the terms and
provisions set forth in Section 10 (other than Subsections 10.8 and 10.9).
7.1 Restrictions. All shares of Restricted Stock Awards granted
or sold pursuant to the Plan shall be subject to the following conditions:
(a) Transferability. The shares may not be sold,
transferred, or otherwise alienated or hypothecated until the
restrictions are removed or expire.
(b) Conditions to Removal of Restrictions. Conditions to
removal or expiration of the restrictions may include, but are not
required to be limited to, continuing employment or service as a
director, officer, consultant, or advisor or achievement of
performance objectives described in the Award Agreement.
(c) Legend. Each certificate representing Restricted
Stock Awards granted pursuant to the Plan shall bear a legend making
appropriate reference to the restrictions imposed.
(d) Possession. The Committee may require the
Corporation to retain physical custody of the certificates
representing Restricted Stock Awards during the restriction period and
may require a Holder of the Award to execute stock powers in blank for
those certificates and deliver those stock powers to the Corporation,
or the Committee may require the Holder to enter into an escrow
agreement providing that the certificates representing Restricted
Stock Awards granted or sold pursuant to the Plan shall remain in the
physical custody of an escrow holder until all restrictions are
removed or expire.
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(e) Other Conditions. The Committee may impose other
conditions on any shares granted or sold as Restricted Stock Awards
pursuant to the Plan as it may deem advisable, including without
limitation (i) restrictions under the Securities Act or Exchange Act,
(ii) the requirements of any securities exchange upon which the shares
or shares of the same class are then listed, and (iii) any state
securities law applicable to the shares.
7.2 Expiration of Restrictions. The restrictions imposed in
Subsection 7.1 on Restricted Stock Awards shall lapse as determined by the
Committee and set forth in the applicable Award Agreement, and the Corporation
shall promptly deliver to the Holder of the Restricted Stock Award a
certificate representing the number of shares for which restrictions have
lapsed, free of any restrictive legend relating to the lapsed restrictions.
Each Restricted Stock Award may have a different restriction period as
determined by the Committee in its sole discretion. The Committee may, in its
discretion, prospectively reduce the restriction period applicable to a
particular Restricted Stock Award.
7.3 Rights as Stockholder. Subject to the provisions of
Subsections 7.1 and 10.9, the Committee may, in its discretion, determine what
rights, if any, a Holder shall have with respect to the Restricted Stock Awards
granted or sold, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto.
7.4 Payment of Taxes. The Committee may, in its discretion,
require a Holder to pay to the Corporation (or the Corporation's Subsidiary if
the Holder is an employee of a Subsidiary of the Corporation) the amount that
the Committee deems necessary to satisfy the Corporation's or its Subsidiary's
current or future obligation to withhold federal, state, or local income or
other taxes that the Holder incurs by reason of the Restricted Stock Award. A
Holder may (a) direct the Corporation to withhold from the shares of Stock to
be issued to the Holder the number of shares necessary to satisfy the
Corporation's obligation to withhold taxes, that determination to be based on
the shares' Fair Market Value as of the date on which tax withholding is to be
made; (b) deliver to the Corporation sufficient shares of Stock (based upon the
Fair Market Value as of the date of such delivery) to satisfy the Corporation's
tax withholding obligation, which tax withholding obligation is based on the
shares' Fair Market Value as of the later of the date of issuance or the date
as of which the shares of Stock issued become includable in the income of the
Holder; or (c) deliver sufficient cash to the Corporation to satisfy its tax
withholding obligations. Holders who elect to have Stock withheld pursuant to
(a) or (b) above must make the election at the time and in the manner that the
Committee prescribes. The Committee may, in its sole discretion, deny any
Holder's request to satisfy withholding obligations through Stock instead of
cash. In the event the Committee subsequently determines that the aggregate
Fair Market Value (as determined above) of any shares of Stock withheld or
delivered as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the amount of that
deficiency.
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7.5 Other Agreement Provisions. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS
Except as otherwise provided in this Section 8 or the applicable Award
Agreement, Awards granted pursuant to this Section 8 shall be subject to the
conditions of Section 5 to the extent permitted under Rule 16b-3.
8.1 Ineligibility for Other Awards. Non-Employee Directors shall
not be eligible to receive any Awards under the Plan other than the Awards
specified in this Section 8.
8.2 Awards of Nonstatutory Options.
(a) Eligibility. Each Non-Employee Director of the
Corporation shall be eligible for Awards as specified in Subsections
8.2(b) or 8.2(c) below.
(b) Awards to Non-Employee Directors at the Closing of
Initial Public Offering. Each Non-Employee Director as of the closing
date of the Initial Public Offering (including persons who are elected
as a Non- Employee Director in conjunction with the closing of the
Initial Public Offering) shall be awarded a Nonstatutory Option to
purchase 5,000 shares of Stock at an Exercise Price per share equal to
the public offering price set forth on the cover page of the
Corporation's final prospectus pursuant to which the Initial Public
Offering is effected.
(c) Awards to Non-Employee Directors Elected or Appointed
After the Closing of the Initial Public Offering. Each Non-Employee
Director who is elected or appointed to the Board of Directors after
the closing date of the Initial Public Offering, and has not served as
a member of the Board of Directors before such date, shall be awarded
a Nonstatutory Option to purchase 5,000 shares of Stock upon the date
of such election or appointment to the Board of Directors at an
Exercise Price per share equal to the average Fair Market Value of a
share of Stock for the five trading days immediately preceding the
Date of Grant.
8.3 Available Stock. The automatic Awards specified in Subsection
8.2 shall be made in the amounts specified in Subsection 8.2 only if the number
of shares of Stock available to be issued, transferred or exercised pursuant to
Awards under this Plan (as calculated in Section 2) is sufficient to make all
automatic grants required to be made by Subsection 8.2 on the Date of Grant of
those automatic Awards. In the event that the number of shares of Stock that
are available to be issued, transferred, or exercised pursuant to Awards under
the Plan on the Date of Grant of the automatic Awards described in Subsection
8.2 is insufficient to permit the grant of the entire number of shares
specified in Subsection 8.2, then the number of available shares shall be
apportioned equally among the automatic Awards made on that date, and the
number of
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shares apportioned to each automatic Award shall be the amount of shares
automatically subject to that automatic Award.
8.4 Exercisability. Each Nonstatutory Option granted pursuant to
this Section 8 shall become exercisable with respect to 1,000 shares of Stock
on each of the first five anniversaries of the Date of Grant. Each
Nonstatutory Option awarded pursuant to this Section 8 shall expire 10 years
after the Date of Grant.
SECTION 9. ADJUSTMENT PROVISIONS
9.1 Adjustment of Awards and Authorized Stock. The terms of an
Award and the number of shares of Stock authorized pursuant to Subsection 2.1
for issuance under the Plan shall be subject to adjustment from time to time,
in accordance with the following provisions:
(a) If at any time, or from time to time, the Corporation
shall subdivide as a whole (by reclassification, by a Stock split, by
the issuance of a distribution on Stock payable in Stock, or
otherwise) the number of shares of Stock then outstanding into a
greater number of shares of Stock, then (i) the maximum number of
shares of Stock available for the Plan as provided in Subsection 2.1
shall be increased proportionately, and the kind of shares or other
securities available for the Plan shall be appropriately adjusted,
(ii) the number of shares of Stock (or other kind of shares or
securities) that may be acquired under any Award shall be increased
proportionately, and (iii) the price (including Exercise Price) for
each share of Stock (or other kind of shares or securities) subject to
then outstanding Awards shall be reduced proportionately, without
changing the aggregate purchase price or value as to which outstanding
Awards remain exercisable or subject to restrictions.
(b) If at any time, or from time to time, the Corporation
shall consolidate as a whole (by reclassification, reverse Stock
split, or otherwise) the number of shares of Stock then outstanding
into a lesser number of shares of Stock, (i) the maximum number of
shares of Stock available for the Plan as provided in Subsection 2.1
shall be decreased proportionately, and the kind of shares or other
securities available for the Plan shall be appropriately adjusted,
(ii) the number of shares of Stock (or other kind of shares or
securities) that may be acquired under any Award shall be decreased
proportionately, and (iii) the price (including Exercise Price) for
each share of Stock (or other kind of shares or securities) subject to
then outstanding Awards shall be increased proportionately, without
changing the aggregate purchase price or value as to which outstanding
Awards remain exercisable or subject to restrictions.
(c) Whenever the number of shares of Stock subject to
outstanding Awards and the price for each share of Stock subject to
outstanding Awards are required to be adjusted as provided in this
Subsection 9.1, the Committee shall promptly prepare a notice setting
forth, in reasonable detail, the event requiring adjustment, the
amount of the adjustment, the method by which such adjustment was
calculated, and the change in price and the number of shares of Stock,
other securities, cash, or property purchasable subject
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to each Award after giving effect to the adjustments. The Committee
shall promptly give each Holder such a notice.
(d) Adjustments under Subsections 9.1(a) and (b) shall be
made by the Committee, and its determination as to what adjustments
shall be made and the extent thereof shall be final, binding, and
conclusive. No fractional interest shall be issued under the Plan on
account of any such adjustments.
9.2 Changes in Control. Upon the occurrence of a Change in
Control, subject to Subsection 1.7(b) (a) each Holder of an Option shall
immediately be granted corresponding Stock Appreciation Rights; (b) all
outstanding Stock Appreciation Rights and Options shall immediately become
fully vested and exercisable in full, including that portion of any Stock
Appreciation Right or Option that pursuant to the terms and provisions of the
applicable Award Agreement had not yet become exercisable (the total number of
shares of Stock as to which a Stock Appreciation Right or Option is exercisable
upon the occurrence of a Change in Control is referred to herein as the "Total
Shares"); and (c) the restriction period of any Restricted Stock Award shall
immediately be accelerated and the restrictions shall expire. If a Change in
Control involves a Restructuring or occurs in connection with a series of
related transactions involving a Restructuring and if such Restructuring is in
the form of a Non-Surviving Event and as a part of such Restructuring shares of
Stock, other securities, cash, or property shall be issuable or deliverable in
exchange for Stock, then a Holder of an Award shall be entitled to purchase or
receive (in lieu of the Total Shares that the Holder would otherwise be
entitled to purchase or receive), as appropriate for the form of Award, the
number of shares of Stock, other securities, cash, or property to which that
number of Total Shares would have been entitled in connection with such
Restructuring (and, for Options, at an aggregate exercise price equal to the
Exercise Price that would have been payable if that number of Total Shares had
been purchased on the exercise of the Option immediately before the
consummation of the Restructuring). Nothing in this Subsection 9.2 shall
impose on a Holder the obligation to exercise any Award immediately before or
upon the Change of Control or cause the Holder to forfeit the right to exercise
the Award during the remainder of the original term of the Award because of a
Change in Control.
9.3 Restructuring Without Change in Control. In the event a
Restructuring shall occur at any time while there is any outstanding Award
hereunder and that Restructuring does not occur in connection with a Change in
Control or a series of related transactions involving a Change in Control,
then:
(a) no outstanding Option or Stock Appreciation Right
shall immediately become fully vested and exercisable in full merely
because of the occurrence of the Restructuring;
(b) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
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(c) the restriction period of any Restricted Stock Award
shall not immediately be accelerated and the restrictions expire
merely because of the occurrence of the Restructuring; and
(d) at the option of the Committee, the Committee may
(but shall not be required to) cause the Corporation to take any one
or more of the following actions with respect to outstanding Awards
other than Awards granted pursuant to Section 8 hereof:
(i) accelerate in whole or in part the time of
the vesting and exercisability of any one or more of the
outstanding Stock Appreciation Rights and Options so as to
provide that those Stock Appreciation Rights and Options shall
be exercisable before, upon, or after the consummation of the
Restructuring;
(ii) grant each Holder of an Option corresponding
Stock Appreciation Rights;
(iii) accelerate in whole or in part the expiration
of some or all of the restrictions on any Restricted Stock
Award;
(iv) if the Restructuring is in the form of a
Non-Surviving Event, cause the surviving entity to assume in
whole or in part any one or more of the outstanding Awards
upon such terms and provisions as the Committee deems
desirable; or
(v) redeem in whole or in part any one or more of
the outstanding Awards (whether or not then exercisable) in
consideration of a cash payment, as such payment may be
reduced for tax withholding obligations as contemplated in
Subsections 5.9, 6.6, or 7.4, as applicable, in an amount
equal to:
(A) for Options and Stock Appreciation
Rights granted in connection with Options, the excess
of (1) the Fair Market Value, determined as of the
date immediately preceding the consummation of the
Restructuring, of the aggregate number of shares of
Stock subject to the Award and as to which the Award
is being redeemed over (2) the Exercise Price for
that number of shares of Stock;
(B) for Stock Appreciation Rights not
granted in connection with an Option, the excess of
(1) the Fair Market Value, determined as of the date
immediately preceding the consummation of the
Restructuring, of the aggregate number of shares of
Stock subject to the Award and as to which the Award
is being redeemed over (2) the Fair Market Value of
the number of shares of Stock on the Date of Grant;
and
(C) for Restricted Stock Awards, the
Fair Market Value, determined as of the date
immediately preceding the consummation of the
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Restructuring, of the aggregate number of shares of
Stock subject to the Award and as to which the Award
is being redeemed.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Subsection 9.3. In the event of any
election or action taken by the Corporation pursuant to this Subsection 9.3
that requires the amendment or cancellation of any Award Agreement as may be
specified in any notice to the Holder thereof, that the Holder shall promptly
deliver that Award Agreement to the Corporation in order for that amendment or
cancellation to be implemented by the Corporation and the Committee. The
failure of the Holder to deliver any such Award Agreement to the Corporation as
provided in the preceding sentence shall not in any manner affect the validity
or enforceability of any action taken by the Corporation and the Committee
under this Subsection 9.3, including without limitation any redemption of an
Award as of the consummation of a Restructuring. Any cash payment to be made
by the Corporation pursuant to this Subsection 9.3 in connection with the
redemption of any outstanding Awards shall be paid to the Holder thereof
currently with the delivery to the Corporation of the Award Agreement
evidencing that Award; provided, however, that any such redemption shall be
effective upon the consummation of the Restructuring notwithstanding that the
payment of the redemption price may occur subsequent to the consummation. If
all or any portion of an outstanding Award is to be exercised or accelerated
upon or after the consummation of a Restructuring that does not occur in
connection with a Change in Control and is in the form of a Non-Surviving
Event, and as a part of that Restructuring shares of stock, other securities,
cash, or property shall be issuable or deliverable in exchange for Stock, then
the Holder of the Award shall thereafter be entitled to purchase or receive (in
lieu of the number of shares of Stock that the Holder would otherwise be
entitled to purchase or receive) the number of shares of Stock, other
securities, cash, or property to which such number of shares of Stock would
have been entitled in connection with the Restructuring (and, for Options, upon
payment of the aggregate exercise price equal to the Exercise Price that would
have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the
Restructuring) and such Award Agreement shall be subject to adjustments that
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Section 9. Notwithstanding the provisions of this Subsection 9.3,
the Committee shall not have the power or authority to take any action pursuant
to this Subsection 9.3 that causes the Plan not to be in compliance with the
requirements of Rule 16b-3 and any such action purported to be taken by the
Committee shall be null and void and without any force or effect.
9.4 Notice of Restructuring. The Corporation shall attempt to
keep all Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's stockholders are
informed by the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 Termination of Employment. Except as provided below, if a
Holder is an Eligible Individual because the Holder is an Employee and if that
employment relationship is terminated for any reason other than (a) Normal
Retirement, (b) that Holder's death, or (c) that Holder's
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Disability (hereinafter defined), then any and all Awards held by such Holder
in such Holder's capacity as an Employee as of the date of the termination that
are not yet exercisable (or for which restrictions have not lapsed) shall
become null and void as of the date of such termination and the portion, if
any, of such Awards that are exercisable as of the date of termination shall be
exercisable for a period of the lesser of (i) the remainder of the term of the
Award or (ii) the date which is 180 days after the date of termination. If a
Holder is an Eligible Individual because such Holder is an Employee and if that
employment relationship is terminated as a result of (a) Normal Retirement, (b)
that Holder's death, or (c) that Holder's Disability, then any and all Awards
held by such Holder in such Holder's capacity as an Employee as of the date of
termination that are not yet exercisable (or for which restrictions have not
lapsed) shall become exercisable (and the restrictions thereon, if any, shall
lapse) as of the date of termination, and all such Awards held by that Holder
as of the date of termination that are exercisable (either as a result of this
sentence or otherwise) shall be exercisable for a period of the lesser of (i)
the remainder of the term of the Award or (ii) the date which is 180 days after
the date of termination. Any portion of any such Award not exercised upon the
expiration of the lesser of the periods specified in (i) or (ii) of the
preceding two sentences shall be null and void upon the expiration of such
period, as applicable. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by the
Corporation for "cause" (hereafter defined), then any and all Awards held by
such Holder in such Holder's capacity as an Employee as of the date of the
termination shall become null and void as of the date of such termination.
"Cause" shall have the meanings given such term in the employment agreement of
the Holder (if any) with the Corporation or a Subsidiary of the Corporation;
provided, however, that if that Holder has no employment agreement, "cause"
shall mean, as determined by the Board of Directors in the sole discretion
exercised in good faith of the Board of Directors, (a) the breach by the Holder
of any nondisclosure, noncompetition, or other agreement to which the Holder
and the Corporation are parties, (b) the commission by the Holder of a felony
or of a misdemeanor involving moral turpitude, (c) the participation by the
Holder in any fraud, (d) dishonesty by the Holder that is detrimental to the
best interest of the Corporation, (e) the willful and continued failure by the
Holder to substantially perform his duties to the Corporation (other than any
such failure resulting from the Holder's incapacity due to physical or mental
illness) after written demand for substantial performance is delivered by the
Corporation specifically identifying the manner in which the Corporation
believes the Holder has not substantially performed his duties, or (f) the
willful engaging by the Holder in misconduct which is materially injurious to
the Corporation, monetarily or otherwise.
10.2 Other Loss of Eligibility. Except as provided below, if a
Holder is an Eligible Individual because the Holder is serving in a capacity
other than as an Employee and if that capacity is terminated for any reason
other than the Holder's death or Disability, then that portion, if any, of any
and all Awards held by the Holder that were granted because of that capacity
which are not yet exercisable (or for which restrictions have not lapsed) as of
the date of the termination shall become null and void as of the date of the
termination and the portion, if any, of any and all Awards held by the Holder
that are then exercisable as of the date of the termination shall survive the
termination and shall be exercisable for a period of the lesser of (a) the
remainder of the term of the Award or (b) 180 days following the date such
capacity is terminated. If a Holder is an Eligible Individual because the
Holder is serving in a capacity other
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than as an Employee and if that capacity is terminated by reason of the
Holder's death or Disability, then the portion, if any, of any and all Awards
held by the Holder that are not yet exercisable (or for which restrictions have
not lapsed) as of the date of that termination for death or Disability shall
become exercisable (and the restrictions thereon, if any, shall lapse) and all
such Awards held by that Holder as of the date of termination that are
exercisable (either as a result of this sentence or otherwise) shall be
exercisable for a period of the lesser of (a) the remainder of the term of the
Award or (b) the date which is 180 days after the date of termination. Any
portion of an Award not exercised upon the expiration of the lesser of the
periods specified in (a) or (b) of the preceding two sentences shall be null
and void upon the expiration of such period, as applicable. If a Holder is an
Eligible Individual because the Holder is serving in a capacity other than as
an Employee and if that capacity is terminated by the Corporation for "cause"
(hereafter defined), then any and all Awards held by the Holder that were
granted because of that capacity shall become null and void as of the date of
such termination. "Cause" shall have the meaning given such term in the
contractual agreement of the Holder (if any) with the Corporation or a
Subsidiary of the Corporation; provided, however, that if that Holder has no
contractual agreement, "cause" shall mean, as determined by the Board of
Directors in the sole discretion exercised in good faith of the Board of
Directors, (a) the breach by the Holder of any other agreement to which the
Holder and the Corporation are parties, (b) the commission by the Holder of a
felony or of a misdemeanor involving moral turpitude, (c) the participation by
the Holder in any fraud, (d) dishonesty by the Holder that is detrimental to
the best interest of the Corporation, (e) the willful and continued failure by
the Holder to substantially perform his duties to the Corporation (other than
any such failure resulting from the Holder's incapacity due to physical or
mental illness) after written demand for substantial performance is delivered
by the Corporation specifically identifying the manner in which the Corporation
believes the Holder has not substantially performed his duties, or (f) the
willful engaging by the Holder in misconduct which is materially injurious to
the Corporation, monetarily or otherwise.
10.3 Death or Disability. Upon the death or Disability of a
Holder, any and all Awards held by the Holder that are not yet exercisable (or
for which restrictions have not lapsed) as of the date of the Holder's death or
Disability may be exercised by, in the case of the Holder's Disability, the
Holder, his guardian or his legal representative or, in the case of the
Holder's death, by the Holder's legal representatives, heirs, legatees, or
distributees, in each case for the periods prescribed in Subsection 10.1 or
Subsection 10.2, as applicable. "Disability" shall have the meaning given it
in the employment agreement of the Holder; provided, however, that if that the
Holder has no employment agreement, "Disability" shall mean, as determined by
the Board of Directors in the sole discretion exercised in good faith of the
Board of Directors, a physical or mental impairment of sufficient severity that
either the Holder is unable to continue performing the duties he performed
before such impairment or the Holder's condition entitles him to disability
benefits under any insurance or employee benefit plan of the Corporation or its
Subsidiaries and that impairment or condition is cited by the Corporation as
the reason for termination of the Holder's employment or participation as a
member of the Board of Directors.
10.4 Leave of Absence. With respect to an Award, the Committee
may, in its sole discretion, determine that any Holder who is on leave of
absence for any reason will be
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considered to still be in the employ of the Corporation, provided that rights
to that Award during a leave of absence will be limited to the extent to which
those rights were earned, vested, or exercisable when the leave of absence
began.
10.5 Transferability of Awards.
(a) Permitted Transferees. The Committee may, in its
discretion, permit a Holder to transfer all or any portion of an
Option or Stock Appreciation Right, or authorize all or a portion of
any Option or Stock Appreciation Right to be granted to an Eligible
Individual to be on terms which permit transfer by such Holder, to (i)
the spouse, children or grandchildren of the Holder ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, or (iii) a partnership in which such
Immediate Family Members are the only partners (collectively,
"Permitted Transferees"); provided that (x) there may be no
consideration for any such transfer and (y) subsequent transfers of
Awards transferred as provided above shall be prohibited except
subsequent transfers back to the original Holder of the Award and
transfers to other Permitted Transferees of the original Holder.
Award Agreements evidencing Options or Stock Appreciation Rights with
respect to which such transferability is authorized at the time of
grant must be approved by the Committee, and must expressly provide
for transferability in a manner consistent with this subsection
10.5(a).
(b) Qualified Domestic Relations Orders. Options and
Stock Appreciation rights may be transferred pursuant to qualified
domestic relations orders entered or approved by a court of competent
jurisdiction upon delivery to the Company of written notice of such
transfer and a certified copy of such order.
(c) Other Transfers. Except as expressly permitted by
subsections 10.5(a) and 10.5(b), Awards requiring exercise shall not
be transferable other than by will or the laws of descent and
distribution.
(d) Effect of Transfer. Following the transfer of any
Award as contemplated by Subsections 10.5(a), 10.5(b) and 10.5(c), (i)
such Award shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided
that the term "Holder" shall be deemed to refer to the Permitted
Transferee, the recipient under a qualified domestic relations order,
or the estate or heirs of a deceased Holder, as applicable, to the
extent appropriate to enable the Holder to exercise the transferred
Award in accordance with the terms of this Plan and applicable law and
(ii) the provisions of Subsections 10.1, 10.2 and 10.3 hereof shall
continue to be applied with respect to the original Holder and,
following the occurrence of any such events described therein the
Awards shall be exercisable by the Permitted Transferee, the recipient
under a qualified domestic relations order, or the estate or heirs of
a deceased Holder, as applicable, only to the extent and for the
periods specified in Subsections 10.1, 10.2 and 10.3.
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(e) Procedures and Restrictions. Any Holder desiring to
transfer an Award as permitted under Subsections 10.5(a) or 10.5(b)
shall make application therefor in the manner and time specified by
the Committee and shall comply with such other requirements as the
Committee may require to assure compliance with all applicable
securities laws. The Committee shall not give permission for such a
transfer if (i) it would give rise to short-swing liability under
Section 16(b) of the Exchange Act, (ii) it may not be made in
compliance with all applicable federal, state and foreign securities
laws or (iii) with respect to any Award granted prior to October 21,
1996 (the effective date of amendments to this Plan to convert this
Plan to be in accordance with Rule 16b-3 as amended effective August
15, 1996), such transfer would occur within six months after the date
of grant of such Award.
(f) Registration. To the extent the issuance to any
Permitted Transferee of any shares of Stock issuable pursuant to
Awards transferred as permitted in this Subsection 10.5 is not
registered pursuant to the effective registration statement of the
Corporation generally covering the shares to be issued pursuant to
this Plan to initial Holders of Awards, the Corporation shall not have
any obligation to register the issuance of any such shares of Stock to
any such transferee.
(g) Option Status. To the extent a permitted transfer of
an Incentive Option under this Section 10.5 would cause an Incentive
Option (or any portion theref) to fail to constitute an incentive
stock option under Section 422 of the Code, such portion of the
Incentive Option shall be deemed to be a Nonstatutory Option under
this Plan.
10.6 Forfeiture and Restrictions on Transfer. Each Award Agreement
may contain or otherwise provide for conditions giving rise to the forfeiture
of the Stock acquired pursuant to an Award or otherwise and may also provide
for those restrictions on the transferability of shares of the Stock acquired
pursuant to an Award or otherwise that the Committee in its sole and absolute
discretion may deem proper or advisable. The conditions giving rise to
forfeiture may include, but need not be limited to, the requirement that the
Holder render substantial services to the Corporation or its Subsidiaries for a
specified period of time. The restrictions on transferability may include, but
need not be limited to, options and rights of first refusal in favor of the
Corporation and stockholders of the Corporation other than the Holder of such
shares of Stock who is a party to the particular Award Agreement or a
subsequent holder of the shares of Stock who is bound by that Award Agreement.
10.7 Delivery of Certificates of Stock. Subject to Subsection
10.8, the Corporation shall promptly issue and deliver a certificate
representing the number of shares of Stock as to which (a) an Option has been
exercised after the Corporation receives an Exercise Notice and upon receipt by
the Corporation of the Exercise Price and any tax withholding as may be
requested, (b) a Stock Appreciation Right has been exercised (to the extent the
Committee determines to pay such Stock Appreciation Right in shares of Stock
pursuant to Subsection 6.5) and upon receipt by the Corporation of any tax
withholding as may be requested, and (c) restrictions have lapsed with respect
to a Restricted Stock Award and upon receipt by the Corporation of any tax
29
<PAGE> 30
withholding as may be requested. The value of the shares of Stock or cash
transferable because of an Award under the Plan shall not bear any interest
owing to the passage of time, except as may be otherwise provided in an Award
Agreement. If a Holder is entitled to receive certificates representing Stock
received for more than one form of Award under the Plan, separate Stock
certificates shall be issued with respect to Incentive Options and Nonstatutory
Options.
10.8 Conditions to Delivery of Stock. Nothing herein or in any
Award granted hereunder or any Award Agreement shall require the Corporation to
issue any shares with respect to any Award if that issuance would, in the
opinion of counsel for the Corporation, constitute a violation of the
Securities Act or any similar or superseding statute or statutes, any other
applicable statute or regulation, or the rules of any applicable securities
exchange or securities association, as then in effect. At the time of any
exercise of an Option or Stock Appreciation Right, or at the time of any grant
of a Restricted Stock Award, the Corporation may, as a condition precedent to
the exercise of such Option or Stock Appreciation Right or vesting of any
Restricted Stock Award, require from the Holder of the Award (or in the event
of his death, his legal representatives, heirs, legatees, or distributees) such
written representations, if any, concerning the Holder's intentions with regard
to the retention or disposition of the shares of Stock being acquired pursuant
to the Award and such written covenants and agreements, if any, as to the
manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by that Holder (or
in the event of the Holder's death, his legal representatives, heirs, legatees,
or distributees) will not involve a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable state or
federal statute or regulation, or any rule of any applicable securities
exchange or securities association, as then in effect.
10.9 Certain Directors and Officers. With respect to Holders who
are directors or officers of the Corporation or any of its Subsidiaries and who
are subject to Section 16(b) of the Exchange Act, Awards granted prior to the
date the stockholders of the Corporation shall have approved the Plan shall be
subject to such stockholder approval, may not be transferred or exercised, as
applicable, until such stockholder approval is obtained, and shall become null
and void on the first anniversary of the Effective Date if such stockholder
approval is not obtained on or before the Effective Date. In addition, no such
officer or director shall have shares of Stock withheld to pay tax withholding
obligations unless permitted under Rule 16b-3 and agreed to by the Committee.
Any election by any such officer or director to have tax withholding
obligations satisfied by the withholding of shares of Stock shall be
irrevocable, shall be communicated in writing to the Committee and shall be
subject to prior approval by Board of Directors, the Committee or the
shareholders of the Corporation as provided by Rule 16b-3. Any election by
such an officer or director to receive cash in full or partial settlement of a
Stock Appreciation Right, as well as any exercise by such individual of a Stock
Appreciation Right for such cash, in either case to the extent permitted under
the applicable Award Agreement or otherwise permitted by the Committee, shall
be subject to prior approval by the Board of Directors, the Committee or the
shareholders of the Corporation as provided by Rule 16b-3.
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<PAGE> 31
10.10 Securities Act Legend. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions, endorsed thereon and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION
OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION
WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.11 Legend for Restrictions on Transfer. Each certificate
representing shares issued to a Holder pursuant to an Award granted under the
Plan shall, if such shares are subject to any transfer restriction, including a
right of first refusal, provided for under the Plan or an Award Agreement, bear
a legend that complies with applicable law with respect to the restrictions on
transferability contained in this Subsection 10.11, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "CHASE BRASS INDUSTRIES, INC. 1994 LONG-TERM INCENTIVE PLAN"
AS ADOPTED BY CHASE BRASS INDUSTRIES, INC. (THE "CORPORATION"), AND
DATED NOVEMBER 10, 1994, AND AN AGREEMENT THEREUNDER BETWEEN THE
CORPORATION AND THE INITIAL HOLDER THEREOF DATED ___________________,
199 , AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF
EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL FURNISH A COPY OF
SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.
10.12 Rights as a Stockholder. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof.
Nevertheless, dividends, dividend equivalent rights and voting rights may be
extended to and made part of any Award (other than Options or Stock
Appreciation Rights) denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the Committee may establish. The
Committee may
31
<PAGE> 32
also establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payment denominated in
Stock or units of Stock.
10.13 Furnish Information. Each Holder shall furnish to the
Corporation all information requested by the Corporation to enable it to comply
with any reporting or other requirement imposed upon the Corporation by or
under any applicable statute or regulation.
10.14 Obligation to Exercise. The granting of an Award hereunder
shall impose no obligation upon a Holder to exercise the same or any part
thereof.
10.15 Adjustments to Awards. Subject to the general limitations set
forth in Sections 5, 6, and 9, the Committee may make any adjustment in the
exercise price of, the number of shares subject to, or the terms of a
Nonstatutory Option or Stock Appreciation Right by cancelling an outstanding
Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory
Option or Stock Appreciation Right. Such adjustment shall be made by amending,
substituting, or regranting an outstanding Nonstatutory Option or Stock
Appreciation Right. Such amendment, substitution, or regrant may result in
terms and conditions that differ from the terms and conditions of the original
Nonstatutory Option or Stock Appreciation Right. The Committee may not,
however, impair the rights of any Holder of previously granted Nonstatutory
Options or Stock Appreciation Rights without that Holder's consent. If such
action is effected by amendment, such amendment shall be deemed effective as of
the Date of Grant of the amended Award.
10.16 Remedies. The Corporation shall be entitled to recover from a
Holder reasonable attorneys' fees incurred in connection with the enforcement
of the terms and provisions of the Plan and any Award Agreement whether by an
action to enforce specific performance or for damages for its breach or
otherwise.
10.17 Information Confidential. As partial consideration for the
granting of each Award hereunder, a Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax or financial advisors, or to a
financial institution to the extent that such information is necessary to
secure a loan. In the event any breach of this promise comes to the attention
of the Committee, it shall take into consideration that breach in determining
whether to recommend the grant of any future Award to that Holder, as a factor
mitigating against the advisability of granting any such future Award to that
Person.
10.18 Consideration. No Option or Stock Appreciation Right shall be
exercisable and no restriction on any Restricted Stock Award shall lapse with
respect to a Holder unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.
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<PAGE> 33
SECTION 11. EFFECTIVENESS, DURATION AND AMENDMENT OF PLAN
11.1 Effectiveness; Duration. Notwithstanding the provisions of
the Plan, Awards granted prior to the date the stockholders of the Corporation
approve the Plan shall be subject to such stockholder approval and may not be
transferred or exercised, as applicable, until such stockholder approval is
obtained. No Awards may be granted hereunder after the date that is ten years
after the Effective Date.
11.2 Amendment. The Committee may, insofar as permitted by law and
subject to ratification of the Board of Directors, with respect to any shares
which, at the time, are not subject to Awards, suspend or discontinue the Plan
or revise or amend it in any respect whatsoever and may amend any provision of
the Plan or any Award Agreement to make the Plan or the Award Agreement, or
both, comply with Section 16(b) of the Exchange Act and the exemptions from
those sections in the regulations thereunder. The Committee may also, subject
to ratification of the Board of Directors, amend, modify, suspend, or terminate
the Plan for the purpose of meeting or addressing any changes in other legal
requirements applicable to the Corporation or the Plan or for any other purpose
permitted by law. The Plan may not be amended without the consent of the
holders of a majority of the shares of Stock then outstanding to (a) increase
materially the aggregate number of shares of Stock that may be issued under the
Plan (except for adjustments pursuant to Section 9 hereof), (b) increase
materially the benefits accruing to Eligible Individuals under the Plan, or (c)
modify materially the requirements about eligibility for participation in the
Plan; provided, however, that such amendments may be made without the consent
of stockholders of the Corporation to the extent applicable law and other legal
requirements (including Rule 16b-3 or Section 162(m)) permit such changes
without shareholder approval. Notwithstanding the provisions of this
Subsection 11.2, the Committee specifically shall have the authority, subject
to ratification by the Board of Directors, to amend the Plan (without approval
of the holders of the shares of Stock then outstanding) to the extent required
to cause the Plan, as it relates to Options and Stock Appreciation Rights
granted to Eligible Individuals subject to Section 162(m), to comply with the
requirements for classification of Awards as "performance-based compensation"
under Section 162(m)(4)(C), except for such amendments that require such
stockholder approval under Section 162(m).
SECTION 12. GENERAL
12.1 Application of Funds. The proceeds received by the
Corporation from the sale of shares pursuant to Awards may be used for any
general corporate purpose.
12.2 Right of the Corporation and Subsidiaries to Terminate
Employment. Nothing contained in the Plan, or in any Award Agreement, shall
confer upon any Holder the right to continue in the employ of the Corporation
or any Subsidiary or interfere in any way with the rights of the Corporation or
any Subsidiary to terminate the Holder's employment at any time.
12.3 No Liability for Good Faith Determinations. Neither the
members of the Board of Directors nor any member of the Committee shall be
liable for any act, omission or determination taken or made in good faith with
respect to the Plan or any Award granted under
33
<PAGE> 34
it; and members of the Board of Directors and the Committee shall be entitled
to indemnification and reimbursement by the Corporation in respect of any
claim, loss, damage, or expense (including attorneys' fees, the costs of
settling any suit, provided such settlement is approved by independent legal
counsel selected by the Corporation, and amounts paid in satisfaction of a
judgment, except a judgment based on a finding of bad faith) arising therefrom
to the full extent permitted by law and under any directors' and officers'
liability or similar insurance coverage that may from time to time be in
effect. This right to indemnification shall be in addition to, and not a
limitation on, any other indemnification rights any member of the Board of
Directors or the Committee may have.
12.4 Other Benefits. Participation in the Plan shall not preclude
a Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension,
profit sharing, retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan and such arrangements
may be either generally applicable or applicable only in specific cases.
12.5 Exclusion from Pension and Profit-Sharing Compensation. By
acceptance of an Award (regardless of form), as applicable, each Holder shall
be deemed to have agreed that the Award is special incentive compensation that
will not be taken into account in any manner as salary, compensation, or bonus
in determining the amount of any payment under any pension, retirement, or
other employee benefit plan of the Corporation or any Subsidiary unless any
pension, retirement, or other employee benefit plan of the Corporation or any
Subsidiary expressly provides that such Award shall be so considered for
purposes of determining the amount of any payment under any such plan. In
addition, each beneficiary of a deceased Holder shall be deemed to have agreed
that the Award will not affect the amount of any life insurance coverage, if
any, provided by the Corporation or a Subsidiary on the life of a Holder that
is payable to the beneficiary under any life insurance plan covering employees
of the Corporation or any Subsidiary.
12.6 Execution of Receipts and Releases. Any payment of cash or
any issuance or transfer of shares of Stock to a Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 Unfunded Plan. Insofar as it provides for Awards of cash and
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, or rights
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Corporation shall not be required to segregate any
34
<PAGE> 35
assets that may at any time be represented by cash, Stock, or rights thereto,
nor shall the Plan be construed as providing for such segregation, nor shall
the Corporation nor the Board of Directors nor the Committee be deemed to be a
trustee of any cash, Stock, or rights thereto to be granted under the Plan.
Any liability of the Corporation to any Holder with respect to a grant of cash,
Stock, or rights thereto under the Plan shall be based solely upon any
contractual obligations that may be created by the Plan and any Award
Agreement; no such obligation of the Corporation shall be deemed to be secured
by any pledge or other encumbrance on any property of the Corporation. Neither
the Corporation nor the Board of Directors nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by the Plan.
12.8 No Guarantee of Interests. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation.
12.9 Payment of Expenses. All expenses incident to the
administration, termination, or protection of the Plan, including, but not
limited to, legal and accounting fees, shall be paid by the Corporation or its
Subsidiaries.
12.10 Corporation Records. Records of the Corporation or its
Subsidiaries regarding a Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by
the Committee to be incorrect.
12.11 Information. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
12.12 No Liability of Corporation. The Corporation assumes no
obligation or responsibility to a Holder or his legal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.
12.13 Corporation Action. Any action required of the Corporation
shall be by resolution of its Board of Directors or by a person authorized to
act by resolution of the Board of Directors.
12.14 Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable and the Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein. If any of the terms or
provisions of this Plan or any Award Agreement conflict with the requirements
of Rule 16b-3 (as those terms or provisions are applied to Eligible Individuals
who are subject to Section 16(b) of the Exchange Act) or Section 422 of the
Code (with respect to Incentive Options), then those conflicting terms or
provisions shall be deemed inoperative to the extent they so conflict with the
requirements of Rule 16b-3 (unless the Board of Directors or the Committee, as
appropriate, has expressly determined that the Plan or such Award should not
comply with Rule 16b-3) or Section 422 of
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<PAGE> 36
the Code. With respect to Incentive Options, if this Plan does not contain any
provision required to be included herein under Section 422 of the Code, that
provision shall be deemed to be incorporated herein with the same force and
effect as if that provision had been set out at length herein; provided,
further, that, to the extent any Option that is intended to qualify as an
Incentive Option cannot so qualify, that Option (to that extent) shall be
deemed a Nonstatutory Option for all purposes of the Plan.
12.15 Notices. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent by
mail. Any notice required or permitted to be delivered hereunder shall be
deemed to be delivered on the date on which it is actually received, addressed
to the applicable party as specified in the applicable Award Agreement. The
Corporation or a Holder may change, at any time and from time to time, by
written notice to the other, the address which it or he had previously
specified for receiving notices. Until changed in accordance herewith, the
Corporation and each Holder shall specify as its and his address for receiving
notices the address set forth in the Award Agreement pertaining to the shares
to which such notice relates. Any person entitled to notice hereunder may
waive such notice.
12.16 Successors. The Plan shall be binding upon the Holder, his
legal representatives, heirs, legatees, and distributees, upon the Corporation,
its successors and assigns and upon the Committee and its successors.
12.17 Headings. The titles and headings of Sections and Subsections
are included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12.18 Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Delaware, without giving effect to any conflict of law provisions
thereof, except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent Delaware corporate law conflicts with
the contract law of such state, in which event Delaware corporate law, without
giving effect to any conflict of law provisions thereof, shall govern. The
obligation of the Corporation to sell and deliver Stock hereunder is subject to
applicable federal and state laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Stock.
12.19 Availability of Exempt Transactions. Notwithstanding the
provisions of the Plan, nothing contained in the Plan shall prohibit any
transactions permitted by Rule 16a-2(d) promulgated under the Exchange Act to
the extent such transactions are approved by the Committee and are not in
violation of, and do not otherwise cause the Plan not to be in compliance with,
Rule 16b-3.
12.20 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of the Plan dictates, the
plural shall be read as the singular and the singular as the plural.
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<PAGE> 37
IN WITNESS WHEREOF, Chase Brass Industries, Inc., acting by and
through its officer hereunto duly authorized, has executed this instrument, to
be effective as of October 21, 1996.
CHASE BRASS INDUSTRIES, INC.
By: /s/ Michael T. Segraves
---------------------------------
Michael T. Segraves
Vice President
37
<PAGE> 1
EXHIBIT 10.6
SCHEDULE OF SUBSTANTIALLY IDENTICAL DOCUMENTS
The following thirteen persons have entered into substantially identical
agreements with the Company.
Raymond E. Cartledge
Charles E. Corpening
Donald J. Donahue
Duane R. Grossett
Parry Katsafanas
John R. Kennedy
David J. Klima
Lawrence R. Lansford
David A. Lichtfuss
Thomas F. McWilliams
Michael T. Segraves
William A. Spanos
William R. Toller
<PAGE> 1
LEASE AGREEMENT EXHIBIT 10.12
This agreement entered into on this the 29 day of August, 1985,
between Industrial Development Authority of Madison County, hereinafter
referred to as "Lessor" and UNR-Leavitt, hereinafter referred to as "Lessee,"
with the agreement containing the following terms and conditions, to wit:
WHEREAS, the Lessor, wishes that the Lessee establish a manufacturing,
and an office facility in Madison County, Mississippi, and in particular in the
Central Mississippi Industrial Center and employ persons in the conduct of the
Lessee's business and such an understanding and agreement is in the best
interest of the citizens of Madison County, Mississippi;
NOW THEREFORE in consideration of the premises and other mutual
agreements contained herein, the parties agree as follows, to wit:
A. Contingency:
1. The Lessee shall cooperate with the Lessor in the
application and approval of a CDBG Grant from the State of Mississippi for the
purpose of improving streets in the Central Mississippi Industrial Park in
order to handle the Lessee's heavy trucking load requirement.
B. Erection of Building and Establishment of Factory:
1. The Lessor shall construct a building and
improvements outlined hereinafter on the following described real property
lying and being situated in Madison County, Mississippi, to wit:
Commence at the NE corner of the W1/2 of the NE1/4 of the SW1/4
Section 22, Township 8 North, Range 2 East, Madison County,
Mississippi, and run thence West
<PAGE> 2
2,043.34 feet to a point; run thence South 749.91 feet to a point; run
thence South 89 degrees 32'02" West, 1350.08 feet to the point of
beginning of the parcel described hereinafter.
From the point of beginning continue thence South 89 degrees 32'02"
West, 1165.94 feet to a point on the east right of way line of
Interstate Highway 55; run thence South 29 degrees 10'18" West
along said East right of way line of Interstate Highway 55 to the
intersection of said right of way line with the West line of the SE1/4
of Section 21, Township 8 North, Range 2 East, Madison County,
Mississippi; departing said East right of way line of Interstate
Highway 55, run southerly along the aforedescribed West line of the
SE1/4 of Section 21, Township 8 North, Range 2 East, Madison County,
Mississippi to the intersection of said line with the centerline of a
drainage channel having a flat bottom approximately 20 feet in width;
run thence easterly and southeasterly along the centerline of said
drainage channel to a point, which point is on a line described as
North 89 degrees 32'02" East and being 621.00 feet, more or less,
South of the point of beginning; run thence North 89 degrees 32'02"
East, along a line to a point on the West right of way line of an
industrial park roadway, which point is described as being South 00
degrees 37'07" East, 620.97 feet from the point of beginning; run
thence North 00 degrees 37'07" West, 620.97 feet back to the point of
beginning, a parcel situated in the SE1/4 of Section 21, Township 8
North, Range 2 East, Madison County, Mississippi, containing 14.4
acres, more or less.
2. The Lessor shall improve the real property and erect
thereon a manufacturing and office facility being 72,000 square feet of
manufacturing and assembling area and 3,100 square feet of office space
pursuant to and according to plans and specifications approved by the Lessor
and Lessee herein. A copy of said plans and specifications is attached hereto
and marked as Exhibit "A" and incorporated herein by reference. The Lessee
shall provide at its expense the plans and specifications and shall be
responsible for the expense of any changes agreed to by the parties hereto. No
changes in the plans and specifications may be made except for the agreement of
the parties herein.
3. The Lessor shall contract for the construction of the
facilities and improvements according to the laws of the State of Mississippi
and shall exercise due diligence in expediting the planning and construction of
said facility and improvements. The construction costs and/or bid is not
contemplated to exceed $900,000 for the construction of the facility.
<PAGE> 3
Lessor shall procure financing for the construction of said facility and
improvements according to the plans and specifications referred to herein and
shall be responsible for the costs of obtaining such financing to include, but
not limited to, bond counsel and bond expenses.
4. The Lessee shall provide, at its own expense, all
improvements over and above the site improvements and the construction of the
facility according to the plans and specifications referred to herein.
C. Lease Agreement:
The Lessor shall lease and let the above described premises
and building to be erected thereon and the Lessee shall take, let and lease
said premises and building which will be located and erected thereon upon
completion according to the following terms and conditions, to wit:
1. The building shall be rendered to the company
immediately upon completion according to the plans and specifications which are
outlined in Exhibit "A" attached hereto.
2. The primary term of the Lease shall be for fifteen
(15) years beginning with the date of occupancy by the Lessee of the facilities
contemplated herein in accordance with C.1.
3. The Lessee agrees and covenants to the Lessor as rent
for the facilities and real property described hereinabove, the amount of One
hundred two thousand five hundred seventy-two and 72/100 Dollars ($102,572.72)
per year payable on a yearly basis with the first payment being due and payable
one year from the date of occupancy and on the same day each year thereafter
throughout the term of this Lease.
-3-
<PAGE> 4
4. The Lessee shall have an option to purchase the above
described facilities, real property, and improvements thereon. The option
price of the real property excluding buildings and facilities located thereon
shall be the appraised value of the real property at the time of the exercise
of the option and purchase with the appraiser or appraisers to be agreed upon
by the parties hereto. In addition to the above price, the Lessee has the
option to purchase the facilities and improvements at any time in accordance
with an amortized purchase pay-off schedule based on equal annual payments on a
$900,000 loan at 7.6% interest, an example of which is attached as Exhibit "B,"
and with the fifteenth (15th) annual payment ownership transfers to the Lessee
with the payment of one (1) dollar and payment of appraised land value.
D. Insurance:
When the said building is delivered to the Lessee by the
Lessor, the Lessee will, at its own expense, carry and maintain fire, windstorm
and extended coverage insurance on the lease premises with an assignment in
favor of the Lessor in an amount not less than $750,000.00, or the remaining
principal balance, as shown by Exhibit "B," whichever is less. In the event of
damage or loss of the building on the said leased premises, from a cause
covered by said insurance, the proceeds from said insurance, if sufficient,
shall be used by the Lessor to repair or replace said building, if the Lessee
has not already caused repairs or replacement to be made to the original
condition, less wear and tear.
E. Maintenance and Repair:
The Lessee agrees to maintain, at its own expense, the leased
premises (building and grounds) in a good state of repair.
-4-
<PAGE> 5
F. Expansion and Additions to Building:
It is agreed by the parties hereto that the Lessee, at its own
expense, may build any addition to the building on the leased premises or any
separate building for the purpose of expanding its manufacturing operations or
business with the approval of the Lessor which shall not be unreasonably
withheld.
G. Alterations to the Building:
It is understood and agreed that the Lessee, at its own
expense, may make any and all alterations to the building or buildings on the
leased premises that it may deem necessary or advisable, provided that no
alterations shall affect the basic structure or impair its value. Said
alterations shall be with the approval of the Lessor and shall not be
unreasonably withheld.
H. Assignability of Lease and Option:
The Lessee may assign this Lease and Option to Purchase or
sublet the whole or any part of the premises. Any assignment or sublease shall
be approved in writing by the Lessor and shall not be unreasonably withheld.
No assignment or sublease shall release or diminish the obligations of the
Lessee hereunder unless agreed to in writing by the Lessor.
I. Tax Exemption:
The building and land will be automatically exempt from ad
valorem taxes of the County prior to the option to purchase. IDAMC will
recommend to the Board of Supervisors that the personal property be exempt from
ad valorem taxes from initial start-up for a period of ten (10) years and that
the building and land be exempt from ad valorem taxes for a period of ten (10)
years from the date of purchase. According to state law, our school taxes
cannot be exempted.
-5-
<PAGE> 6
J. Defaults:
If the Lessee shall abandon the premises, or if manufacturing
operations therein or thereon shall be discontinued for a continuous period of
six (6) months or more at any time, provided that such discontinuance is not
caused by causes beyond the control of the company, such as but not limited to,
acts of God, the government of the United States or any political subdivision
thereof, or of any foreign nation, strikes or labor disputes; or if the Lessee
shall fail to pay the rental herein provided for within thirty (30) days after
notice that such rent is due and payable shall have been given to the Lessee at
such address as the Lessee may from time to time designate in writing to the
Lessor then in that event this agreement shall terminate and the Lessor shall
be entitled to peaceful possession of said premises, within 90 days, cleared of
all persons, goods and things not properly belonging to same, in as good order
and condition as when received, ordinary wear and tear excepted, but without
release of the Lessee from the monetary considerations hereunder.
L. Lessor shall assist Lessee in employee screening and providing
training programs for employees available through offices of the State of
Mississippi and the educational institutions located in the Madison County
area.
M. It is understood and agreed by and between the respective
parties hereto that this instrument shall constitute the agreement of leasehold
between the parties hereto and shall inure to the benefit of and be binding
upon the heirs, successors and assigns of either of the parties hereto.
N. The parties hereto do hereby certify and attest that they are
authorized to execute this Lease Agreement and to bind the parties hereto.
-6-
<PAGE> 7
WITNESS OUR SIGNATURES on this the 29th day of August, 1985.
LESSOR:
INDUSTRIAL DEVELOPMENT AUTHORITY
OF MADISON COUNTY, MISSISSIPPI
By: /s/ John Wallace
--------------------------------
President
ATTEST:
/s/ Thomas Johnson
- ------------------------------
Secretary
LESSEE:
By: /s/ Michael Rosenzweig
--------------------------------
Michael Rosenzweig, President
By: /s/ Robert W. Hunt
--------------------------------
Robert W. Hunt, Senior Vice
President Operations
ATTEST:
- ------------------------------
Secretary
-7-
<PAGE> 8
STATE OF MISSISSIPPI
COUNTY OF MADISON
PERSONALLY APPEARED before me, the undersigned authority in and for
the aforesaid jurisdiction John Wallace, who acknowledged to me that he is the
President of Industrial Development Authority of Madison County, Mississippi,
and that as such, he did sign and deliver the above and foregoing instrument on
the date and for the purposes therein stated in the name of, for and on behalf
of the said corporation, he being first duly authorized so to do.
GIVEN UNDER MY HAND and official seal on this the 29th day of August,
1985.
/s/ Margaret Richard
---------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
April 12, 1983
-8-
<PAGE> 9
STATE OF ILLINOIS
COUNTY OF COOK
PERSONALLY APPEARED before me, the undersigned authority in and for
the aforesaid jurisdiction Michael Rosenzweig, who acknowledged to me that he
is the President of UNR-Leavitt and that as such, he did sign and deliver the
above and foregoing instrument on the date and for the purposes therein stated
in the name of, for and on behalf of the said corporation, he being first duly
authorized so to do.
GIVEN UNDER MY HAND and official seal on this the 5th day of
September, 1985.
/s/ Bonita M. Lewis
------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
January 20, 1987
-9-
<PAGE> 1
EXHIBIT 10.13
ASSIGNMENT AND CONSENT AGREEMENT
STATE OF MISSISSIPPI )
) KNOW ALL PERSONS BY THESE PRESENTS THAT:
COUNTY OF MADISON )
This ASSIGNMENT AND CONSENT AGREEMENT (the "Assignment") is made as of
the 28th day of August, 1996, by and between UNR INDUSTRIES, INC., UNR -
LEAVITT DIVISION, a Delaware corporation (herein called "Assignor") and LEAVITT
TUBE COMPANY, INC., a Delaware corporation and wholly owned subsidiary of Chase
Brass Industries, Inc. (herein called "Assignee").
W I T N E S S E T H:
WHEREAS, Assignor has entered into that certain Lease Agreement dated
August 29, 1985 (herein called the "Lease"), between Assignor, as lessee, and
Madison County Economic Development Authority (formerly known as Industrial
Development Authority of Madison County), an agency of Madison County,
Mississippi, as lessor (herein called "Lessor"), whereby Assignor leased that
certain real property and improvements located in Madison County, Mississippi,
as further described on Exhibit "A" attached hereto and incorporated herein for
all purposes (the "Premises"); and
WHEREAS, pursuant to the terms of that certain Sale and Purchase
Agreement dated May 15, 1996 (the "Agreement"), by and among Chase Brass
Industries, Inc., a Delaware corporation, UNR Industries, Inc., a Delaware
corporation and Leavitt Structural Tubing Co., a Delaware corporation, Assignor
now desires to assign the Lease to Assignee, and Assignee desires to accept
such assignment.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor does hereby ASSIGN,
TRANSFER, SET OVER, CONVEY AND DELIVER unto Assignee, its successors and
assigns, all of the rights, powers, privileges and interests of Assignor in and
to the Lease, upon the following terms and conditions:
1. Assignee accepts this assignment and expressly assumes and
agrees to perform and fulfill all the terms, covenants, conditions and
obligations required by Assignor as lessee under the Lease, including, without
limitation, the making of all payments due to or payable on behalf of Lessor
when due and payable, to the extent that such payments, liabilities and
obligations relate to periods on or after the effective date hereof.
2. This Assignment shall become effective upon the later of (i)
August 30, 1996, or (ii) the date that the closing contemplated under the
Agreement occurs.
3. This Assignment shall be binding on and inure to the benefit
of the parties hereto and their successors and assigns.
<PAGE> 2
4. This Assignment may be executed in a number of identical
counterparts, each of which for all purposes is to be deemed an original, and
all of which constitute collectively, one Assignment; but in making proof of
this Assignment, it shall not be necessary to produce or account for more than
one such counterpart.
[THE BALANCE OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
as of the date first above written.
ASSIGNOR:
UNR INDUSTRIES, INC.,
UNR - LEAVITT DIVISION,
a Delaware corporation
By: /s/ T.H. Gildehaus
--------------------------------
Thomas A. Gildehaus
President and Chief Executive Officer
ASSIGNEE:
LEAVITT TUBE COMPANY, INC.,
a Delaware corporation
By: /s/ Martin V. Alonzo
------------------------------------
Martin V. Alonzo
Chief Executive Officer and
Vice President
STATE OF ILLINOIS )
)
COUNTY OF COOK )
PERSONALLY APPEARED BEFORE ME, the undersigned authority in and for
the said county and state, on this 30th day of August, 1996, within my
jurisdiction, the within named Thomas A. Gildehaus, who acknowledged that he is
the President and Chief Executive Officer of UNR INDUSTRIES, INC., UNR -
LEAVITT DIVISION, a Delaware corporation, and that for and on behalf of the
said corporation, and as its act and deed, he executed the above and foregoing
instrument, after first having been duly authorized by said corporation so to
do.
/s/ Dolores Hall
------------------------------------
Notary Public
Printed Name: Dolores Hall
-----------------------
My Commission Expires: 10/16/98
--------------
-3-
<PAGE> 4
STATE OF ILLINOIS )
)
COUNTY OF COOK )
PERSONALLY APPEARED BEFORE ME, the undersigned authority in and for
the said county and state, on this 30th day of August, 1996, within my
jurisdiction, the within named Martin V. Alonzo, who acknowledged that he is
the Chief Executive Officer/Vice President of LEAVITT TUBE COMPANY, INC., a
Delaware corporation, and that for and on behalf of the said corporation, and
as its act and deed, he executed the above and foregoing instrument, after
first having been duly authorized by said corporation so to do.
/s/ Adrienne Martycz
----------------------------------
Notary Public
Printed Name: Adrienne Martycz
----------------------
My Commission Expires: 3/2/97
-------------
[THE BALANCE OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
-4-
<PAGE> 5
CONSENT OF LESSOR
The undersigned is the Lessor in the Lease described in this
Assignment. Lessor hereby consents to the assignment of the Lease to LEAVITT
TUBE COMPANY, INC., a Delaware corporation, upon the terms and conditions
described above and waives no rights under the terms of the Lease as to the
Assignor or the Assignee.
IN WITNESS WHEREOF, the Lessor has executed this Assignment as of the
28th day of August, 1996.
LESSOR:
MADISON COUNTY ECONOMIC
DEVELOPMENT AUTHORITY
By: /s/ Steve Vassallo
-----------------------------------
Steve Vassallo
President
STATE OF MISSISSIPPI )
)
COUNTY OF MADISON )
PERSONALLY APPEARED BEFORE ME, the undersigned authority in and for
the said county and state, on this 28th day of August, 1996, within my
jurisdiction, the within named Steve Vassallo, who acknowledged that he is the
President of MADISON COUNTY ECONOMIC DEVELOPMENT AUTHORITY, an authority
organized under the laws of the State of Mississippi, and that for and on
behalf of the said authority, and as its act and deed he executed the above and
foregoing instrument, after first having been duly authorized by said authority
so to do.
/s/ Joy Foy
-------------------------------------
Notary Public
Printed Name: Joy Foy
-------------------------
My Commission Expires: 3/2/97
----------------
Prepared by:
Glenn E. Airola, Esq.
Winstead Sechrest & Minick P.C.
910 Travis St., Suite 1700
Houston, Texas 77002
(713) 951-3896
-5-
<PAGE> 6
EXHIBIT "A"
THE PREMISES
INDEXING INSTRUCTION
The property described in this instrument is located in the SE
1/4 of Section 21, Township 8 North, Range 2 East, in Madison
County, Mississippi.
Commence at the NE corner of the W1/2 of the NE1/4 of the SW1/4 of Section 22,
Township 8 North, Range 2 East, Madison County, Mississippi, and run thence
West 2,043.34 feet to a point; run thence South 749.91 feet to a point; run
thence South 80 32'02" West, 1350.08 feet to the point of beginning of the
parcel described hereinafter.
From the point of beginning continue thence South 89 32'02" West, 1165.94 feet
to a point on the east right of way line of Interstate Highway 55; run thence
South 29 10'18" West along said East right of way line of Interstate Highway 55
to the intersection of said right of way line with the West line of the SE1/4
of Section 21, Township 8 North, Range 2 East, Madison County, Mississippi;
departing said East right of way line of Interstate Highway 55, run southerly
along the aforedescribed West line of the SE1/4 of Section 21, Township 8
North, Range 2 East, Madison County, Mississippi to the intersection of said
line with the centerline of a drainage channel having a flat bottom
approximately 20 feet in width; run thence easterly and southeasterly along the
centerline of said drainage channel to a point, which point is on a line
described as North 89 32'02" East and being 621.00 feet, more or less, South of
the point of beginning; run thence North 89 32'02" East, along a line to a
point on the West right of way line of an industrial park roadway, which point
is described as being South 00 37'07" East, 620.97 feet from the point of
beginning; run thence North 00 37'07" West, 620.97 feet back to the point of
beginning, a parcel situated in the SE1/4 of Section 21, Township 8 North,
Range 2 East, Madison County, Mississippi, containing 14.4 acres, more or less.
<PAGE> 1
EXHIBIT 10.14
LEASE AGREEMENT
This agreement entered into on this the 14th day of October, 1988,
between Industrial Development Authority of Madison County, hereinafter
referred to as "Lessor" and UNR Industries, Inc., UNR-Leavitt Division,
hereinafter referred to as "Lessee," with the agreement containing the
following terms and conditions, to wit:
WHEREAS, the Lessor, wishes that the Lessee expand a manufacturing,
and an office facility in Madison County, Mississippi, and in particular in the
Central Mississippi Industrial Center and employ persons in the conduct of the
Lessee's business and such an understanding and agreement is in the best
interest of the citizens of Madison County, Mississippi;
NOW THEREFORE in consideration of the premises and other mutual
agreements contained herein, the parties agree as follows, to wit:
A. Erection of Building and Establishment of Factory
1. The Lessor shall construct a building and
improvements outlined hereinafter on the following described real property
lying and being situated in Madison County, Mississippi, to wit:
Commence at the Northeast corner of the West One-Half (W 1/2) of the
Northeast One-Quarter (NE 1/4) of the Southwest One-Quarter (SW 1/4)
Section 22, Township 8 North, Range 2 East, Madison County,
Mississippi, and run West 2043.34 feet; run thence South 724.91 feet
to the Northeast corner of the Industrial Development Authority of
Madison county property; run thence South 89 degrees 32 minutes 02
seconds West, along the Northern boundary of said Industrial
Development Authority property, 1350.08 feet to a point on the West
right-of-way of a public road and also the Southeast corner of the
Debeukelaer Corporation tract. Said point being the Point of
Beginning of the following described tract.
From the Point of Beginning run thence South 89 degrees 32 minutes 02
seconds West, along the Southern boundary of the Debeukelaer
Corporation tract, 1151.72 feet to a point on the East right-of-way
line of Interstate Highway 55; run thence South 29 degrees 03
<PAGE> 2
minutes 50 seconds West along said East right-of-way of Interstate
Highway 55, 121.03 feet, run thence South 01 degrees 12 minutes 51
seconds East leaving said right-of-way, 369.50 feet to a point in the
center of a drainage ditch; run thence South 73 degrees 30 minutes 48
seconds East along the centerline of said drainage ditch, 180.40 feet;
run thence North 89 degrees 40 minutes 26 seconds East along the
centerline of said drainage ditch, 630.69 feet; run thence South 61
degrees 48 minutes 19 seconds East along the centerline of said
drainage ditch, 99.66 feet; run thence South 57 degrees 51 minutes 46
seconds East along the centerline of said drainage ditch, 83.67 feet;
run thence North 89 degrees 22 minutes 53 seconds East leaving said
drainage ditch 247.02 feet to a point on the West right-of-way of a
public road; run thence North 00 degrees 37 minutes 07 seconds West
along the West right-of-way of said public road 621.15 feet to the
Point of Beginning. Herein described parcel contains 15.18 acres,
more or less.
2. The Lessor shall improve the real property and erect
thereon a manufacturing building being 156,000 square feet of manufacturing and
assembling area pursuant to and according to plans and specifications approved
by the Lessor and Lessee herein. A copy of said plans and specifications is
attached hereto and marked as Exhibit "A" and incorporated herein by reference.
The Lessee shall provide at its expense the plans and specifications and shall
be responsible for the expense of any changes agreed to by the parties hereto.
No changes in the plans and specifications may be made except for the agreement
of the parties herein.
3. The Lessor shall contract for the construction of the
building and improvements according to the laws of the State of Mississippi and
shall exercise due diligence in expediting the planning and construction of
said building and improvements. The construction costs are contemplated to be
approximately $665,000 for the construction of the shell building. Lessor
shall procure financing for the construction of said building and improvements
according to the plans and specifications referred to herein. Lessor shall
provide at no cost to Lessee a boundary survey and clearing limit markers for
the construction project.
-2-
<PAGE> 3
4. The Lessee shall provide, at its own expense, all
improvements over and above the site improvements and the construction of the
facility according to the plans and specifications referred to herein.
B. Lease Agreement
The Lessor shall lease and let the above described premises
and building to be erected thereon and the Lessee shall take, let and lease
said premises and building which will be located and erected thereon upon
completion according to the following terms and conditions, to wit:
1. The building shall be rendered to the company
immediately upon completion according to the plans and specifications which are
outlined in Exhibit "A" attached hereto.
2. The primary term of the Lease shall be for twelve
(12) years beginning with the date of occupancy by the Lessee of the facilities
contemplated herein in accordance with B.1.
3. The Lessee agrees and covenants to the Lessor as rent
for the facilities and real property described hereinabove, the amount of
Forty-Two Thousand Two Hundred Eighty-Three and 48/100 ($42,283.48) payable
semi-annually with the first payment being due and payable six months from the
date Lessee commences occupancy of the building in any manner and every six (6)
months thereafter throughout the term of this Lease. In addition, a single
payment equal to the difference between Lessor's construction contract plus
costs of financing as described on the attached Exhibit "C" and $665,000 shall
be due and payable by
-3-
<PAGE> 4
Lessee at the time of the execution of the construction contract. Lessor shall
adjust rent payment after the sale of Bonds used to finance the construction of
the building.
4. The Lessee shall have an option to purchase the above
described facilities, real property, and improvements thereon. The option
price of the real property excluding buildings and facilities located thereon
shall be the appraised value of the real property at the time of the exercise
of the option and purchase with the appraiser or appraisers to be agreed upon
by the parties hereto but in no event to exceed $14,500 per acre. In addition
to the above price, the Lessee has the option to purchase the facilities and
improvements at any time in accordance with an amortized purchase pay-off
schedule based on equal semi-annual payments on a $665,000 loan at 7.393229%
interest, an example of which is attached as Exhibit "B," and with the
Twenty-Fourth (24th) annual payment in the year 2001 ownership transfers to the
Lessee with the payment of one (1) dollar and payment of appraised land value
not to exceed $14,500.
C. Insurance
When the said building is delivered to the Lessee by the
Lessor, the Lessee will, at its own expense, carry and maintain fire, windstorm
and extended coverage insurance on the lease premises with an assignment in
favor of the Lessor in an amount not less than $665,000.00, or the remaining
principal balance, as shown by Exhibit "B," whichever is less. In the event of
damage or loss of the building on the said leased premises, from a cause
covered by said insurance, the proceeds from said insurance, if sufficient,
shall be used by the Lessor to repair or replace said building, if the Lessee
has not already caused repairs or replacement to be made to the original
condition, less wear and tear.
-4-
<PAGE> 5
D. Maintenance and Repair
The Lessee agrees to maintain, at its own expense, the leased
premises (building and grounds) in a good state of repair.
E. Expansion and Additions to Building
It is agreed by the parties hereto that the Lessee, at its own
expense, may build any addition to the building on the leased premises or any
separate building for the purpose of expanding its manufacturing operations or
business with the approval of the Lessor which shall not be unreasonably
withheld.
F. Alterations to the Building
It is understood and agreed that the Lessee, at its own
expense, may make any and all alterations to the building or buildings on the
leased premises that it may deem necessary or advisable, provided that no
alterations shall affect the basic structure or impair its value. Said
alterations shall be with the approval of the Lessor and shall not be
unreasonably withheld.
G. Assignability of Lease and Option
The Lessee may assign this Lease and Option to Purchase or
sublet the whole or any part of the premises. Any assignment or sublease shall
be approved in writing by the Lessor and shall not be unreasonably withheld.
No assignment or sublease shall release or diminish the obligations of the
Lessee hereunder unless agreed to in writing by the Lessor.
H. Tax Exemption
The building and land will be automatically exempt from ad
valorem taxes of the County prior to the option to purchase. Lessor will
recommend to the Board of Supervisors that the personal property be exempt from
ad valorem taxes from initial start-up for a period of ten
-5-
<PAGE> 6
(10) years and that the building and land be exempt from ad valorem taxes for a
period of ten (10) years from the date of purchase. According to state law,
our school taxes cannot be exempted.
I. Defaults
If the Lessee shall abandon the premises, or if manufacturing
operations therein or thereon shall be discontinued for a continuous period of
six (6) months or more at any time, provided that such discontinuance is not
caused by causes beyond the control of the company, such as but not limited to,
acts of God, the government of the United States or any political subdivision
thereof, or of any foreign nation, strikes or labor disputes; or if the Lessee
shall fail to pay the rental herein provided for within thirty (30) days after
notice that such rent is due and payable shall have been given to the Lessee at
such address as the Lessee may from time to time designate in writing to the
Lessor then in that event this agreement shall terminate and the Lessor shall
be entitled to peaceful possession of said premises, within 90 days, cleared of
all persons, goods and things not properly belonging to same, in as good order
and condition as when received, ordinary wear and tear excepted, but without
release of the Lessee from the monetary considerations hereunder.
J. Employee Training
Lessor shall assist Lessee in employee screening and providing
training programs for employees available through offices of the State of
Mississippi and the educational institutions located in the Madison County
area.
-6-
<PAGE> 7
K. Agreement of Parties
It is understood and agreed by and between the respective
parties hereto that this instrument shall constitute the agreement of leasehold
between the parties hereto and shall inure to the benefit of and be binding
upon the heirs, successors and assigns of either of the parties hereto.
L. Authorized Execution
The parties hereto do hereby certify and attest that they are
authorized to execute this Lease Agreement and to bind the parties hereto.
WITNESS OUR SIGNATURES on this the 14th day of October, 1988.
LESSOR:
INDUSTRIAL DEVELOPMENT AUTHORITY OF
MADISON COUNTY, MISSISSIPPI
By:/s/ John Wallace
---------------------------------
President
ATTEST:
/s/
- --------------------------
Secretary
-7-
<PAGE> 8
LESSEE:
By: /s/ Roy A. Herman
-----------------------------
Roy A. Herman, President
By: /s/ Robert W. Hunt
-----------------------------
Robert W. Hunt, Senior Vice
President Operations
ATTEST:
/s/ Bonita M. Lewis
- -------------------------------
Secretary
STATE OF MISSISSIPPI
COUNTY OF MADISON
PERSONALLY APPEARED before me, the undersigned authority in and for
the aforesaid jurisdiction John M. Wallace, who acknowledged to me that he is
the President of Industrial Development Authority of Madison County,
Mississippi, and that as such, he did sign and deliver the above and foregoing
instrument on the date and for the purposes therein stated in the name of, for
and on behalf of the said corporation, he being first duly authorized so to do.
GIVEN UNDER MY HAND and official seal on this the 14th day of October,
1988.
/s/ Sidney Rummels
---------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
May 2, 1990
- ----------------------------------
-8-
<PAGE> 9
STATE OF ILLINOIS
COUNTY OF COOK
PERSONALLY APPEARED before me, the undersigned authority in and for
the aforesaid jurisdiction Roy A. Herman, who acknowledged to me that he is the
President of UNR-Leavitt Division-UNR, Inc. and that as such, he did sign and
deliver the above and foregoing instrument on the date and for the purposes
therein stated in the name of, for and on behalf of the said corporation, he
being first duly authorized so to do.
GIVEN UNDER MY HAND and official seal on this the 6th day of October, 1988.
/s/ Bonita M. Lewis
---------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
April 16, 1991
- --------------------------
-9-
<PAGE> 1
EXHIBIT 10.15
ASSIGNMENT AND CONSENT AGREEMENT
STATE OF MISSISSIPPI )
) KNOW ALL PERSONS BY THESE PRESENTS THAT:
COUNTY OF MADISON )
This ASSIGNMENT AND CONSENT AGREEMENT (the "Assignment") is made as of
the 28th day of August, 1996, by and between UNR INDUSTRIES, INC., UNR -
LEAVITT DIVISION, a Delaware corporation (herein called "Assignor") and LEAVITT
TUBE COMPANY, INC., a Delaware corporation and wholly owned subsidiary of Chase
Brass Industries, Inc. (herein called "Assignee").
W I T N E S S E T H:
WHEREAS, Assignor has entered into that certain Lease Agreement dated
October 14, 1988 (herein called the "Lease"), between Assignor, as lessee, and
Madison County Economic Development Authority (formerly known as Industrial
Development Authority of Madison County), an agency of Madison County,
Mississippi, as lessor (herein called "Lessor"), whereby Assignor leased that
certain real property and improvements located in Madison County, Mississippi,
as further described on Exhibit "A" attached hereto and incorporated herein for
all purposes (the "Premises"); and
WHEREAS, pursuant to the terms of that certain Sale and Purchase
Agreement dated May 15, 1996 (the "Agreement"), by and among Chase Brass
Industries, Inc., a Delaware corporation, UNR Industries, Inc., a Delaware
corporation and Leavitt Structural Tubing Co., a Delaware corporation, Assignor
now desires to assign the Lease to Assignee, and Assignee desires to accept
such assignment.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor does hereby ASSIGN,
TRANSFER, SET OVER, CONVEY AND DELIVER unto Assignee, its successors and
assigns, all of the rights, powers, privileges and interests of Assignor in and
to the Lease, upon the following terms and conditions:
1. Assignee accepts this assignment and expressly assumes and
agrees to perform and fulfill all the terms, covenants, conditions and
obligations required by Assignor as lessee under the Lease, including, without
limitation, the making of all payments due to or payable on behalf of Lessor
when due and payable, to the extent that such payments, liabilities and
obligations relate to periods on or after the effective date hereof.
2. This Assignment shall become effective upon the later of (i)
August 30, 1996, or (ii) the date that the closing contemplated under the
Agreement occurs.
3. This Assignment shall be binding on and inure to the benefit
of the parties hereto and their successors and assigns.
<PAGE> 2
4. This Assignment may be executed in a number of identical
counterparts, each of which for all purposes is to be deemed an original, and
all of which constitute collectively, one Assignment; but in making proof of
this Assignment, it shall not be necessary to produce or account for more than
one such counterpart.
[THE BALANCE OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
as of the date first above written.
ASSIGNOR:
UNR INDUSTRIES, INC.,
UNR - LEAVITT DIVISION,
a Delaware corporation
By: /s/ T.H. Gildehaus
------------------------------------
Thomas A. Gildehaus
President and Chief Executive Officer
ASSIGNEE:
LEAVITT TUBE COMPANY, INC.,
a Delaware corporation
By: /s/ Martin V. Alonzo
-----------------------------------
Martin V. Alonzo
Chief Executive Officer and Vice
President
STATE OF ILLINOIS )
)
COUNTY OF COOK )
PERSONALLY APPEARED BEFORE ME, the undersigned authority in and for
the said county and state, on this 30th day of August, 1996, within my
jurisdiction, the within named Thomas A. Gildehaus, who acknowledged that he is
the President and Chief Executive Officer of UNR INDUSTRIES, INC., UNR -
LEAVITT DIVISION, a Delaware corporation, and that for and on behalf of the
said corporation, and as its act and deed, he executed the above and foregoing
instrument, after first having been duly authorized by said corporation so to
do.
/s/ Dolores Hall
-------------------------------------
Notary Public
Printed Name: Dolores Hall
-------------------------
My Commission Expires: 10/16/98
----------------
-3-
<PAGE> 4
STATE OF ILLINOIS )
)
COUNTY OF COOK )
PERSONALLY APPEARED BEFORE ME, the undersigned authority in and for
the said county and state, on this 30th day of August, 1996, within my
jurisdiction, the within named Martin V. Alonzo, who acknowledged that he is
the Chief Executive Officer and Vice President of LEAVITT TUBE COMPANY, INC., a
Delaware corporation, and that for and on behalf of the said corporation, and
as its act and deed, he executed the above and foregoing instrument, after
first having been duly authorized by said corporation so to do.
/s/ Adrienne Martycz
----------------------------------
Notary Public
Printed Name: Adrienne Martycz
----------------------
My Commission Expires: 3/2/97
-------------
[THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
-4-
<PAGE> 5
CONSENT OF LESSOR
The undersigned is the Lessor in the Lease described in this
Assignment. Lessor hereby consents to the assignment of the Lease to LEAVITT
TUBE COMPANY, INC., a Delaware corporation, upon the terms and conditions
described above and waives no rights under the terms of the Lease as to the
Assignor or the Assignee.
IN WITNESS WHEREOF, the Lessor has executed this Assignment as of the
28th day of August, 1996.
LESSOR:
MADISON COUNTY ECONOMIC
DEVELOPMENT AUTHORITY
By: /s/ Steve Vassallo
-----------------------------------
Steve Vassallo
President
STATE OF MISSISSIPPI )
)
COUNTY OF MADISON )
PERSONALLY APPEARED BEFORE ME, the undersigned authority in and for
the said county and state, on this 28th day of August, 1996, within my
jurisdiction, the within named Steve Vassallo, who acknowledged that he is the
President of MADISON COUNTY ECONOMIC DEVELOPMENT AUTHORITY, an authority
organized under the laws of the State of Mississippi, and that for and on
behalf of the said authority, and as its act and deed he executed the above and
foregoing instrument, after first having been duly authorized by said authority
so to do.
/s/ Joy Foy
--------------------------------------
Notary Public
Printed Name: Joy Foy
-------------------------
My Commission Expires: 3/2/97
-----------------
Prepared by:
Glenn E. Airola, Esq.
Winstead Sechrest & Minick P.C.
910 Travis St., Suite 1700
Houston, Texas 77002
(713) 951-3896
-5-
<PAGE> 6
EXHIBIT "A"
THE PREMISES
INDEXING INSTRUCTION
The property described in this instrument is located in the SE
1/4 of Section 21, Township 8 North, Range 2 East, in Madison
County, Mississippi.
Commence at the Northeast corner of the West One-Half (W 1/2) of the Northeast
One-Quarter (NE 1/4) of the Southwest One-Quarter (SW 1/4) of Section 22,
Township 8 North, Range 2 East, Madison County, Mississippi and run West
2043.34 feet; run thence South 724.91 feet to the Northeast corner of the
Industrial Development Authority of Madison County property; run thence South
89 degrees 32 minutes 02 seconds West, along the Northern boundary of said
Industrial Development Authority property, 1350.08 feet to a point on the West
right-of-way of a public road and also the Southeast corner of the Debeukelaer
Corporation tract. Said point being the Point of Beginning of the following
described tract.
From the Point of Beginning run thence South 89 degrees 32 minutes 02 seconds
West along the Southern boundary of the Debeukelaer Corporation tract, 1151.72
feet to a point on the East right-of-way of Interstate Highway 55; run thence
South 29 degrees 03 minutes 50 seconds West along the East right-of-way of
Interstate Highway 55, 121.03 feet; run thence South 01 degrees 12 minutes 51
seconds East leaving said right-of-way, 369.50 feet to a point in the center of
a drainage ditch; run thence South 73 degrees 30 minutes 48 seconds East along
the centerline of said drainage ditch, 180.40 feet; run thence North 89 degrees
40 minutes 26 seconds East along the centerline of said drainage ditch, 630.69
feet; run thence South 61 degrees 48 minutes 19 seconds East along the
centerline of said drainage ditch, 99.66 feet; run thence South 57 degrees 51
minutes 46 seconds East along the centerline of said drainage ditch, 83.67
feet; run thence North 89 degrees 22 minutes 53 seconds East leaving said
drainage ditch 247.02 feet to a point on the West right-of-way of a public
road; run thence North 00 degrees 37 minutes 07 seconds West along the West
right-of-way of said public road 621.15 feet to the Point of Beginning, a
parcel situated in the SE 1/4 of Section 21, Township 8 North, Range 2 East,
Madison County, Mississippi, containing 15.18 acres, more or less.
<PAGE> 1
EXHIBIT 10.16
CHASE BRASS & COPPER COMPANY
BENEFIT RESTORATION PLAN
<PAGE> 2
CHASE BRASS & COPPER COMPANY
BENEFIT RESTORATION PLAN
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III - CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV - IN-SERVICE WITHDRAWAL . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V - CREDITING OF CONTRIBUTIONS AND INCOME . . . . . . . . . . . . . 8
ARTICLE VI - BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VIII - ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . 12
ARTICLE IX - CLAIM REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X - LIMITATION OF RIGHTS . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE XI - LIMITATION OF ASSIGNMENT AND PAYMENTS TO
LEGALLY INCOMPETENT DISTRIBUTEE . . . . . . . . . . . . . 15
ARTICLE XII - AMENDMENT TO OR TERMINATION OF THE PLAN . . . . . . . . . . . 15
ARTICLE XIII - STATUS OF PARTICIPANT AS UNSECURED CREDITOR . . . . . . . . 16
ARTICLE XIV - GENERAL AND MISCELLANEOUS . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
CHASE BRASS & COPPER COMPANY
BENEFIT RESTORATION PLAN
PREAMBLE
WHEREAS, Chase Brass & Copper Company, Inc. ("Company"), a corporation
formed under the laws of the State of Delaware, maintains a benefit restoration
plan for the exclusive benefit of a select group of management and highly
compensated employees of the Company to restore certain retirement benefits on
behalf of such employees decreased or limited because of limitations imposed by
the Internal Revenue Code of 1986 and subsequent legislation;
WHEREAS, the Company desires to amend the Plan in certain respects to
limit the Company's matching and profit sharing contributions to a
Participant's Annual Compensation up to but not in excess of $350,000; and
WHEREAS, the Company intends that any Participant or Beneficiary under
the Plan shall have the status of an unsecured general creditor with respect to
the Company, the Plan, and the Trust Fund, if any, established in connection
with the Plan;
NOW, THEREFORE, Chase Brass & Copper Company, Inc. hereby amends and
restates the Chase Brass & Copper Company Benefit Restoration Plan, effective
January 1, 1996, as follows:
ARTICLE I
DEFINITIONS
1.1 "Account" shall mean the record maintained by the Committee
showing the monetary value of the individual interest in the Plan of each
Participant or Beneficiary. The term "Account" shall refer only to a
bookkeeping entry and shall not be construed to require the segregation of
assets on behalf of any Participant or Beneficiary.
1.2 "Affiliate" shall mean a member of a controlled group of
corporations (as defined in Section 414(b) of the Code), a group of trades or
businesses (whether or not incorporated) which are under common control (as
defined in Section 414(c) of the Code), or an affiliated service group (as
defined in Section 414(m) of the Code) of which the Company is a member; and
any entity otherwise required to be aggregated with the Company pursuant to
Section 414(o) of the Code or the regulations issued thereunder.
1.3 "Annual Compensation" shall mean the total amounts paid or
accrued by the Company or an Affiliate to an employee as remuneration for
personal services rendered during each Plan Year, including bonuses and
commissions, as reported on the employee's federal
<PAGE> 4
income tax withholding statement or statements (IRS Form W-2), together with
any amounts not includable in such employee's gross income pursuant to Sections
125 or 402(g) of the Code or by virtue of a deferral election under Section 3.1
of the Plan, but Annual Compensation shall not include: (1) moving expenses;
(2) amounts, if any, realized from the sale, exchange or other disposition of
stock acquired under a stock option; (3) amounts, if any, realized from a stock
award or the award or vesting of restricted stock; (4) amounts, if any,
received as distributions from this Plan; and (5) non-cash and imputed forms of
compensation included on an employee's IRS Form W-2.
1.4 "Beneficiary" shall mean the Beneficiary or Beneficiaries
designated by each Participant under the Profit Sharing Plan; provided,
however, that a Participant may designate a different Beneficiary or
Beneficiaries hereunder by delivering to the Committee a written beneficiary
designation, in the form provided by the Committee, and executed specifically
with respect to this Plan.
1.5 "Board" shall mean the Board of Directors of the Company.
1.6 "CBI" shall mean Chase Brass Industries, Inc., a Delaware
corporation.
1.7 "Change in Control" means the event that is deemed to have
occurred if:
(a) any Acquiring Person (as hereinafter defined) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of CBI
representing fifty percent or more of the combined voting power of the
then outstanding Voting Securities (as hereinafter defined) of CBI; or
(b) a public announcement is made of a tender or exchange
offer by any Acquiring Person for fifty percent or more of the
outstanding Voting Securities of CBI, and the Board of Directors of
CBI approves or fails to oppose that tender or exchange offer in its
statements in Schedule 14D-9 under the Exchange Act; provided,
however, that the events to occur under Sections 6.5 and 7.3 hereof
shall not occur solely as a result of an event described in this
clause (b) unless, within one year after the occurrence of such event,
an event described in clauses (a), (c) or (d) hereof shall have
occurred, in which case such events to occur under Sections 6.5 and
7.3 hereof shall occur upon the occurrence of such event but shall be
deemed to have been effective as of the time of the occurrence of the
event described in this clause (b); or
(c) the stockholders of CBI approve a merger or
consolidation of CBI with any other corporation or partnership (or, if
no such approval is required, the consummation of such a merger or
consolidation of CBI), other than a merger or consolidation that would
result in the Voting Securities of CBI outstanding immediately before
the consummation thereof continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the
surviving entity or of a parent of the surviving entity) a majority of
the combined voting power of the Voting Securities and
-2-
<PAGE> 5
Convertible Voting Securities (as hereinafter defined) (on a
fully-diluted basis assuming full conversion thereof) of the surviving
entity (or its parent) outstanding immediately after that merger or
consolidation; or
(d) the stockholders of CBI approve a plan of complete
liquidation of CBI or an agreement for the sale or disposition by CBI
of all or substantially all CBI's assets (or, if no such approval is
required, the consummation of such a liquidation, sale, or disposition
in one transaction or series of related transactions) other than a
liquidation, sale or disposition of all or substantially all CBI's
assets in one transaction or a series of related transactions to a
Subsidiary (as hereinafter defined) of CBI or any other corporation
owned directly or indirectly by the stockholders of CBI in
substantially the same proportions as their ownership of stock in CBI;
or
(e) CBI ceases to be the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing at least a majority of the
combined voting power of the then outstanding Voting Securities of the
Company; or
(f) members of the Incumbent Board (as hereinafter
defined) of CBI cease for any reason to constitute at least a majority
of the Board of Directors of CBI; or
(g) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or partnership
(or, if no such approval is required, the consummation of such a
merger or consolidation of the Company), other than a merger or
consolidation that would result in the Voting Securities of the
Company outstanding immediately before the consummation thereof
continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity or of a
parent of the surviving entity) a majority of the combined voting
power of the Voting Securities and Convertible Voting Securities (on a
fully-diluted basis assuming full conversion thereof) of the surviving
entity (or its parent) outstanding immediately after that merger or
consolidation; or
(h) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets (or, if no such approval is required, the consummation of such
a liquidation, sale, or disposition in one transaction or series of
related transactions) other than a liquidation, sale or disposition of
all or substantially all the Company's assets in one transaction or a
series of related transactions to CBI or a Subsidiary of CBI, or any
other corporation owned directly or indirectly by the stockholders of
CBI in substantially the same proportions as their ownership of stock
in CBI.
For purposes of this Section 1.7, an "Acquiring Person" means any
Person other than (a) CBI, any Subsidiary of CBI, any employee benefit plan of
CBI or of a Subsidiary of CBI or
-3-
<PAGE> 6
of a corporation owned directly or indirectly by the stockholders of CBI in
substantially the same proportions as their ownership of Stock of CBI, or any
trustee or other fiduciary holding securities under an employee benefit plan of
CBI or of a Subsidiary of CBI or of a corporation owned directly or indirectly
by the stockholders of CBI in substantially the same proportions as their
ownership of Stock of CBI (b) Citicorp Venture Capital, Ltd., a New York
corporation ("CVC"), or (c) any Affiliate (as hereinafter defined) of CVC that
is directly controlled by Citicorp or Citibank, N.A., or otherwise is in the
same tier as CVC of Affiliates under the control of such entities ("Direct
Affiliates"), but shall not include any entities that may be deemed an
Affiliate of CVC as a result of the investment by any Direct Affiliate in such
entity.
For purposes of this Section 1.7, a "Person" means any person or
entity of any nature whatsoever, specifically including (but not limited to) an
individual, a firm, a company, a corporation, a partnership, a trust, or other
entity. A Person, together with that Person's affiliates and associates (as
"affiliate" and "associate" are defined in Rule 12b-2 under the Exchange Act
for purposes of this definition only), and any Persons acting as a partnership,
limited partnership, joint venture, association, syndicate, or other group
(whether or not formally organized), or otherwise acting jointly or in concert
or in a coordinated or consciously parallel manner (whether or not pursuant to
any express agreement), for the purpose of acquiring, holding, voting, or
disposing of securities of CBI or the Company with that Person, shall be deemed
a single "Person."
For purposes of this Section 1.7, "Affiliate" means (a) any Person who
is directly or indirectly the beneficial owner of at least 10% of the voting
power of the outstanding Voting Securities of CBI or (b) any Person
controlling, controlled by, or under common control with CBI or any Person
contemplated in clause (a) of this definition.
For purposes of this Section 1.7, "Voting Securities" means (i) any
securities that are entitled to vote generally in the election of directors, in
the admission of general partners or in the selection of any other similar
governing body and (ii) with respect to CBI, all shares of CBI's nonvoting
common stock, par value $.01 per share (all of which are convertible into
shares of CBI's common stock, par value $.01 per share).
For purposes of this Section 1.7, "Convertible Voting Securities"
means any and all options, warrants, or other rights to purchase, or securities
convertible into or exchangeable or exercisable for, directly or indirectly,
Voting Securities of any Person.
For purposes of this Section 1.7, "Subsidiary" means, with respect to
any Person, any corporation, or other entity of which a majority of the Voting
Securities is owned, directly or indirectly, by that Person.
For purposes of this Section 1.7, "Incumbent Board" means individuals
who, as of the Effective Date, constitute the Board of Directors of CBI and any
other individual who becomes a director thereof after such date and whose
election or appointment by the Board of Directors
-4-
<PAGE> 7
of CBI or nomination for election by the stockholders of CBI was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time, and the rules and regulations promulgated
thereunder.
1.9 "Committee" shall mean a committee of two or more persons
designated by the Board to administer the Plan. The Committee may be
reconstituted by the Board and its members may be replaced without cause by the
Board at any time by written notice to the member or members who are to be
replaced.
1.10 "Company" shall mean Chase Brass & Copper Company, Inc., or
its successor or successors.
1.11 "Disability" shall mean a physical or mental condition, the
occurrence of which shall entitle a Participant to benefits under the long-term
disability plan of the Company in which such individual participates, and in
the absence of such a plan, Disability shall mean a physical or mental
condition that prevents the Participant from any gainful employment with the
Company, as determined by the Committee in its sole and absolute discretion,
which determination shall be conclusive and binding for all purposes hereunder.
1.12 "Effective Date" shall mean January 1, 1996.
1.13 "Exchange Act" means the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, or any successor law, as it
may be amended from time to time.
1.14 "Normal Retirement Age" shall mean the age of sixty-five (65)
years.
1.15 "Participant" shall mean an individual who has been designated
by the Committee as being eligible to participate in the Plan.
1.16 "Plan" shall mean the Chase Brass & Copper Company Benefit
Restoration Plan, as amended from time to time.
1.17 "Plan Year" shall mean the annual period beginning January 1
of each year and ending December 31 of each year.
1.18 "Profit Sharing Plan" shall mean the Chase Brass & Copper
Company Savings and Profit Sharing Plan for Salaried Employees, as may be
amended.
1.19 "Trust Agreement" shall mean the agreement, if any, including
any amendments thereto entered into between the Company and the Trustee for the
accumulation of contributions made under the Plan.
-5-
<PAGE> 8
1.20 "Trust Fund" shall mean the cash and other properties held and
administered by the Trustee pursuant to the Trust Agreement, if any.
1.21 "Trustee" shall mean the designated trustee acting at any time
under the Trust Agreement, if any.
1.22 "Valuation Date" shall mean the last day of March, June,
September, and December of each Plan Year; provided, however, if the investment
options made available to a Participant under Section 5.3 of the Plan are
valued on a date other than the last day of March, June, September, and
December, then each day on which such investment options are valued shall
constitute a Valuation Date under the Plan.
1.23 "Year of Service" shall mean a year of service for vesting, as
such term is defined in the Profit Sharing Plan.
ARTICLE II
ELIGIBILITY
Participation in the Plan shall be made available to a select group of
individuals, as determined by the Committee, who are providing services to the
Company or an Affiliate in key positions of management and responsibility and
who are eligible to make contributions to the Profit Sharing Plan, the amount
of which is reduced by reason of the application of the limitations set forth
in Sections 401(a)(17) or 402(g)(1) of the Code. Such individuals will
automatically participate in the contributions described in Section 3.3 of the
Plan. Such individuals may elect to participate in the contributions described
in Sections 3.1 and 3.2 of the Plan by executing a participation agreement in
such form and at such time as the Committee shall require, provided that each
participation agreement shall be executed no later than the last day of
December immediately preceding the Plan Year for which an individual elects to
make contributions to the Plan in accordance with the provisions of Section 3.1
hereof. Notwithstanding the foregoing, in the first year in which an
individual becomes eligible to participate in the Plan, he may elect to
participate in the Plan by executing a participation agreement, in such form as
the Committee shall require, within thirty (30) days following the date on
which he is notified by the Committee of his eligibility to participate in the
Plan. In such event, his election to participate in the Plan shall become
effective as of the first full payroll period beginning on or after the
Committee's receipt of his participation agreement. The determination as to
the eligibility of any individual to participate in the Plan shall be in the
sole and absolute discretion of the Committee, whose decision in that regard
shall be conclusive and binding for all purposes hereunder.
-6-
<PAGE> 9
ARTICLE III
CONTRIBUTIONS
3.1 For any Plan Year, a Participant may irrevocably elect to
defer a portion of the Annual Compensation otherwise payable to him with
respect to such Plan Year, in the amount set forth below. The amount which a
Participant may elect to defer under this Plan for any Plan Year shall be a
percentage of his Annual Compensation for such Plan Year which is no less than
one percent (1%) and no greater than twelve percent (12%), with such deferral
amount to be reduced by the amount of the Participant's 401(k) deferral under
the Profit Sharing Plan during such Plan Year. Any amounts withheld,
pursuant to this Section 3.1, from the Annual Compensation otherwise payable to
a Participant shall be credited to his Account as of the date on which such
amounts would otherwise have been paid. Unless a Participant revokes or
changes his deferral election, a Participant's deferral election for any given
Plan Year shall be deemed to apply to the following Plan Year without the
necessity of the Participant's completion of a new deferral election form.
3.2 As of the last day of each calendar month, the Company shall
credit a matching contribution to the Account of each Participant who has
deferred amounts under the Plan during such month in accordance with the
provisions of Section 3.1 above. The amount of a Participant's matching
contribution shall be equal to fifty percent (50%) of the amount deferred
hereunder by the Participant during such month under Section 3.1; provided,
however, in calculating a Participant's matching contribution, the
Participant's deferral amount under Section 3.1 that is attributable to Annual
Compensation in excess of $350,000 shall be disregarded.
3.3 As of the last day of each Plan Year, the Company shall credit
a profit sharing contribution to the Account of each Participant hereunder,
other than Participants who: (a) terminated service with the Company and all
Affiliates prior to the last day of the Plan Year or (b) failed to complete a
Year of Service during the Plan Year. The profit sharing contribution
hereunder for each Plan Year shall equal a percentage of Annual Compensation in
excess of the amount set forth in Section 401(a)(17)(A) of the Code (as in
effect for the calendar year in which such Plan Year begins) which is equal to
the percentage of compensation allocated as a profit sharing contribution to
the Profit Sharing Plan for such Plan Year; provided, however, the Annual
Compensation taken into consideration for this purpose shall be limited to
$350,000. The Committee shall credit a contribution under this Section to the
Account of a Participant whose employment with the Company and all Affiliates
terminated prior to the last day of the Plan Year as a result of death,
Disability, or retirement on or after his Normal Retirement Age. Such
contribution hereunder for each Plan Year shall equal a percentage of Annual
Compensation in excess of the amount set forth in Section 401(a)(17)(A) of the
Code (as in effect for the calendar year in which such Plan Year begins) which
is equal to the percentage of compensation allocated as a profit sharing
contribution to the Profit Sharing Plan for the immediately preceding Plan
Year.
-7-
<PAGE> 10
ARTICLE IV
IN-SERVICE WITHDRAWAL
4.1 In the event of an unforeseeable emergency, a Participant may
make a written request to the Committee for a withdrawal from his Account. For
purposes of this Section, the term "unforeseeable emergency" shall mean a
severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent (as defined
in Section 152(a) of the Code) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. Any determination of the existence of an unforeseeable emergency
and the amount to be withdrawn on account thereof shall be made by the
Committee. However, notwithstanding the foregoing, a withdrawal will not be
permitted to the extent that the financial hardship is or may be relieved: (i)
through reimbursement or compensation by insurance or otherwise; (ii) by
liquidation of the Participant's assets, to the extent that liquidation of such
assets would not itself cause severe financial hardship; or (iii) by cessation
of deferrals under this Plan. In no event shall the need to send a
Participant's child to college or the desire to purchase a home be deemed to
constitute an unforeseeable emergency. No member of the Committee shall vote
or decide upon any matter relating to the determination of the existence of his
own financial hardship or the amount to be withdrawn by him on account thereof.
A request for a hardship withdrawal must be made in writing on a form provided
by the Committee, and must be expressed as a specific dollar amount. The
amount of a hardship withdrawal may not exceed the amount required to meet the
severe financial hardship. All hardship withdrawals shall be paid in a lump
sum in cash.
Upon a Participant's receipt of a hardship withdrawal, then
notwithstanding any other provision herein to the contrary, such Participant
shall be prohibited from making any further deferrals pursuant to Section 3.1
hereof for a period of twelve (12) months, beginning on the date on which the
withdrawal is made. The Participant may elect to resume deferrals pursuant to
Section 3.1 hereof as of the first full payroll period beginning on or after
the last day of such twelve (12) month period by executing a new participation
agreement within the time period prior to such date established by the
Committee.
4.2 Any withdrawal under Section 4.1 hereof shall be charged pro
rata to the individual investment options in which amounts credited to the
Participant's Account are deemed to be invested, pursuant to his designation
under Section 5.3 hereof.
ARTICLE V
CREDITING OF CONTRIBUTIONS AND INCOME
5.1 All amounts deferred by a Participant pursuant to the
provisions of Section 3.1 hereof shall be credited to the Account of the
Participant, together with all amounts credited to such Account on his behalf
pursuant to Sections 3.2 and 3.3 hereof.
-8-
<PAGE> 11
5.2 As of each Valuation Date, there shall be credited to each
Participant's Account the deemed income or losses attributable thereto, as
provided in Section 5.3 below, as well as any other credits to or charges
against such Account.
5.3 Unless otherwise designated by the Committee, the investment
options available under the Plan at any given time shall be the same as the
investment options available under the Profit Sharing Plan at such given time.
Each Participant, upon becoming a Participant in the Plan, may, on a form
prescribed by the Committee, designate the manner in which his Account shall be
deemed to be invested among the various investment options available for this
purpose. Such designation may be changed as of any Valuation Date, with
respect to future contributions and existing Account balances, by filing a new
election with the Committee. The Participant must designate, in such minimum
percentages or amounts as may be prescribed by the Committee, that portion of
his Account which the Participant wishes to allocate to each investment option
offered hereunder. The investment designation will continue until changed by
the timely submission of a new investment designation form, which change will
be effective as of the next succeeding Valuation Date. In the absence of any
investment designation, a Participant's Account shall be deemed to be invested
in such property as the Committee, in its sole and absolute discretion, shall
determine. The Committee may, but shall not be obligated to, invest amounts
credited to a Participant's Account in accordance with the investment
designations of such Participant; nevertheless, the Account of such Participant
shall be credited with the amount of income, gains and losses attributable
thereto, as if the amounts credited to such Account had been so invested. The
Committee shall be authorized at any time and from time to time to modify,
alter, delete or add to the investment options hereunder. In the event a
modification occurs, the Committee shall notify those Participants whom the
Committee, in its sole and absolute discretion, determines are affected by the
change, and shall give such persons such additional time as is determined
necessary by the Committee to designate the manner and percentage in which
amounts thereby affected shall be deemed to be invested. The Committee shall
not be obligated to substitute options with similar investment criteria for
existing options, nor shall it be obligated to continue any particular type of
investment options.
ARTICLE VI
BENEFITS
6.1 Upon the death of a Participant, the Beneficiary of such
Participant shall be entitled to the entire value of all amounts credited to
such Participant's Account, determined as of the Valuation Date immediately
preceding the date on which a distribution under Section 7.2 is made to the
Participant's Beneficiary. If a Participant fails to name a Beneficiary, or if
all Beneficiaries named by a Participant predecease him or die before complete
distribution of the Participant's Account, the then entire value of the
Participant's Account shall be paid to the Participant's estate.
6.2 Upon a determination of a Participant's Disability or
retirement on or after attainment of Normal Retirement Age, such Participant
shall be entitled to the entire value of all
-9-
<PAGE> 12
amounts credited to his Account, determined as of the Valuation Date
immediately preceding the date on which a distribution under Section 7.1 is
made to the Participant.
6.3 In the event of the termination of service of a Participant
for reasons other than death, Disability or retirement on or after the
attainment of Normal Retirement Age, the Participant shall be entitled to that
portion of the value of amounts credited to his Account in which he has a
vested interest, as set forth in Section 6.4 below, determined as of the
Valuation Date immediately preceding the date on which a distribution under
Section 7.1 is made to the Participant. Transfer of a Participant among the
Company and its Affiliates shall not be deemed for any purpose under the Plan
to be a termination of service of a Participant. A Participant shall be deemed
to have terminated service only upon his actual termination of service with the
Company and all Affiliates.
6.4 That portion of a terminated Participant's benefits in which
he is vested shall be:
(a) the entire value of all amounts credited to his
Account which are attributable to deferrals made by such Participant
pursuant to the provisions of Section 3.1 hereof; and
(b) a percentage of the value of all amounts credited to
his Account which are attributable to matching or profit sharing
contributions credited on his behalf pursuant to the provisions of
Sections 3.2 and 3.3 hereof, such percentage to be determined in
accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage
Completed Years of Service Payable
-------------------------- -----------
<S> <C>
Less than 3 years 00.00%
3 years but less than 4 years 33.33%
4 years but less than 5 years 66.67%
5 years or more 100.00%
</TABLE>
Any amounts credited to a Participant's Account in which he is not
vested, as provided in this Section 6.4, shall be forfeited as of the date on
which the Participant receives a distribution under Article VII. Any such
forfeited amounts shall remain the property of the Company or a Trust, if any,
and shall not be allocated among the other Participants in the Plan.
6.5 Upon a Change in Control, each Participant shall be fully
vested in the entire value of all amounts credited to his Account as of the
effective date of such Change in Control. Upon a Change in Control, the Board
may, in its sole and absolute discretion, and notwithstanding any other
provision herein to the contrary, direct that all benefits hereunder will be
paid as soon as administratively practicable after the effective date thereof;
provided, however, if the Change in Control involves a successor to the Company
and such successor decides to assume this Plan,
-10-
<PAGE> 13
then a Participant may defer any distribution to him by electing such a
deferral prior to the Change in Control on a form provided by the Committee.
6.6 In the event that an amendment to this Plan directly or
indirectly changes the vesting schedule set forth in Section 6.4 above, the
vested percentage of each Participant in his benefit accumulated to the date
when the amendment is adopted shall not be reduced as a result of the
amendment. In addition, any Participant with at least three (3) Years of
Vesting Service at that time may irrevocably elect, by written notice to the
Committee, within the election period hereinafter provided, to remain under the
pre-amendment vesting schedule with respect to all of his benefits accrued both
before and after the amendment. The election period shall begin no later than
the date on which the amendment is adopted and shall end no earlier than sixty
(60) days after the latest of: (a) the date on which the amendment is adopted,
(b) the date on which the amendment becomes effective, or (c) the date on which
the Participant is issued written notice of the amendment by the Company or the
Committee.
ARTICLE VII
PAYMENT OF BENEFITS
7.1 Payment of a Participant's benefit under the Plan shall be
made in a lump sum in cash as soon as administratively feasible following a
Participant's entitlement to a distribution under the Plan, but in no event
later than thirty (30) days following the event entitling the Participant to a
distribution.
7.2 Payment of a Participant's death benefits shall be made in a
lump sum in cash to his Beneficiary as soon as administratively feasible
following the Committee's receipt of proper notice of such Participant's death,
but in no event later than thirty (30) days following the Committee's receipt
of such notice.
7.3 Notwithstanding any other provision herein to the contrary,
upon the effective date of a Change in Control, a Participant may elect at any
time thereafter, on a form prescribed by the Committee, to accelerate the date
on which payment of his benefit hereunder would otherwise be made. Upon such
election, the amount to which such Participant is entitled shall be ninety
percent (90%) of the vested benefit otherwise payable hereunder, which shall be
distributed in one lump sum, in cash, as soon as administratively practicable
following such election. The remainder of any amounts credited to such
Participant's Account in which he is otherwise vested shall be forfeited as of
the date of such distribution. If, at the time of such election, the
Participant is employed by the Company or an Affiliate (as, for example, in the
case of a Change in Control), such Participant shall be prohibited from
participating in the Plan for a period of twelve (12) months from the date on
which he receives the accelerated distribution, and no amounts shall be
credited to his Account pursuant to Sections 3.1, 3.2 or 3.3 hereunder with
respect to such twelve (12) month period. The Participant may again elect to
participate in the Plan as of the first full payroll period beginning on or
after the last day of such twelve (12)
-11-
<PAGE> 14
month period by executing a new participation agreement within the time prior
to such date established by the Committee.
7.4 Notwithstanding the provisions of Section 7.1, the benefits
payable hereunder may be paid before they would otherwise be payable if, based
on a change in the federal or applicable state tax or revenue laws, a published
ruling or similar announcement issued by the Internal Revenue Service, a
regulation issued by the Secretary of the Treasury, a decision by a court of
competent jurisdiction involving a Participant or a Beneficiary, or a closing
agreement made under section 7121 of the Code that is approved by the Internal
Revenue Service and involves a Participant, the Committee determines that a
Participant has or will recognize income for federal or state income tax
purposes with respect to amounts that are or will be payable under the Plan
before they otherwise would be paid. The amount of any payments pursuant to
this Section 7.4 shall not exceed the lesser of: (a) the amount in the
Participant's Account or (b) the amount of taxable income with respect to which
the tax liability is assessed or determined.
ARTICLE VIII
ADMINISTRATION OF THE PLAN
8.1 The Company may establish a Trust Fund for the purpose of
retaining assets set aside by the Company pursuant to a Trust Agreement, if
any, for payment of all or a portion of the benefits payable pursuant to the
Plan. Any benefits not paid from a Trust shall be paid from the Company's
general assets. The Trust Fund, if any, shall be subject to the claims of
general creditors of the Company in the event the Company is "Insolvent," as
such term is defined in the Trust Agreement.
8.2 Any benefits payable under the Profit Sharing Plan shall be
payable solely in accordance with the terms and provisions thereof, and nothing
in this Agreement shall operate or be construed in any way to modify, amend or
affect the terms and provisions of the Profit Sharing Plan.
8.3 The Plan shall be administered by the Committee. The members
of the Committee shall not receive compensation with respect to their services
on the Committee. The members of the Committee shall serve without bond or
security for the performance of their duties hereunder unless applicable law
makes the furnishing of such bond or security mandatory or unless required by
the Company. Any member of the Committee may resign by delivering his written
resignation to the Company and to the other members of the Committee.
8.4 The Committee shall perform any act which the Plan authorizes
expressed by a vote at a meeting or in a writing signed by a majority of its
members without a meeting. The Committee may, by a writing signed by a
majority of its members, appoint any member of the Committee to act on behalf
of the Committee. Any person who is a member of the Committee shall not vote
or decide upon any matter relating solely to himself or vote in any case in
which his individual right or claim to any benefit under the Plan is
particularly involved. If, in any
-12-
<PAGE> 15
matter or case in which a person is so disqualified to act, the remaining
persons constituting the Committee cannot resolve such matter or case, the
Board will appoint a temporary substitute to exercise all the powers of the
disqualified person concerning the matter or case in which he is disqualified.
8.5 The Committee may designate in writing other persons to carry
out its responsibilities under the Plan, and may remove any person designated
to carry out its responsibilities under the Plan by notice in writing to that
person. The Committee may employ persons to render advice with regard to any
of its responsibilities. All usual and reasonable expenses of the Committee
shall be paid by the Company. The Company shall indemnify and hold harmless
each member of the Committee from and against any and all claims and expenses
(including, without limitation, attorney's fees and related costs), in
connection with the performance by such member of his duties in that capacity,
other than any of the foregoing arising in connection with the willful neglect
or willful misconduct of the person so acting.
8.6 The Committee shall establish rules, not contrary to the
provisions of the Plan, for the administration of the Plan and the transaction
of its business. The Committee shall determine the eligibility of any
individual to participate in the Plan, shall interpret the Plan in its sole and
absolute discretion, and shall determine all questions arising in the
administration, interpretation and application of the Plan. All determinations
of the Committee shall be conclusive and binding on all employees, Participants
and Beneficiaries, subject to the provisions of this Plan and applicable law.
8.7 Any action to be taken hereunder by the Company shall be taken
by resolution adopted by the Board or an executive committee thereof; provided,
however, that by resolution, the Board or an executive committee thereof may
delegate to any officer of the Company the authority to take any actions
hereunder, other than the power to amend or terminate the Plan.
ARTICLE IX
CLAIM REVIEW PROCEDURE
9.1 In the event that a Participant or Beneficiary is denied a
claim for benefits under this Plan (the "Claimant"), the Committee shall
provide to the Claimant written notice of the denial which shall set forth:
(a) the specific reason or reasons for the denial;
(b) specific references to pertinent Plan provisions on
which the Committee based its denial;
(c) a description of any additional material or
information needed for the Claimant to perfect the
claim and an explanation of why the material or
information is needed;
-13-
<PAGE> 16
(d) a statement that the Claimant may:
(i) Request a review upon written application to
the Committee;
(ii) Review pertinent Plan documents; and
(iii) Submit issues and comments in writing; and
(e) That any appeal the Claimant wishes to make of the
adverse determination must be in writing to the
Committee within sixty (60) days after receipt of the
Committee's notice of denial of benefits. The
Committee's notice must further advise the Claimant
that his failure to appeal the action to the
Committee in writing within the sixty (60) day period
will render the Committee's determination final,
binding, and conclusive.
9.2 If the Claimant should appeal to the Committee, he, or his
duly authorized representative, may submit, in writing, whatever issues and
comments he, or his duly authorized representative, feels are pertinent. The
Committee shall re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under the
circumstances. The Committee shall advise the Claimant in writing of its
decision on his appeal, the specific reasons for the decision, and the specific
Plan provisions on which the decision is based. The notice of the decision
shall be given within sixty (60) days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make the
rendering of a decision within the sixty (60) day period infeasible, but in no
event shall the Committee render a decision regarding the denial of a claim for
benefits later than 120 days after its receipt of a request for review. If an
extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the Claimant prior to the
date the extension period commences. The Committee's notice of denial of
benefits shall identify the address to which the Claimant may forward his
appeal.
9.3 The Company shall promptly reimburse each Claimant for his
legal fees reasonably incurred in successfully attempting to secure payment of
the benefit to which such Claimant is entitled hereunder.
ARTICLE X
LIMITATION OF RIGHTS
The establishment of this Plan shall not be construed as giving to any
Participant, employee of the Company or any person whomsoever, any legal,
equitable or other rights against the Company, or its officers, directors,
agents or shareholders, or as giving to any Participant or Beneficiary any
equity or other interest in the assets or business of the Company or shares of
Company stock or as giving any employee the right to be retained in the
employment of the Company. All employees of the Company and Participants shall
be subject to discharge to the
-14-
<PAGE> 17
same extent they would have been if this Plan had never been adopted. The
rights of a Participant hereunder shall be solely those of an unsecured general
creditor of the Company.
ARTICLE XI
LIMITATION OF ASSIGNMENT AND PAYMENTS TO
LEGALLY INCOMPETENT DISTRIBUTEE
11.1 No benefits which shall be payable under the Plan to any
person shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of the same shall be void. No benefit shall in any manner be
subject to the debts, contracts, liabilities, engagements or torts of any
person, nor shall it be subject to attachment or legal process for or against
any person, except to the extent required by law.
11.2 Whenever any benefit which shall be payable under the Plan is
to be paid to or for the benefit of any person who is then a minor or
determined by the Committee, on the basis of qualified medical advice, to be
incompetent, the Committee need not require the appointment of a guardian or
custodian, but shall be authorized to cause the same to be paid over to the
person having custody of the minor or incompetent, or to cause the same to be
paid to the minor or incompetent without the intervention of a guardian or
custodian, or to cause the same to be paid to a legal guardian or custodian of
the minor or incompetent, if one has been appointed, or to cause the same to be
used for the benefit of the minor or incompetent.
ARTICLE XII
AMENDMENT TO OR TERMINATION OF THE PLAN
The Company reserves the right at any time to amend or terminate the
Plan in whole or in part by resolution of the Board; provided, however, that
upon a Change in Control, any amendment or termination of the Plan shall, for a
period of two (2) years following the effective date of such Change in Control,
require the prior written consent of a majority of all Participants and
Beneficiaries hereunder, including those Participants and Beneficiaries who, at
the time of such amendment or termination, are currently entitled to a benefit
hereunder, whether or not employed at such time by the Company or an Affiliate.
No amendment shall have the effect of retroactively changing or depriving
Participants or Beneficiaries of rights already accrued under the Plan. In the
event that the Company shall change its name, the Plan shall be deemed to be
amended to reflect the name change without further action of the Company, and
the language of the Plan shall be changed accordingly. Upon termination of the
Plan, the Board may, in its sole and absolute discretion, and notwithstanding
any other provision hereunder to the contrary, direct that all benefits
hereunder will be paid as soon as administratively practicable thereafter and
in any event no later than 30 days following the termination of the Plan.
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<PAGE> 18
ARTICLE XIII
STATUS OF PARTICIPANT AS UNSECURED CREDITOR
All benefits under the Plan shall be the unsecured obligations of the
Company and, except for those assets which may be placed in a Trust Fund
established in connection with this Plan, no assets will be placed in trust or
otherwise segregated from the general assets of the Company for the payment of
obligations hereunder. To the extent that any person acquires a right to
receive payments hereunder, such right shall be no greater than the right of
any unsecured general creditor of the Company.
ARTICLE XIV
GENERAL AND MISCELLANEOUS
14.1 Severability. In the event that any provision of this Plan
shall be declared illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining provisions of this Plan but shall be
fully severable and this Plan shall be construed and enforced as if said
illegal or invalid provision had never been inserted herein.
14.2 Construction. The section headings and numbers are included
only for convenience of reference and are not to be taken as limiting or
extending the meaning of any of the terms and provisions of this Plan.
Whenever appropriate, words used in the singular shall include the plural or
the plural may be read as the singular. When used herein, the masculine gender
includes the feminine gender.
14.3 Governing Law. The validity and effect of this Plan and the
rights and obligations of all persons affected hereby shall be construed and
determined in accordance with the laws of the State of Ohio unless superseded
by federal law.
14.4 No Requirement to Fund. The Company is not required to set
aside any assets for payment of the benefits provided under this Plan; however,
it may do so as provided in the Trust Agreement, if any. A Participant shall
have no security interest in any such amounts. It is the Company's intention
that this Plan be construed as a plan which is unfunded and maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees.
14.5 Taxes. All amounts payable hereunder shall be reduced by any
and all federal, state and local taxes imposed upon the Participant or his
Beneficiary which are required to be paid or withheld by the Company or an
Affiliate.
- -----------------------
END
-16-
<PAGE> 19
CHASE BRASS & COPPER COMPANY BENEFIT RESTORATION PLAN
-17-
<PAGE> 1
EXHIBIT 10.17
LEAVITT TUBE COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE> 2
CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1. Establishment and Purpose . . . . . . . . . . . . . . . . 1
Article 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Article 3. Administration . . . . . . . . . . . . . . . . . . . . . . 3
Article 4. Eligibility and Participation . . . . . . . . . . . . . . 3
Article 5. Profit Sharing Benefits . . . . . . . . . . . . . . . . . 4
Article 6. Forfeiture of Benefits . . . . . . . . . . . . . . . . . . 5
Article 7. Change in Control . . . . . . . . . . . . . . . . . . . . 5
Article 8. Rights of Participants . . . . . . . . . . . . . . . . . . 5
Article 9. Withholding of Taxes . . . . . . . . . . . . . . . . . . . 6
Article 10. Amendment and Termination . . . . . . . . . . . . . . . . 6
Article 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE.
1.1 ESTABLISHMENT. Leavitt Tube Company, Inc., a Delaware
corporation (the "Company"), hereby establishes, effective as of August 30,
1996, a nonqualified supplemental executive retirement plan for key employees
as described herein, which shall be known as the "Leavitt Tube Company
Supplemental Executive Retirement Plan" (the "Plan").
1.2 PURPOSE. The principal purpose of the Plan is to provide
protection against reductions in Company profit sharing contributions under the
Qualified Profit Sharing Plan which are limited by operation of certain tax
laws.
ARTICLE 2. DEFINITIONS.
Whenever used herein, the following terms shall have the respective
meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" of the Company shall be deemed to have
occurred as of the first day that any one or more of the
following conditions shall have been satisfied:
(i) Any Person (other than those Persons in control of
the Company as of the Effective Date, or other than a
trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or a
corporation owned directly or indirectly by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the
Company), becomes the beneficial owner, directly or
indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities;
or
(ii) During any period of two (2) consecutive years (not
including any period prior to the execution of this
Agreement), individuals who at the beginning of such
period constitute the Board (and any new Director,
whose election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of
the Directors then still in office who either were
Directors at the beginning of the period or whose
election or nomination for election was so approved),
cease for any reason to constitute a majority
thereof; or
(iii) The stockholders of the Company approve: (a) a plan
of complete liquidation of the Company; or (b) an
agreement for the sale or disposition of all or
substantially all the Company's assets; or (c) a
merger,
-1-
<PAGE> 4
consolidation, or reorganization of the Company with
or involving any other corporation, other than a
merger, consolidation, or reorganization that would
result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity), at least fifty percent (50%) of
the combined voting power of the voting securities of
the Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or
reorganization.
However, in no event shall a Change in Control be deemed to
have occurred, with respect to the executive, if the executive
is part of a purchasing group which consummates the
Change-in-Control transaction. The executive shall be deemed
"part of a purchasing group" for purposes of the preceding
sentence if the executive is an equity participant in the
purchasing company or group (except for (i) passive ownership
of less than three percent (3%) of the stock of the purchasing
company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not
significant, as determined prior to the Change in Control by a
majority of the nonemployee continuing Directors).
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee, or any other
committee appointed by the Board to administer the Plan, or if
no such committee is appointed, the Board.
(e) "Company" means Leavitt Tube Company, Inc., a Delaware
corporation.
(f) "Compensation" shall have the same meaning as defined in the
Qualified Profit Sharing Plan.
(g) "Disability" shall have the same meaning as defined in the
Qualified Profit Sharing Plan.
(h) "Normal Retirement Age" means the date of a Participant's 65th
birthday.
(i) "Participant" means an individual whose Qualified Profit
Sharing Plan contributions are affected by Sections 415 or
401(a)(17) of the Code, or other individuals selected by the
Committee for participation in the Plan.
(j) "Plan" means the Leavitt Tube Company Supplemental Executive
Retirement Plan as set forth in this document.
(k) "Qualified Profit Sharing Plan" means the tax qualified
defined contribution profit sharing plan known as the Leavitt
Tube Company Salaried Employees Profit Sharing and 401(k)
Plan.
-2-
<PAGE> 5
(l) "Retirement" means a voluntary termination of a Participant's
employment at any time following Normal Retirement Age.
(m) "Top-Hat Group" means those executives who comprise a select
group of management or highly compensated employees.
(n) "Year" or "Plan Year" means the calendar year.
ARTICLE 3. ADMINISTRATION.
3.1 AUTHORITY OF THE COMMITTEE. The Plan shall be administered by
the Committee. However, the Committee may delegate any and all of its
authority granted under the Plan to any executive or executives of the Company.
The Committee shall have the same powers, rights, duties, and
obligations as are extended to the Committee in the Qualified Profit Sharing
Plan, including but not limited to, the right to establish rules for the
administration of the Plan.
3.2 INDEMNIFICATION. The members of the Committee and the Board,
and the agents, officers, directors, and employees of the Company and its
affiliates shall be indemnified and held harmless by the Company from and
against any and all claims, loss, damages, expenses (including reasonable
counsel fees) and liability to which any such person may be subjected by reason
of any act done or omitted to be done with respect to the Plan, except where
the same is finally adjudicated to be due to the wilful misconduct of such
person.
3.3 DECISIONS BINDING. The Committee shall have the exclusive
right and the maximum discretion permitted by law to construe, interpret, and
apply the provisions of the Plan. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board and the Committee shall be final, conclusive, and
binding on all persons, including the Company, its stockholders, employees,
Participants, and their estates and beneficiaries.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION.
4.1 ELIGIBILITY. Persons eligible to participate in the Plan
shall include all individuals in the Top-Hat Group whose Qualified Profit
Sharing Plan contributions are limited by Code Sections 415 or 401(a)(17). In
addition, the Plan may include key executives of the Company, as selected by
the Committee, at its sole discretion. It is the intent of the Company to
extend eligibility only to those executives who comprise a select group of
management or highly compensated employees, such that the Plan shall qualify
for treatment as a "Top-Hat" plan under the Employee Retirement Income Security
Act of 1974, as amended.
In the event a Participant no longer meets the requirements for
participation in the Plan, such Participant shall become an inactive
Participant, retaining all benefits accrued under the Plan, except the right to
any future participation or benefit accruals, until such time that the
Participant again becomes an active Participant.
-3-
<PAGE> 6
4.2 NOTIFICATION OF ELIGIBILITY. An employee shall, within thirty
(30) calendar days of becoming eligible to participate in the Plan, be notified
by the Company of such eligibility.
ARTICLE 5. PROFIT SHARING BENEFITS.
5.1 COMPANY CONTRIBUTIONS. For each Year in which an employee is
a Participant, the Company shall credit to each Participant's account in the
Plan an amount equal to (a) minus (b) where:
(a) Is the amount which would have been credited to the
Participant's account under the Qualified Profit Sharing Plan
from employer profit sharing contributions and forfeitures for
such Year had the amounts not been limited by Section 415
and/or Section 401(a)(17) of the Code; and
(b) Is the amount which actually is credited to the Participant's
account under the Qualified Profit Sharing Plan from employer
profit sharing contributions and forfeitures for such Year.
5.2 DISCRETIONARY CONTRIBUTIONS. For each Plan Year, the
Committee also shall have the ability to make discretionary contributions to
the Plan, on behalf of each Participant actively employed by the Company at the
end of such Plan Year; however, the Company is not required to make a
contribution in any Plan Year. The amount of any such discretionary
contribution shall be at the complete discretion of the Committee and may vary
for each Participant.
5.3 VESTING OF COMPANY CONTRIBUTIONS. Each Participant shall vest
in his or her Company contributions described under Articles 5.1 and 5.2 herein
according to the following schedule:
<TABLE>
<CAPTION>
====================================================================
NUMBER OF YEARS
OF CREDITED SERVICE CUMULATIVE
UNDER THE QUALIFIED PERCENTAGE OF VESTED
PROFIT SHARING PLAN COMPANY CONTRIBUTIONS
- --------------------------------------------------------------------
<S> <C>
1 20%
2 40%
3 60%
4 80%
5 100%
- --------------------------------------------------------------------
</TABLE>
5.4 FORM AND TIMING OF BENEFIT PAYMENTS. Vested benefit payments
under this Plan shall be paid in cash in a single lump sum and shall be paid
out as soon as practicable following termination of employment.
-4-
<PAGE> 7
5.5 EARNINGS ON COMPANY CONTRIBUTIONS. Company contributions
under the Plan shall be credited with earnings, compounded on an annual basis,
at a rate determined by the Committee to be equal to the rate of return on
those securities held during the corresponding period by the Qualified Profit
Sharing Plan "Balanced Fund."
5.6 DISTRIBUTION UPON DEATH OR DISABILITY. In the event of death
or Disability, all benefits payable under this Plan shall vest in full and be
paid to Participants or beneficiaries in the manner set forth in Article 5.4
herein.
5.7 BENEFICIARY. The beneficiary designated by each Participant
under the Qualified Profit Sharing Plan shall be the beneficiary of the
Participant's benefits under this Plan.
ARTICLE 6. FORFEITURE OF BENEFITS.
6.1 TERMINATION FOR CAUSE. In the event that a Participant's
employment is terminated by the Company as a result of the Participant's being
convicted of a felony, or because of the Participant's repeated occurrences of
grossly inadequate performance, as determined by the Board in its sole
discretion, as of the date of such determination, the Participant shall forfeit
all rights and entitlement to benefit payments from this Plan.
6.2 OTHER TERMINATIONS. In the event of a Participant's
termination of employment for any reason other than death, Disability, or for
"Cause" (as provided in Article 6.1 herein), the vested portion of the
Participant's benefit shall be paid out in accordance with Article 5.4 herein.
All nonvested amounts shall be forfeited to the Company unless the Committee,
at its sole discretion, should decide otherwise.
ARTICLE 7. CHANGE IN CONTROL.
Upon the occurrence of a Change in Control, all benefits payable under
the Plan, including nonvested contributions, shall vest in full. If an
employee is terminated subsequent to a change in control, all amounts will be
paid in full in accordance with Article 5.4, except for benefits impacted by
Article 6.1.
ARTICLE 8. RIGHTS OF PARTICIPANTS.
8.1 CONTRACTUAL OBLIGATION. The Plan shall create a contractual
obligation on the part of the Company to provide the benefits specified in this
Plan to Participants.
8.2 UNSECURED INTEREST. All benefits paid under the Plan shall be
paid in cash from the general assets of the Company. Such amounts shall be
reflected on the accounting records of the Company but shall not be construed
to create or require the creation of a trust, custodial or escrow account, nor
create a trust or fiduciary relationship of any kind between the Company and a
Participant or any other person. No Participant or party claiming an interest
in contributions made on behalf of a Participant shall have any interest
whatsoever in any specific asset of the Company. To the extent that any party
acquires a right to receive payments under the Plan, such right shall be
equivalent to that of an unsecured general creditor of the Company.
-5-
<PAGE> 8
The Company may establish one or more trusts, with such trustee as the
Committee may approve, for the purpose of providing for the payment of deferred
amounts and/or contributions. Such trust or trusts may be irrevocable, but the
assets thereof shall be subject to the claims of the Company's general
creditors. To the extent any contributions under the Plan are actually paid
from any such trust, the Company shall have no further obligation with respect
thereof, but to the extent not so paid, such deferred amounts and contributions
shall remain the obligation of, and shall be paid by, the Company.
8.3 EMPLOYMENT. Nothing in the Plan shall interfere with nor
limit in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Company.
8.4 PARTICIPATION. No employee whose participation is at the
discretion of the Committee as set forth in Article 2(i) and the second
sentence of Article 4.1 of the Plan shall have the right to be selected as a
Participant, or, having been so selected for any given Year, to be selected
again for any other Year.
ARTICLE 9. WITHHOLDING OF TAXES.
The Company shall have the right to require Participants to remit to
the Company an amount sufficient to satisfy Federal, state, and local
withholding tax requirements, or to deduct from all payments made pursuant to
the Plan amounts sufficient to satisfy withholding tax requirements.
ARTICLE 10. AMENDMENT AND TERMINATION.
The Company hereby reserves the right to amend, modify, or terminate
the Plan at any time by action of the Committee. Except as described below in
this Article 10, no such amendment or termination shall in any material manner
adversely affect any Participant's rights to contributions previously credited
to the Participant, or interest earned thereon, without the consent of the
Participant.
The Plan is intended to comprise both an ERISA excess benefit plan (to
the extent it provides protection against reductions pursuant to Code Section
415) and an unfunded arrangement of deferred compensation maintained primarily
for the purpose of providing additional retirement benefits for a select group
of "management or highly compensated employees" within the meaning of Sections
201, 301, and 401 of ERISA, and therefore to be exempt from the provisions of
Parts 2, 3, and 4 of Title I of ERISA. Accordingly, the Board may terminate
the Plan and commence termination payout for all or certain Participants, or
remove certain employees as Participants, if it is determined by the United
States Department of Labor or a court of competent jurisdiction that the Plan
constitutes an employee pension benefit plan within the meaning of Section 3(2)
of ERISA which is not so exempt. If payout is commenced pursuant to the
operation of this Article 10, the payment of such amounts shall be made in the
manner described under Article 5.6 herein.
-6-
<PAGE> 9
ARTICLE 11. MISCELLANEOUS.
11.1 NOTICE. Any notice or filing required or permitted to be
given to the Company under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail to the Treasurer of the
Company. Notice to the Treasurer of the Company, if mailed, shall be addressed
to the principal executive offices of the Company. Notice mailed to a
Participant shall be at such address as is given in the records of the Company.
Notices shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification.
11.2 NONTRANSFERABILITY. Participants' rights to contributions and
interest earned thereon under the Plan may not be sold, transferred, assigned,
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. In no event shall the Company make any payment under
the Plan to any assignee or creditor of a Participant.
11.3 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
11.4 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular, and the singular shall include the plural.
11.5 COSTS OF THE PLAN. All costs of implementing and
administering the Plan shall be borne by the Company.
11.6 APPLICABLE LAW. The Plan shall be governed and construed in
accordance with the applicable provisions of Part I, Title I of ERISA and the
laws of the State of Illinois, other than its laws with respect to choice and
conflicts of law.
11.7 SUCCESSORS. All obligations of the Company under the Plan
shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.
11.8 EFFECT ON OTHER BENEFIT PLANS. Amounts credited or paid under
this Plan shall not be considered to be Compensation for the purposes of the
Qualified Profit Sharing Plan. The treatment of such amounts under other
employee benefit plans shall be determined pursuant to the provisions of such
plans.
-7-
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF CHASE BRASS INDUSTRIES, INC.
AS OF MARCH 27, 1997
Chase Brass & Copper Company, Inc.
Chase Brass & Copper Company Foreign Sales Corporation
(a wholly owned subsidiary of Chase Brass & Copper Company, Inc.)
Leavitt Tube Company, Inc.
Holco Corporation
(a wholly owned subsidiary of Leavitt Tube Company, Inc.)
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Chase Brass Industries, Inc. on Form S-8 (File No. 33-87278) of our report
dated February 3, 1997, on our audits of the consolidated financial statements
and financial statement schedules of Chase Brass Industries, Inc. as of
December 31, 1996 and 1995, and for the years ended December 31, 1996, 1995 and
1994, which report is included in the Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Detroit, Michigan
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,763
<SECURITIES> 0
<RECEIVABLES> 34,514
<ALLOWANCES> 1,236
<INVENTORY> 52,050
<CURRENT-ASSETS> 100,355
<PP&E> 97,628
<DEPRECIATION> 0
<TOTAL-ASSETS> 204,751
<CURRENT-LIABILITIES> 51,706
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 74,232
<TOTAL-LIABILITY-AND-EQUITY> 204,751
<SALES> 366,991
<TOTAL-REVENUES> 366,991
<CGS> 311,345
<TOTAL-COSTS> 311,345
<OTHER-EXPENSES> 18,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,612
<INCOME-PRETAX> 34,203
<INCOME-TAX> 13,564
<INCOME-CONTINUING> 20,639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,639
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 0
</TABLE>