-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I4htJVd1S226f38rzFePrO1f9AgOsGr/K9zlz1E9Duu9fM2OJL1H0C9N4bs/G6zl oXsayiq/51daoApVkiIkEw== 0000906275-96-000012.txt : 19960911 0000906275-96-000012.hdr.sgml : 19960911 ACCESSION NUMBER: 0000906275-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHATWINS GROUP INC CENTRAL INDEX KEY: 0000906275 STANDARD INDUSTRIAL CLASSIFICATION: 3448 IRS NUMBER: 742156829 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-63274 FILM NUMBER: 96607917 BUSINESS ADDRESS: STREET 1: 300 WEYMAN PLAZA STREET 2: STE 340 CITY: PITTSBURGH STATE: PA ZIP: 15236 BUSINESS PHONE: 4128855501 MAIL ADDRESS: STREET 1: 300 WEYMAN PLAZA STREET 2: SUITE 340 CITY: PITTSBURGH STATE: PA ZIP: 15236 10-Q 1 06/30/96 FORM 10-Q 1======================================================================= UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - - ----- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 ------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - - ----- EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission File Number 33-63274 -------- CHATWINS GROUP, INC. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) DELAWARE 74-2156829 - - ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 300 WEYMAN PLAZA, SUITE 340 PITTSBURGH, PENNSYLVANIA 15236 ------------------------------------------------------------ (Address of principal executive offices, including zip code) (412) 885-5501 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 ----- ----- At July 31, 1996, 242,887 shares of common stock, par value $.01 per share, were outstanding. Exhibit index is on page 18. Page 1 of 142 pages. ============================================================================== 2 CHATWINS GROUP, INC. INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheet at June 30, 1996 and December 31, 1995 3 Condensed Consolidated Statement of Income for the three and six months ended June 30, 1996 and 1995 4 Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 16 (b) Reports on Form 8-K 16 SIGNATURES 17 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements
CHATWINS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 AND DECEMBER 31, 1995 (in thousands) At June 30, At December 31, 1996 1995 ----------- -------------- (unaudited) ASSETS: Cash and cash equivalents $ 377 $ 357 Receivables, net 28,941 29,958 Inventories, net (note 2) 20,093 19,487 Other current assets 3,683 4,556 -------- -------- Total current assets 53,094 54,358 Property, plant and equipment, net 27,764 26,385 Amounts due from related parties - 3,523 Investments, net 13,485 13,209 Goodwill, net 4,989 5,015 Other assets, net 5,004 4,846 -------- -------- Total assets $104,336 $107,336 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current maturities of debt $ 128 $ 148 Trade payables 13,135 16,175 Amount due to related parties 1,331 2,924 Other current liabilities 10,483 9,179 -------- -------- Total current liabilities 25,077 28,426 Revolving Credit Facility 22,000 23,147 Senior notes due 2003, net 49,864 49,852 Other long-term debt 870 1,018 Other liabilities 4,743 4,713 -------- -------- Total liabilities 102,554 107,156 Commitments and contingent liabilities (note 5) - - Minority interests 1,124 - Redeemable preferred stock 7,342 7,114 Warrant value 210 210 Stockholders' equity (note 3) (6,894) (7,144) -------- -------- Total liabilities and stockholders' equity $104,336 $107,336 ======== ======== See accompanying notes to condensed consolidated financial statements.
4
CHATWINS GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (in thousands, except share and per share information)(unaudited) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 1996 1995 1996 1995 ------- ------- ------- ------- Net sales $38,920 $50,632 $77,966 $94,248 Cost of sales 30,658 39,985 62,038 74,983 ------- ------- ------- ------- Gross profit 8,262 10,647 15,928 19,265 Selling, general & administrative 5,064 5,504 10,228 10,761 Other expense, net 295 274 575 682 ------- ------- ------- ------- Operating profit 2,903 4,869 5,125 7,822 Interest expense, net 2,351 2,441 4,758 4,815 ------- ------- ------- ------- Income before income taxes and equity in income of affiliate 552 2,428 367 3,007 Provision for income taxes 169 494 65 692 ------- ------- ------- ------- Income before equity in income of affiliate 383 1,934 302 2,315 Equity in income (loss) from continuing operations of affiliate 23 - (200) - Equity in income from discontinued operations of affiliate 428 - 428 - ------- ------- ------- ------- Net income $ 834 $ 1,934 $ 530 $ 2,315 ======= ======= ======= ======= Earnings applicable to common stock $ 720 $ 1,820 $ 302 $ 2,087 ======= ======= ======= ======= Earnings (loss) per common share: Before equity in income of affiliate $ 0.92 $ 6.21 $ 0.25 $ 7.13 Continuing operations of affiliate 0.08 - (0.68) - Discontinued operations of affiliate 1.46 - 1.46 - ------- ------- ------- ------- Earnings per common share $ 2.46 $ 6.21 $ 1.03 $ 7.13 ======= ======= ======= ======= Average equivalent common shares outstanding 292,887 292,887 292,887 292,887 ======= ======= ======= ======= See accompanying notes to condensed consolidated financial statements. /TABLE 5
CHATWINS GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (in thousands)(unaudited) Six Months Ended June 30, 1996 1995 ------- ------- Cash flow from operating activities: Net income $ 530 $ 2,315 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,627 1,737 Amortization 500 543 Equity in net income of affiliate (274) - Changes in assets and liabilities, net of the purchase of a business: Decrease (increase) in receivables 1,017 (5,637) Increase in inventories (606) (2,515) Increase (decrease) in trade payables (3,040) 4,654 Net change in other assets, liabilities and minority interests 2,722 981 ------- ------- Cash provided by operating activities 2,476 2,078 ------- ------- Cash flow from investing activities: Receipts from related parties 3,664 - Investment in joint venture (150) - Equity investment - (6,616) Capital expenditures (3,010) (2,964) ------- ------- Cash provided by (used in) investing activities 504 (9,580) ------- ------- Cash flow from financing activities: Issuance of debt 80 - Repayments of debt (48) (1,738) Repayments to related parties (1,793) - Net borrowings (repayments) under revolver (1,147) 9,784 ------- ------- Cash provided by (used in) financing activities (2,908) 8,046 ------- ------- Effect of exchange rate changes on cash (52) - ------- ------- Net increase in cash and cash equivalents 20 544 Cash and cash equivalents, beginning of year 357 445 ------- ------- Cash and cash equivalents, end of period $ 377 $ 989 ======= ======= Noncash investing and financing activities: Equity investment and related increases in note payable and other long-term debt $ - $ 6,000 ======= ======= See accompanying notes to condensed consolidated financial statements. /TABLE 6 CHATWINS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 NOTE 1: BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair statement of the results of operations have been included. The results of operations for the three and six month periods ended June 30, 1996 are not necessarily indicative of the results of operations for the full year. When reading the financial information contained in this Quarterly Report, reference should be made to the financial statements, schedules and notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. NOTE 2: INVENTORIES Inventories are comprised of the following (in thousands): At June 30, At December 31, 1996 1995* ----------- -------------- (unaudited) Raw materials $ 9,541 $10,918 Work-in-process 7,575 6,876 Finished goods 3,910 2,608 ------- ------- Total inventories 21,026 20,402 Less: LIFO reserves (933) (915) ------- ------- Inventories, net $20,093 $19,487 ======= ======= * Certain amounts have been reclassified for comparative purposes.
7 NOTE 3: STOCKHOLDERS' EQUITY The following represents a reconciliation of the change in stockholders' equity for the six month period ended June 30, 1996 (in thousands): Par Capital Accum- Value in ulated of Trea- Excess Notes Accum- Trans- Common sury of Par Receiv- ulated lation Stock Stock Value able Deficit Adjmt. Total ------ ----- ------- ------- -------- ------ -------- At January 1, 1996 $ 3 $(500) $1,664 $(1,001) $ (6,891) $(419) $ (7,144) Activity (unaudited): Net income - - - - 530 - 530 Preferred stock accretions - - - - (228) - (228) Translation adjustment - - - - - (52) (52) --- ----- ------ ------- -------- ----- -------- At June 30, 1996 $ 3 $(500) $1,664 $(1,001) $ (6,589) $(471) $ (6,894) === ===== ====== ======= ======== ===== ========
Earnings per share amounts are based on the weighted average equivalent number of shares of common stock outstanding during the period. In calculating earnings (loss) per common share, income before income taxes has been adjusted for dividends earned on preferred stock for the three and six month periods ended June 30, 1996 and 1995 of $114,000 and $228,000, respectively, in each. NOTE 4: RELATED PARTY TRANSACTIONS The Company has a consulting agreement with Stanwich Partners, Inc. under which $75,000 and $150,000 were recorded as expense in each of the three and six month periods ended June 30, 1996 and 1995, respectively. In May 1996, Reunion Industries, Inc. (Reunion) paid the Company $3.7 million in cash in final repayment, including interest, of the Oneida Advances (as defined herein). The Company holds 38% of the outstanding common stock of Reunion. Charles E. Bradley, Sr. (Mr. Bradley), Chairman of the Board of the Company, is Reunion's President and Chief Executive Officer. Contemporaneously with the $3.7 million cash payment received from Reunion, the Company paid $1.7 million to Mr. Bradley in partial repayment, including interest, of the Parkdale Note (as defined herein). On January 6 and June 6, 1996, the Company made principal repayments of $50,000 each, plus interest, of the Gesterkamp Note (as defined herein). The Gesterkamp Note is owned by Mr. Franklin Myers, a director of Reunion. NOTE 5: COMMITMENTS AND CONTINGENT LIABILITIES The Company is involved in various litigation matters in the ordinary course of business. In the opinion of management, settlement of these matters and other contingent matters will have no material effect on the Company's financial position. The Company has no adverse commitments at June 30, 1996. 8 PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General Through September 14, 1995, the Company's organizational structure included six divisions that design, manufacture and market metal products, a wholly-owned subsidiary that manufactured high volume, precision plastic products and provided engineered plastic services, an oil and gas division and an equity investment in Reunion Industries, Inc. (Reunion), formerly Reunion Resources Company. In 1995, the combined operations of the six metal manufacturing divisions accounted for approximately 85% of the Company's net sales and approximately 91% of the Company's operating income before corporate office expenses. As discussed below, several significant changes to the Company's structure transpired in 1995. On June 20, 1995, the Company acquired 1,450,000 shares (Reunion Common Stock), or approximately 38%, of the issued and outstanding shares of common stock of Reunion from Parkdale Holdings Corporation N.V. (Parkdale), and purchased 75,000 warrants to purchase shares of Reunion common stock from P. Dean Gesterkamp (Gesterkamp Warrants) (such transactions collectively referred to herein as the "Chatwins Acquisition"). The aggregate purchase price consisted of $5.8 million paid in cash and a $5.8 million promissory note (Parkdale Note) issued to Parkdale, and $0.3 million paid in cash and a $0.2 million two-year promissory note issued to P. Dean Gesterkamp (Gesterkamp Note). Subsequent to its acquisition of Oneida on September 14, 1995 (see below), Reunion is primarily engaged in the manufacture of high volume, precision plastics products and providing engineered plastics services. Additionally, with the merger of Oneida and Rostone, Inc. (Rostone) (see below), Reunion also compounds and molds thermoset polyester resins. Reunion also has real estate development and wine grape agricultural operations in Napa County, California. Reunion was also engaged in producing and selling crude oil and natural gas in the United States until May 24, 1996, when Reunion sold substantially all of its oil and gas assets to a Houston-based corporation for approximately $8.0 million in cash and a $2.2 million note. Of the $8.0 million in cash proceeds, Reunion used approximately $5.1 million to pay in full related-party indebtedness, which included $1.4 million owed to Charles E. Bradley, Sr. (Mr. Bradley), Reuniuon's President and Chief Executive Officer and Chairman of the Board of the Company, and $3.7 million owed to the Company as a result of the acquisition of Oneida by Reunion. The Company's investment in Reunion is being accounted for under the equity method of accounting. The Company's proportional share of Reunion's operating results is included in the accompanying condensed consolidated statement of income for the three and six month periods ended June 30, 1996 as equity in income (loss) of affiliate. See "Results of Operations" and "Liquidity and Capital Resources." On September 14, 1995 (Sale Date), the Company, through its wholly-owned subsidiary, Chatwins Holdings, Inc. (CHI), sold its holdings of all of the issued and outstanding shares of common stock and preferred stock of Oneida Molded Plastics Corp. (Oneida) to Reunion, 38% of the common stock of which is owned by the Company. Oneida was a wholly-owned subsidiary of the Company which manufactured high volume, precision plastic products and provided engineered plastic services. The total purchase price received by the Company was $3.1 million in cash. Through August 31, 1995, the Company had made advances to Oneida totalling $4.9 million (Oneida Advances). The liabilities of Oneida upon its sale to Reunion included the Oneida Advances. In November 1995, the Company 9 received $1.6 million in cash from Reunion in partial repayment, including interest from September 1, 1995, of the Oneida Advances. In May 1996, Reunion paid the Company $3.7 million in cash in final repayment, including interest from November 1995, of the Oneida Advances. See below and "Liquidity and Capital Resources." The Company owns 49% of a holding company, CGI Investment Corporation (CGII), which owned 100% of the outstanding preferred stock and approximately 94% of the fully diluted common stock of Rostone. On February 2, 1996, CGII acquired the minority interest in Rostone's common stock it did not already own. Rostone compounds and molds thermoplastic polyester resin (bulk and sheet molding compound) primarily for the electrical distribution market and business machine market. On December 22, 1995, Rostone and Oneida entered into a merger agreement (Merger Agreement) whereby Rostone was subsequently merged into Oneida, which is owned by Reunion, and, as the surviving corporation, Oneida's name was changed to Oneida Rostone Corp. (ORC). In the merger, ORC purchased all of the issued and outstanding preferred and common stock of Rostone, including the preferred and common stock of Rostone held by CGII. See "Liquidity and Capital Resources." In December 1995, the Company entered into a joint venture agreement with China Metallurgical Import & Export Shanghai Company (CMIESC) and Wanggang Township Economic Development Corporation (Wanggang) to form the Shanghai Klemp Metal Products Co., Ltd. (Shanghai Klemp). The joint venture will provide metal grating to the expanding construction industries in China and nearby countries. See "Liquidity and Capital Resources." Results of Operations Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 Net sales for the first half of 1996 totalled $78.0 million, compared to $94.2 million for the first half of 1995. Sales for the first half of 1995 included $18.3 million from Oneida, which was sold in September 1995. Excluding Oneida's sales, sales for the first half of 1996 increased $2.0 million, or almost 3%, over the first half of 1995. Sales increased at all significant divisions of the Company except for Auto-Lok, whose sales were down approximately $1.3 million from 1995's first half. By division, sales increased $0.2 million at Alliance, $1.3 million at Hanna, $0.5 million at CPI and $1.5 million at Klemp. The increase in sales at Alliance was primarily due to a backlog reduction in the first quarter of 1996 while the increases at Hanna and CPI were due to increased marketing efforts resulting in higher volume. The increase in sales at Klemp included $1.1 million at the Company's Klemp de Mexico subsidiary due to an improving Mexican economy. The decrease in sales at Auto-Lok is primarily due to a softening in the markets for Auto- Lok's products. Gross profit for the first half of 1996 was $15.9 million, compared to $19.3 million for the first half of 1995. Gross profit for the first half of 1995 included $3.2 million from Oneida. Excluding Oneida's first half 1995 gross profit, first half 1996 gross profit decreased $0.2 million, or 1%. Gross profit margin decreased to 20.4% in the first half of 1996, compared to 21.2% in the comparable 1995 period, excluding the gross profit and sales of Oneida. Gross profit and gross profit margin in the first half of 1996 compared to the first half of 1995 improved at the CPI and Klemp divisions and the Company's Klemp de Mexico subsidiary, but declined at the remaining divisions of the Company. The improvements at CPI were primarily due to higher volume and cost reductions due to labor productivity improvements while the improvements at Klemp and Klemp de Mexico were primarily due to higher 10 volumes. The declines at Auto-Lok were primarily due to lower volume as a result of a softening in the markets for Auto-Lok's products. The declines at Alliance were primarily due to a decline in second quarter volume as well as a change in product mix from higher margin fabrication sales to lower margin engineered products caused by a change in customer demand. The declines at Steelcraft were primarily due to unfavorable labor and overhead variances. Hanna's gross profit margin decreased to 19.6% in the first half of 1996 from 24.3% in the first half of 1995. Hanna's gross profit margin was affected by competitive pressures in the hydraulic cylinder industry which resulted in sales price compression and a change in product mix to lower margin specialty cylinders caused by a change in customer demand, in addition to manufacturing inefficiencies caused by the harsh weather conditions in the midwest during the first quarter of 1996. Selling, general and administrative (SGA) expenses for the first half of 1996 were $10.2 million, compared to $10.8 million for the first half of 1995. SGA expenses for the first half of 1995 included $1.7 million from Oneida. Excluding Oneida's SGA expenses, first half 1996 SGA expenses increased $1.1 million compared to first half 1995. SGA expenses as a percentage of sales, excluding the SGA expenses and sales of Oneida, increased to 13% in the first half of 1996 compared to 12% in the 1995 first half. The increase in SGA expenses primarily relates to additional expenses incurred in connection with increased marketing and sales efforts, both domestically and internationally. Other expense for the first half of 1996 was $0.6 million, compared to $0.7 million for the first half of 1995, a net decrease of $0.1 million. The primary reason for this decrease was the devaluation of the Mexican Peso during 1995, which resulted in foreign currency transaction losses at the Company's Mexican subsidiary in the first half of 1995 which did not recur in the first half of 1996. Interest expense, net, for the first half of 1996 was $4.8 million, which was approximately equal to interest expense, net, for the first half of 1995. Interest expense for the first half of 1995 included $0.4 million related to Oneida. Excluding Oneida's interest expense, first half 1996 interest expense increased $0.4 million over first half 1995. The increase is primarily due to a higher level of debt during the first half of 1996 as a result of the issuance of the Parkdale and Gesterkamp Notes in June 1995 to fund a portion of the purchase price of the Reunion Common Stock and Gesterkamp Warrants, and a higher level of average borrowings under the Company's revolving credit facility (Revolving Credit Facility) with Congress Financial Corporation (Congress) to fund both the remaining portion of the purchase price of the Reunion Common Stock and Gesterkamp Warrants and an increase in the average level of net working capital in the first half of 1996 compared to the first half of 1995. There was a tax provision of less than $0.1 million in the first half of 1996, compared to a tax provision of $0.7 million in the first half of 1995. The tax provisions were attributable to the pre-tax incomes in each period. The equity in income (loss) from continuing operations of affiliate in the first half of 1996 relates to the Company's June 1995 investment in Reunion and represents the Company's proportionate share of Reunion's results from continuing operations for its first half of 1996. There was no equity income or loss in the first half of 1995. The equity in income (loss) from discontinued operations of affiliate in the first half of 1996 relates to the Company's June 1995 investment in Reunion and represents the Company's proportionate share of Reunion's results from discontinued operations for its first half of 1996. 11 Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995 Net sales for the second quarter of 1996 totalled $38.9 million, compared to $50.6 million for the second quarter of 1995. Sales for the second quarter of 1995 included $9.2 million from Oneida, which was sold in September 1995. Excluding Oneida's sales, sales for the second quarter of 1996 decreased $2.5 million, or 6%, compared to the second quarter of 1995. Sales decreased $2.2 million at Alliance, $1.5 million at Auto-Lok, and $0.1 million at Steelcraft, while increasing $1.2 million at Klemp and $0.3 million at Hanna. Sales decreased slightly at CPI. The decrease in sales at Alliance was primarily due to a decrease in the level of orders beginning in late 1995 and continuing into 1996 as compared to the same periods in prior years while the decrease in sales at Auto-Lok was due to a softening in the markets for Auto-Lok's products. The increase at Hanna was due to increased marketing efforts resulting in higher volume. The increase in sales at Klemp was primarily due to an increase in sales at the Company's Klemp de Mexico subsidiary due to an improving Mexican economy. Gross profit for the second quarter of 1996 was $8.3 million, compared to $10.6 million for the second quarter of 1995. Gross profit for the second quarter of 1995 included $1.7 million from Oneida. Excluding Oneida's second quarter 1995 gross profit, second quarter 1996 gross profit decreased $0.6 million, or almost 8%. Gross profit margin decreased to 21.2% in the second quarter of 1996, compared to 21.6% in the comparable 1995 period, excluding the gross profit and sales of Oneida. Gross profit and gross profit margin in the second quarter of 1996 compared to the second quarter of 1995 improved at the CPI and Klemp divisions, but declined at the remaining divisions of the Company. The improvements at CPI were primarily due to cost reductions from labor productivity improvements while the improvements at Klemp were primarily due to higher volume. The declines at Auto-Lok were primarily due to lower volume as a result of a softening in the markets for Auto-Lok's products. The declines at Alliance were primarily due to a decline in second quarter volume as well as a change in product mix from higher margin fabrication sales to lower margin engineered products caused by a change in customer demand. The declines at Steelcraft were primarily due to unfavorable labor and overhead variances. Hanna's gross profit margin decreased to 21.6% in the second quarter of 1996 from 22.9% in the second quarter of 1995. Hanna's gross profit margin was affected by competitive pressures in the hydraulic cylinder industry which resulted in sales price compression and a change in product mix to lower margin specialty cylinders caused by a change in customer demand. SGA expenses for the second quarter of 1996 were $5.1 million, compared to $5.5 million for the second quarter of 1995. SGA expenses for the second quarter of 1995 included $0.8 million from Oneida. Excluding Oneida's SGA expenses, second quarter 1996 SGA expenses increased $0.4 million compared to second quarter 1995. SGA expenses as a percentage of sales, excluding the SGA expenses and sales of Oneida, increased to 13% in the second quarter of 1996 compared to 11% in the second quarter of 1995. The increase in SGA expenses primarily relates to additional expenses incurred in connection with increased marketing and sales efforts, both domestically and internationally. Other expense for the second quarters of 1996 and 1995 were each $0.3 million. Interest expense, net, for the second quarter of 1996 was almost $2.4 million, compared to over $2.4 million for the second quarter of 1995. Interest expense for the second quarter of 1995 included $0.2 million related to Oneida. Excluding Oneida's interest expense, second quarter 1996 interest expense increased $0.1 million over second quarter 1995. The increase is primarily due to a higher level of debt during the second quarter of 1996 as a result of the issuance of the Parkdale and Gesterkamp Notes in June 1995 to 12 fund a portion of the purchase price of the Reunion Common Stock and Gesterkamp Warrants, and a higher level of average borrowings under the Revolving Credit Facility to fund both the remaining portion of the purchase price of the Reunion Common Stock and Gesterkamp Warrants and an increase in the average level of net working capital in the second quarter of 1996 compared to the second quarter of 1995. There was a tax provision of $0.2 million in the second quarter of 1996, compared to a tax provision of $0.5 million in the second quarter of 1995. The tax provisions were attributable to the pre-tax incomes in each period. The equity in income (loss) from continuing operations of affiliate in the second quarter of 1996 relates to the Company's June 1995 investment in Reunion and represents the Company's proportionate share of Reunion's results from continuing operations for its second quarter of 1996. There was no equity income or loss in the second quarter of 1995. The equity in income (loss) from discontinued operations of affiliate in the second quarter of 1996 relates to the Company's June 1995 investment in Reunion and represents the Company's proportionate share of Reunion's results from discontinued operations for its second quarter of 1996. Liquidity and Capital Resources General The Company manages its liquidity as a consolidated enterprise. The operating divisions of the Company carry minimal cash balances. Cash generated from the divisions' operating activities generally is used to repay previous borrowings under the Revolving Credit Facility, as well as other uses (e.g. corporate headquarters expenses, debt service, capital expenditures, etc.). Conversely, cash required for the divisions' operating activities generally is provided from funds available under the Revolving Credit Facility. Although the Company operates in relatively mature markets, it intends to continue to invest in and grow its businesses through selected capital expenditures as cash generation permits. Management believes that all required principal and interest payments, as well as capital expenditures, will be met by cash flows from operations and/or borrowings under the Revolving Credit Facility, if necessary. While Oneida was a subsidiary of the Company, its liquidity was managed separately. Prior to its sale, Oneida had a $5.0 million credit facility with Congress. This facility consisted of a term loan and a revolving loan. In addition to advances to Oneida from the Company, this facility provided a primary source of liquidity to Oneida. Prior to March 4, 1994, the Company had a $20.0 million revolving credit facility with Heller Financial, Inc. On March 4, 1994, the Company refinanced this facility into the Revolving Credit Facility under which Congress agreed to make revolving loans to the Company of up to $20.0 million, subject to compliance with various covenants, representations and warranties, and contingent upon there being no events of default, all as defined in the Loan and Security Agreement (Loan Agreement) between Congress and the Company. The Maximum Credit (as defined in the Loan Agreement) under the Revolving Credit Facility was temporarily increased to $26 million on June 20, 1995 in connection with the Chatwins Acquisition, permanently fixed at $25 million on October 18, 1995 and temporarily increased to $27.5 million on May 1, 1996. At June 30, 1996, the Company was in compliance with all covenants and there were no events of default under the Revolving Credit Facility. Borrowings outstanding under the Revolving Credit Facility at June 30, 1996 totalled $22.0 million. Borrowings under the Revolving Credit Facility bear interest at an annual rate of the Philadelphia National Bank Prime Rate plus 1.5%. The facility 13 also contains an unused line fee of 0.5% and a $5,000 monthly servicing fee. The Loan Agreement was originally scheduled to expire on March 4, 1997 and was renewable annually thereafter. However, the Company and Congress made various amendments to the Revolving Credit Facility, discussions of which follow. On June 20, 1995, the Company acquired the Reunion Common Stock in the Chatwins Acquisition. The purchase price consisted of $5.8 million in cash and the Parkdale Note. On September 14, 1995, Mr. Bradley purchased the Parkdale Note from Parkdale and the Company made a partial repayment of the Parkdale Note as required by the terms thereof equal to the $3.1 million proceeds from the sale of Oneida. In May 1996, the Company made a partial repayment of the Parkdale Note totalling $1.7 million, including interest thereon, primarily from the $3.7 million in cash received by the Company from Reunion in full payment of the Oneida Advances. In a letter agreement dated June 18, 1996, the Company and Mr. Bradley agreed to extend the maturity date of the Parkdale Note to December 31, 1996. In connection with the purchase of the Reunion Common Stock, the Company purchased the Gesterkamp Warrants. The purchase price for the Gesterkamp Warrants totalled $0.5 million and consisted of $0.3 million paid in cash and the Gesterkamp Note. Subsequent to its issuance, the Gesterkamp Note was purchased by Mr. Franklin Myers, a director of Reunion. Pursuant to the terms of the Gesterkamp Note, the Company made principal repayments of $50,000, plus interest at 10% per annum, on each of January 6 and June 6, 1996. Such repayments, plus interest, will continue semi-annually until the Gesterkamp Note is repaid. The cash portions of the above transactions were funded with borrowings under the Revolving Credit Facility. To accommodate the additional borrowings, the Revolving Credit Facility was amended to provide a temporary, 90-day increase in the Maximum Credit to $26.0 million from $20.0 million, which included a temporary $4.0 million overadvance availability. This temporary increase was originally scheduled to expire on September 18, 1995. However, on September 14, 1995, Congress and the Company further amended the Revolving Credit Facility to extend the expiration date to October 18, 1995. Subsequent to September 14, 1995, Congress and the Company further amended the Revolving Credit Facility to permanently increase the Maximum Credit to $25.0 million, reduce the temporary $4.0 million overadvance availability to $1.5 million, and extend the expiration date of the temporary overadvance availability to January 15, 1996. As of December 31, 1995, all borrowings under the temporary overadvance availability had been repaid by the Company. On May 1, 1996, the Revolving Credit Facility was amended to provide a temporary, 97-day increase in the Maximum Credit to $27.5 million from $25.0 million, which includes a temporary $2.5 million overadvance availability. The proceeds from this temporary increase in the Maximum Credit were used for various purposes, including the Company's May 1, 1996 interest payment on its senior notes. During the temporary, 97-day increase period, the temporary $2.5 million overadvance availability was required to be reduced in weekly increments in amounts ranging from $150,000 beginning on May 20, 1996 to $250,000 ending on August 5, 1996. The Company made repayments pursuant to the required reductions on May 20 and 27, 1996, totalling $0.3 million. However, on May 28, 1996, contemporaneously with the receipt of $3.7 million in cash from Reunion in final repayment of the Oneida Advances, as required, the Company repaid $2.0 million of the temporary $2.5 million overadvance availability and, by June 10, 1996, all amounts borrowed under the temporary $2.5 million overadvance availability had been repaid by the Company. Additionally, as part of this amendment, the expiration date of the Loan Agreement was extended to June 30, 1998 and is renewable annually thereafter. The Company owns 49% of CGII, which owned 100% of the outstanding preferred stock and approximately 94% of the fully diluted common stock of Rostone. On February 2, 1996, CGII acquired the minority interest in Rostone's common stock it did not already own. On December 22, 1995, Rostone 14 and Oneida entered into the Merger Agreement whereby Rostone was subsequently merged into Oneida, which is owned by Reunion, and, as the surviving corporation, Oneida's name was changed to ORC. In the merger, ORC acquired from CGII all of the issued and outstanding preferred and common stock of Rostone. The Merger Agreement provides for the payment of merger proceeds of up to $4.0 million ($2.0 million in 1997 and $2.0 million in 1998) to CGII contingent upon Rostone's achieving specified levels of earnings before interest and taxes in 1996 and 1997. However, under the terms of ORC's loan facility with Congress, all such payments may only be made from equity contributions Reunion may provide to ORC. Since Rostone's preferred stock was pledged by CGII to the Company to secure the Company's December 1993 loan of $1.35 million to CGII, any merger proceeds will be paid to the Company until the debt and related interest is paid in full. The amount due the Company related to this loan was $1.6 million at June 30, 1996. Any merger proceeds in excess of the amount due the Company will be payable to CGII and allocated among CGII's remaining creditors, one of which is the Company. CGII's primary assets remaining after the sale of Rostone are two notes receivable from affiliates of the Company and a minimal amount of cash, the sum of which total $0.6 million. The Company is entitled to any proceeds from these assets. Under the equity method of accounting, the carrying value of the Company's investment in CGII at June 30, 1996 was $0.9 million. In December 1995, the Company entered into a joint venture agreement with CMIESC and Wanggang to form Shanghai Klemp. The joint venture will provide metal grating to the expanding construction industries in China and nearby countries. During the first quarter of 1996, the Company satisfied its investment obligation to make contributions of assets, primarily machinery, to the joint venture with an estimated fair market value totalling approximately $1.9 million. Shanghai Klemp's manufacturing facilities are located in Wanggang Township, Pudong New Area, Shanghai. Production is expected to begin during 1996. At December 31, 1995, the Company had net operating loss carryforwards for tax reporting purposes of approximately $6.7 million, which are scheduled to expire beginning in 2005. The ultimate realization of this benefit depends on the Company's ability to generate sufficient taxable income in the future. While the Company believes that the benefit of such net operating losses will be fully or partially realized by future operating results, prior losses and a desire to be conservative prompted management to leave on its books at December 31, 1995, a valuation reserve for a portion of such future benefits, in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Operating Activities Operating activities provided $2.5 million of cash during the first half of 1996, compared to cash provided of $2.1 million in the first half of 1995, an increase of $0.4 million. This increase in cash provided is primarily the result of net working capital (defined as receivables, inventories and trade payables) increasing only $2.6 million in the first half of 1996 compared to an increase in net working capital of $3.5 million in the first half of 1995, resulting in an increase in operating cash provided in the first half of 1996 of $0.9 million and an increase of $1.7 million from changes in other assets and liabilities, partially offset by a decrease in income before depreciation, amortization and equity income of $2.2 million. 15 Investing Activities Investing activities provided $0.5 million of cash during the first half of 1996, compared to cash used of $9.6 million during the first half of 1995, an increase in cash provided of $10.0 million. This increase in cash provided is the result of $6.6 million of cash used in June 1995 for the Reunion Acquisition which did not recur in the 1996 first half in addition to the receipt of $3.7 million of cash received by the Company from the repayment of the remaining portion of the Oneida Advances, including interest, by Reunion. These increases were partially offset by almost $0.2 million of cash used in the first half of 1996 to satisfy the cash portion of the Company's investment obligation in the Shanghai Klemp joint venture. Financing Activities Financing activities during the first half of 1996 used $2.9 million in cash, compared to $8.0 million of cash provided from financing activities during the first half of 1995, an increase in cash used of $10.9 million. This increase in cash used is primarily the result of a decrease of $1.1 million in the level of net borrowings under the Revolving Credit Facility during the first half of 1996 compared to an increase of $9.8 million in the first half of 1995. Although repayments of debt were approximately equal in the first half of 1996 compared to the first half of 1995, the 1996 first half included the May 1996 payment of $1.7 million to Mr. Bradley in partial repayment of the Parkdale Note and payments totalling $0.1 million to Mr. Franklin Myers in partial repayment of the Gesterkamp Note. 16 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following exhibits are filed herewith in accordance with Item 601 of Regulation S-K: Exhibit No. Exhibit Description ----------- ------------------- 10.7 Agreement, dated June 1, 1996, between CP Industries, Inc. and United Steelworkers of America on behalf of Local #1514-01. 10.8 Agreement, dated June 1, 1996, between CP Industries, Inc. and United Steelworkers of America on behalf of Local #1514. 10.44 Agreement, dated June 14, 1996, between The Alliance Machine Company and Local Union No. 2361 United Steelworkers of of America AFL-CIO. 10.51 Letter Agreement dated June 18, 1996 between Chatwins Group, Inc. and Charles E. Bradley, Sr. extending the maturity date of the Parkdale Note to December 31, 1996. 10.52 Joint Venture Agreement by and among Klemp de Mexico, S.A. de C.V. and Consolidated Fabricators, Inc. 10.53 Second Amendment dated March 25, 1996 to Lease Agreement dated May 31, 1994 between RTF Properties, L.P. and Chatwins Group, Inc. 10.54 Third Amendment dated June 10, 1996 to Lease Agreement dated May 31, 1994 between RTF Properties, L.P. and Chatwins Group, Inc. 27 Financial Data Schedule (b) Reports on Form 8-K None. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. Date: August 12, 1996 CHATWINS GROUP, INC. --------------- (Registrant) By: /s/ Joseph C. Lawyer ------------------------------- Joseph C. Lawyer President and Chief Executive Officer By: /s/ John M. Froehlich ------------------------------- John M. Froehlich Vice President, Chief Financial Officer and Treasurer (chief financial and accounting officer) 18 EXHIBIT INDEX Exhibit No. Exhibit Description Page No. ----------- ------------------- -------- 10.7 Agreement, dated June 1, 1996, 19 between CP Industries, Inc. and United Steelworkers of America on behalf of Local #1514-01. 10.8 Agreement, dated June 1, 1996, 40 between CP Industries, Inc. and United Steelworkers of America on behalf of Local #1514. 10.44 Agreement, dated June 14, 1996, 63 between The Alliance Machine Company and Local Union No. 2361 United Steelworkers of America AFL-CIO. 10.51 Letter Agreement dated June 18, 1996 96 between Chatwins Group, Inc. and Charles E. Bradley, Sr. extending the maturity date of the Parkdale Note to December 31, 1996. 10.52 Joint Venture Agreement by and among 98 Klemp de Mexico, S.A. de C.V. and Consolidated Fabricators, Inc. 10.53 Second Amendment dated March 25, 1996 133 to Lease Agreement dated May 31, 1996 between RTF Properties, L.P. and Chatwins Group, Inc. 10.54 Third Amendment dated June 10, 1996 136 to Lease Agreement dated May 31, 1996 between RTF Properties, L.P. and Chatwins Group, Inc. 27 Financial Data Schedule 142 EX-10.7 2 EXHIBIT 10.7 19 TABLE OF CONTENTS Article Page* 1 Purpose 1 2 Management 2 3 Existing Working Conditions 3 4 Contracting Out 4 5 General Principles 5 6 Union Shop 6 7 Grievance Procedure 7 8 Safety and Health 9 9 Hours of Work 11 10 Overtime and Holidays 12 11 Vacations 14 12 Seniority 15 13 Military Service 20 14 Severance Allowance 20 15 Rates of Pay 22 16 Sick Leave 24 17 Termination 26 Appendices A Letter of Agreement on Misc. Matters 27 B Manning Agreement 28 C Standard Biweekly Salary Rate 30 D Memorandum - Service Bonus 31 E Memorandum - Benefits 32 F Letter of Agreement - 1996 33 * Page references are to the original, signed agreement and not the "EDGARized" version of the agreement as filed herein. 20 AGREEMENT This Agreement is between CP Industries, Inc. (Company) and the United Steelworkers of America on behalf of Local #1514-01 (Union). The Company recognizes the Union as the exclusive collective bargaining representative of all salaried clerical and technical employees for whom the Union is certified by the National Labor Relations Board as the exclusive collective bargaining representative. This agreement applies only to operations at the Christy Park Plant in McKeesport, PA. Any future business ventures which may be pursued and/or obtained by CP Industries, Inc. will be considered separate entities and not subject to the provisions of this Agreement. ARTICLE 1 PURPOSE The purpose of this agreement is to establish rates of pay, hours of work and other conditions of employment promoting a cooperative relationship among all employees, ensuring uninterrupted operations and achieving the highest level of employee performance consistent with safety, good health and sustained effort. ARTICLE 2 MANAGEMENT 2.1 The Company retains the exclusive right to manage the business and to direct the work force. These rights include the right to hire, suspend or discharge for proper cause, or transfer, and the right to relieve employees from duty because of lack of work or for other legitimate reasons. 2.2 A supervisor will not perform work normally done by a bargaining unit employee except in the following types of situations: experimental and/or demonstrational work, work under emergency conditions where interference with operations, injury, or damage to material or equipment could occur, and work under existing circumstances would be unreasonable to assign to bargaining unit employees or is negligible in amount. Work incidental to supervisory duties or a job normally performed by a supervisor, even though similar to duties in bargaining unit jobs, shall not be affected by this provision. 2.3 If a supervisor performs work in violation of the above and the employee who would have done the work and who has realized a loss of earnings can be identified, the Company shall pay that employee the applicable standard hourly wage rate for the time involved or for four hours, whichever is greater. 2.4 An employee who is assigned as a temporary supervisor will not issue discipline to employees, provided that this provision will not prevent a temporary supervisor from relieving an employee from work for the balance of the turn for alleged misconduct. An employee will not be called by either party in the grievance procedure or arbitration to testify as a witness regarding any events involving discipline which occurred while the employee was assigned as a temporary supervisor. 2.5 Crew leader assignments will be made at the discretion of management; however, such assignments will not be made for a period exceeding four consecutive months. 21 ARTICLE 3 EXISTING WORKING CONDITIONS A. Identified specific practices or customs in effect as of the date of this agreement will remain in effect except as they are changed or eliminated by mutual agreement or, if the basis for the existence of such practice or custom is changed or eliminated, the Company will have the right to void same. When such a change or elimination is made by the Company, any affected employee shall have recourse to the grievance procedure to have the Company justify its action. A three month period of time will be provided following the effective date of this agreement for the parties to agree to which, if any, practices exist. Any claimed practice, custom, or condition not identified and agreed to during this time will not be recognized. ARTICLE 4 CONTRACTING OUT 4.1 The Company intends to use its employees when reasonable and practicable for work on its property. The following shall govern the various types of contracting out situations: A. Where the practice has been to perform clerical and technical work within the plant by bargaining unit employees, such will continue unless otherwise agreed to. B. Where the practice has been to contract out such work, it may continue unless otherwise agreed to. C. Where such work has been performed within the plant under some circumstances by bargaining unit employees and under some circumstances by contractors, such contracting out shall be permissible under circumstances similar to those under which contracting out has been the practice unless otherwise agreed to. 4.2 A joint committee will be established to discuss problems which may arise concerning the application of this Article. The Union representative(s) will be notified when the Company decides to contract out work for performance in the plant; such notice will be in advance of contracting out except where emergency requirements preclude same. 4.3 Should the Union representatives on the committee believe discussion is necessary, they shall request a meeting within 5 days after notice is given and a meeting shall be held within 3 days thereafter. If the matter is not resolved, a grievance challenging such action may be filed, if initiated within 30 days from the date of the Company's notice. If the Company fails to notify the Union on matters covered by paragraphs 4.2 and 4.3 and the reason was not due to an emergency situation, and such failure deprived the Union of a reasonable opportunity to suggest practicable alternatives, the Board of Arbitration shall have the authority to fashion a remedy appropriately. ARTICLE 5 GENERAL PRINCIPLES 5.1 The provisions of this agreement will be applied to all employees without regard to race, color, religious creed, national origin, sex or age. 22 5.2 There will be no Union activity on Company time. There will be no strikes, work stoppages, slow-downs, or other acts which would interrupt or impede operations. No officer or representative of the Union shall authorize, instigate, aid, or condone any such activities. 5.3 The Company agrees there will be no lockouts. 5.4 The right of the Company to discipline an employee for a violation of this agreement shall be limited to the failure of such employee to discharge his responsibilities as an employee and may not in any way be based upon the failure of such employee to discharge his responsibilities as a representative or officer of the Union. The Union has the exclusive right to discipline its officers and representatives. The Company has the exclusive right to discipline its officers, representatives and employees. ARTICLE 6 UNION SHOP 6.1 Each employee in the bargaining unit on the date of this agreement and each person who becomes an employee shall, as a condition of continued employment, be required to be a member of the Union on the 30th day following the date of this agreement or the beginning of his employment, whichever is later. 6.2 The Company agrees to deduct, upon written authorization signed by the employee, initiation fees and/or monthly dues from employees' earnings. The amount of monthly dues shall be twice the employee's current hourly vacation rate. 6.3 The Union shall indemnify and save the Company harmless against any and all claims, demands, suits or other forms of liability that shall arise out of or by reason of action taken or not taken by the Company for the purpose of complying with any of the provisions of this article. ARTICLE 7 GRIEVANCE PROCEDURE 1. Differences between the parties as to interpretation or application of, or compliance with, the provisions of this agreement should be addressed in an expeditious and effective manner. The following procedure for processing grievances will be applied: A. An Employee and/or his grievance committeeman will discuss complaints or grievances with his immediate supervisor within ten (10) calendar days after the occurrence or non-occurrence of the event prompting the grievance, or the date on which such event should reasonably have become known. B. If the issue remains unresolved, a grievance must be filed in writing, signed by the employee and his grievance committeeman, and submitted to his supervisor no later than ten (10) calendar days after a response from the supervisor. The written grievance will set forth the specific alleged infraction, facts relating thereto, and the contractual provisions claimed to have been violated. A grievance not conforming to this format will not be appropriate for processing. C. A meeting will be held with a Company representative from the area 23 involved at mutually agreeable times. If an answer is not provided within ten (10) calendar days thereafter, the grievance will be granted. D. Should the grievance remain unresolved, it may be appealed within ten (10) calendar days for a hearing before the President and/or his representatives, the Grievance Committee and a Representative from the International Union, if desired. Meetings will be held at mutually agreeable times after the appeal is received. The resolution of grievances up to and including this level will be without prejudice to the position of either party. For any unresolved grievance, a summary of pertinent points discussed will be prepared by the Company and jointly signed. E. In the event the grievance is not settled, it may be appealed to an arbitrator mutually selected by the parties, provided such is so appealed within thirty (30) calendar days after (D) above. F. Hearings before an arbitrator will be held within thirty (30) calendar days after (E) above. G. An arbitrator will have jurisdiction and authority only to interpret, apply, or determine compliance with this agreement and may not add to, detract from, or alter this agreement. H. The costs of arbitration will be equally shared by the parties. I. If a grievance is not appealed in accordance with the above, it shall be considered settled on the basis of the last decision made. 7.2 A Grievance Committee will be designated by the Union and will number no more than two employees, one of whom will be the Chairman. 7.3 In all instances where the Company believes an employee's conduct justifies discharge, he will first be suspended for not more than five (5) calendars days and notified in writing that he will be discharged at the end thereof. During such five day period, if the employee believes his proposed discharge is unjust, he may request a hearing and discussion of the offense before the head of his department. Within five (5) calendar days thereafter, the suspension will be affirmed, modified, extended, revoked or converted to discharge. Should the determination result in discharge, the employee may file a grievance within five (5) calendar days after notice. A hearing before the President and/or his representatives will be held and decision rendered within ten (10) calendar days. This decision may be appealed to arbitration and heard in the manner set forth above. Additionally, the Arbitrator will not have jurisdiction to modify the degree of discipline imposed should it be determined that the employee has been suspended or discharged for proper cause. ARTICLE 8 SAFETY AND HEALTH 8.1 The safety and health of all employees is of great concern to the Company and Union of CP Industries, Inc. and all employees will accept "safety" as a part of their individual responsibility. 8.2 The Company will make all necessary repairs and adjustments to assure 24 the safety of all its employees and shall comply with all applicable State and Federal regulations regarding job safety and health. The Union agrees to cooperate fully in providing a safe work environment. 8.3 Protective devices and other equipment deemed necessary by Management to protect employees from accidents and health hazards shall be provided by the Company. On July 1, 1997 and July 1, 1999, each employee, other than probationary employees, who is required to wear safety shoes or metatarsals will be provided an allowance of $40.00 to purchase safety shoes for wear at the plant. 8.4 The Company welcomes suggestions from all employees or from the Union which offer practical and feasible ways of improving plant safety. An employee may submit safety suggestions through his immediate supervisor. 8.5 The Company reserves the right to adopt reasonable plant rules and may impose appropriate discipline for the violation of such rules. Employees of CP Industries must recognize that compliance with safety rules and regulations is a condition of employment. To be effective, all employees must be constantly on the lookout for any condition or action which might be unsafe or careless. Both the Union and the Company agree to promote all rules necessary to insure safety on the job. 8.6 Both the Company and the Union agree that failure to report accidents, even if minor in nature, can result in a loss of a life or limb to other workers and also disrupt the efficient operation of the plant. 8.7 Consequently, employees are required to immediately report to their supervisor any accident or injury, major or minor, which may occur to them. If then directed by his supervisor, the employee will report immediately for medical treatment. 8.8 A Joint Union - Management Safety and Health Committee will be established. ARTICLE 9 HOURS OF WORK 9.1 The normal weekly work hours shall be 40 and shall be scheduled normally on five (5) successive days. 9.2 The normal daily work hours shall be 8 and the parties recognize that business conditions could require daily hours in excess of 8. These hours shall be consecutive except for lunch periods in accordance with existing practices; employees currently having a one hour lunch break. 9.3 The final right to arrange working schedules rests with Management in order to avoid adversely affecting the work and such schedules may be changed to suit the varying conditions of the business. 9.4 An employee who is called for jury service or subpoenaed as a witness shall be excused from work without deduction from salary for the days on which he serves. Service includes required reporting whether or not he is used. The employee will present proof that he did serve or report as a juror or was subpoenaed and reported as a witness. 25 ARTICLE 10 OVERTIME AND HOLIDAYS 10.1 Overtime at the rate of 1-1/2 times the regular rate of pay shall be paid for hours worked in excess of eight (8) hours in a workday or forty (40) hours in a week. 10.2 Payment of overtime rates shall not be duplicated for the same hours worked. 10.3 The designated holidays are: January 1, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day, the day after Thanksgiving Day, the day before Christmas Day and Christmas Day. If the calendar holiday is on Sunday, the holiday shall be the following Monday. 10.4 For hours worked on any designated holiday, an overtime rate of 2-1/2 times an employee's regular rate of pay will be paid. 10.5 An eligible employee who does not work on a designated Holiday will be paid eight (8) times his current hourly vacation rate. If, however, he is scheduled to work and fails to report or perform work, he will be ineligible for pay unless his absence was due to sickness or because of death in the immediate family (parents including in-laws, children, brother, sister, spouse and grandparents) or because of similar good cause. 10.6 An eligible employee is one who: (a) Performs work or is on vacation in the payroll period in which the Holiday occurs; or if he is laid-off for such payroll period, performs work or is on vacation in both the payroll period preceding and the payroll period following the payroll period in which the Holiday occurs; and (b) Works as scheduled or assigned both on his last scheduled workday prior to and on his first scheduled workday following the Holiday unless he has failed to so work because of sickness or because of death in the immediate family or because of similar good cause. 10.7 When a Holiday occurs during an eligible employee's scheduled vacation, he shall be paid for same in addition to his vacation pay. Such payment shall also apply to (1) an employee whose vacation has been scheduled prior to his layoff and who thereafter is laid off and takes his vacation as scheduled, or (2) an employee who is not at work at the time his vacation is scheduled, but who thereafter returns to work and is then absent from work during a Holiday week because of his scheduled vacation. However, an employee who is not at work at the time of scheduling his vacation and is not working at the time his vacation commences, is not eligible for Holiday pay for such Holiday occurring during his vacation. ARTICLE 11 VACATIONS 11.1 Each employee who has attained at least six months of continuous service, and who in any calendar year has performed work in such calendar year or who, during the last pay period closed during the year immediately preceding such calendar year: (a) has performed work or, (b) was on vacation from work or, (c) was receiving sick leave salary continuance or, (d) was receiving sick and accident benefits after salary continuance has been exhausted, shall receive vacation in accordance with the following: 26
Years of Continuous Service Weeks of Vacation Less than 6 months None 6 months but less than 1 1 1 but less than 6 2 6 but less than 15 3 15 but less than 23 4 23 or more 5
Vacations will be taken on a calendar week basis. 11.2 Vacations will, so far as practicable, be granted at times most desired by employees (longer service employees being given preference as to choice); but the final right to allot vacation periods and to change such allotments is exclusively reserved to the Company in order to insure the orderly operation of the plant. 11.3 Vacations may be scheduled throughout the calendar year; however, the Company may designate certain weeks as vacation shutdown periods. 11.4 Each employee granted a vacation under this Article will be paid at his average rate of earnings per hour for the first two of the last four closed and calculated pay periods worked by the employee preceding the first week of the actual vacation period. Hours of vacation pay for each vacation week shall be the average hours per week worked by the employee in the first two of the last four pay periods worked by the employee preceding the first week of the actual vacation period, but not less than forty (40) hours per week nor more than forty-eight (48) hours per week. 11.5 The average rate of earnings per hour shall be computed by: A. Totaling pay received for all hours worked (total earnings, excluding premium for overtime, holiday, Sunday and shift differential) and pay for unworked holidays, and B. Dividing such earnings by the total of hours worked and unworked holiday hours which were paid for. ARTICLE 12 SENIORITY 12.1 The parties recognize that promotional opportunity and job security in event of promotions, decrease of forces and recalls after layoffs should increase in proportion to length of continuous service. 12.2 It is understood and agreed that the provisions of the Manning Agreement of the 6/1/96 hourly settlement agreement between CPI and the USW are applicable in this agreement and will provide the guidelines for administration of work assignments and mobility of the work force to the extent stated therein. The Manning Agreement is referenced as Appendix B and is modified to recognize the existing clerical and technical departments: (A) Production Engineering Planning, (B) Accounting, and (C) Maintenance. The Production Engineering Planning Department has two separate units. 12.3 Plant continuous service shall be used for all purposes in which a 27 measure of continuous service is utilized, except vacation preference purposes where continuous combined corporation service will apply. In the event two or more employees have identical plant continuous service, the tie will be broken on the basis of continuous combined corporation service. If they are the same, the tie will be resolved with the employee having the earliest birth date being recognized as the senior employee. 12.4 It is understood and agreed that in all cases of: A. Promotion the following factors as listed below shall be considered; however, only where factors "1" and "2" are relatively equal shall continuous service be the determining factor: 1. Ability to perform the work, 2. Physical fitness, 3. Continuous service. B. Decrease in forces or recalls after layoffs the following factors as listed below shall be considered; however, only where both factors "1" and "2" are relatively equal shall continuous service be the determining factor: 1. Ability to perform the work, 2. Physical fitness, 3. Continuous service. 12.5 Continuous service shall be calculated from date of first employment or reemployment following a break in continuous service. 12.6 Continuous service shall be broken by: A. Quit B. Discharge, provided that if the employee is rehired within six (6) months the break in continuous service shall be removed. C. Termination in accordance with Article 14 - Severance Allowance. D. Absence in excess of two years, except as provided in 12.7 and 12.8 below. 12.7 If an employee is absent because of layoff or physical disability in excess of two (2) years, he shall continue to accumulate continuous service during such absence for an additional period equal to (i) three years, or (ii) the excess, if any, of his length of continuous service at commencement of such absence over two years, whichever is less. Any accumulation in excess of two years during such absence shall be counted, however, only for purposes of this Article and shall not be counted for any other purpose under this agreement. In order to avoid a break in service within the above period after an absence in excess of two years, an employee absent because of layoff or physical disability must report for work promptly upon termination of either cause, provided, in the case of layoff, the Company has mailed a recall notice to the last address furnished to the Company by the employee. 12.8 Absence due to a compensable disability incurred during course of employment shall not break continuous service, provided such individual is returned to work within thirty (30) days after final payment of statutory compensation for such disability or after the end of the period used in calculating a lump-sum payment. 12.9 New employees and those hired after a break in continuity of service will be regarded as probationary employees for the first six biweekly pay 28 periods of actual work and will receive no continuous service credit during such period. Probationary employees may be laid off or discharged as exclusively determined by Management. Probationary employees continued in the service of the Company subsequent to the first six biweekly pay periods of actual work shall receive full continuous service credit from date of original hiring. 12.10 When a decrease in force continues to the point at which a grievance committeeman would otherwise be laid off, he shall be retained in active employment (for such hours per week as may be scheduled for an employee on the job to which he is assigned) for the purpose of continuity in the administration of this Agreement in the interest of employees and the Company so long as a work force is at work in the plant area which he represents on the grievance committee. In any event, no grievance committeeman shall be retained in employment under this paragraph unless work which he can perform is available in the plant area which he represents on the grievance committee. 12.11 The principles set forth in the preceding paragraph shall apply on a plant-wide basis to employees who hold the following office: President or Vice-President. This applies only if not in conflict with the National Labor Relations Board's ruling. When there are not sufficient jobs available to provide employment in accordance with both this paragraph and the preceding paragraph, priority shall be given to employees covered by the preceding paragraph. 12.12 The Company shall make available for review by the local union concerned lists showing the relative continuous service of each employee in each seniority unit. Such lists shall be revised by the Company from time to time, as necessary, to keep them relatively up-to-date. The seniority rights of individual employees shall in no way be prejudiced by errors, inaccuracies, or omissions in such lists. 12.13 The procedure outlined below will govern assignments to permanent job vacancies if and when Management determines that such a vacancy exists and is to be filled: Within a given line of progression, a vacancy within such line would be filled by employees occupying jobs immediately below that job, by job class, on the basis of plant service. Then, to fill the ensuing vacancy in that job, employees in the next lower level job would be offered promotion. This procedure would continue until there remained a vacancy at the entry level job. At this point, for departments where more than one line of progression exists, employees in other lines may submit applications for the posted entry level job. In the end, a department entry level job would be filled on a plant-wide basis. In department where all jobs are part of one line of progression, the entry level job will be posted and filled on a plant-wide basis. An entry level job will be posted for a period of seven (7) calendar days. Vacancies not filled within 45 days will be reposted. A successful bidder may decide to return to his former incumbent position within 45 days and such return will be without loss of his seniority standing. In such case, other applicants will be considered. 29 ARTICLE 13 MILITARY SERVICE 13.1 Employees who enter military service shall receive all rights and privileges accorded them by the laws of the United States. 13.2 Employees called for encampment of the National Guard or Reserve shall receive the difference in their service pay and average rate of earnings (as calculated for vacation pay) for hours they would have worked for up to a maximum of two (2) weeks per year. ARTICLE 14 SEVERANCE ALLOWANCE 14.1 If the Company, in its sole discretion, decided to permanently close the plant or a department thereof, an employee with three (3) or more years of continuous Company service whose employment is terminated because he was not entitled to nor offered other employment shall be eligible for severance allowance in accordance with the following scale:
Continuous Company Service Weeks of Severance Allowance 3 years but less than 5 years 4 5 years but less than 7 years 6 7 years but less than 10 years 7 10 years or more 8
14.2 A week's severance allowance shall be the employee's vacation rate as calculated pursuant to Article 11. Payment shall be made in a lump sum at the time of termination and acceptance of same shall terminate employment and continuous service for all purposes. 14.3 An employee who is offered employment in another department of the plant shall not be entitled to severance allowance. If, however, he transfers and such transfer results directly in the permanent displacement of some other employee, the latter shall be eligible for severance allowance provided he otherwise qualifies. 14.4 Severance allowance shall not be duplicated for the same severance and any payment received from other sources shall be deducted from the amount to which the employee may be entitled under this article. 14.5 An employee whose employment would otherwise have been terminated may elect to be placed on layoff for thirty (30) days during which time he shall decide whether to remain on layoff or take severance allowance. If he elects to continue on layoff, severance allowance is permanently waived. Moreover, any SUB payments received during this time shall be deducted from any severance allowance to be paid. ARTICLE 15 RATES OF PAY 15.1 The standard biweekly scale of rates for the respective job classes shall be those set forth in Appendix C and shall continue in effect without 30 change until the expiration date of this Agreement. Although reference is made herein to a biweekly salary rate, it is agreed and understood that the 80 hour "guarantee" previously recognized has been eliminated. Employees may be scheduled on a weekly basis, in which case the biweekly salary rate is divided by two and is the established salary rate of pay for an eligible employee scheduled for 40 hours of work. There is established for each salary rate a corresponding hourly equivalent rate equal to one-eightieth of the biweekly salary rate which is recognized as the straight-time regular rate from which to calculate overtime. 15.2 The Company may authorize absence from work without reduction of the salary rate; however, nothing shall require payment for time not worked due to causes such as: A. Strikes or work stoppages in connection with labor disputes. B. Refusal to perform assigned work. C. Absence from work without just cause. D. Voluntary absence from work. E. Justifiable discharge or suspension from work. 15.3 To be eligible for the established weekly salary rate, an employee shall have accrued two years of continuous service; this will not be utilized to permit Management to schedule an employee for less than 40 hours in a week except for weeks containing holidays. 15.4 The starting rate for a newly hired employee will be $2.50 per hour less than the established rate for the particular job to which he is assigned. This rate will remain in effect for the first 2080 hours of work. 15.5 No basis shall exist for an employee to allege that a salary rate inequity exists and no complaint or grievance on behalf of an employee alleging a salary rate inequity shall be initiated or processed during the terms of this Agreement. 15.6 Notwithstanding any provisions of this Article, errors in application of rates of pay shall be corrected. 15.7 For hours worked on the afternoon shift there shall be paid a premium rate of $.30 per hour. For hours worked on the night shift there shall be paid a premium of $.45 per hour. Shifts are identified as follows: Day Shift - Turns starting between 7:00 AM and 9:30 AM inclusive. Afternoon Shift - Turns starting between 3:00 PM and 5:30 PM inclusive. Night Shift - Turns starting between 11:00 PM and 1:30 AM inclusive. 15.8 Shift differential shall be included in the calculation of overtime compensation. 15.9 An employee shall be paid a premium of 50% based on his regular rate of pay for all hours worked on Sunday which are not paid for on an overtime basis. 15.10 Existing practices and procedures governing job descriptions and classifications will remain in effect for the duration of this Agreement unless modified by mutual consent. 31 ARTICLE 16 SICK LEAVE 16.1 An eligible employee who is absent from work as the result of personal disability caused by accident or sickness shall have his salary continued during such disability in accordance with the following table of limitations:
Length of Maximum Sick Leave Continuous Service Salary Continuance Less than 2 years Not Eligible 2 yrs. but less than 5 Balance of pay period and 4 pay periods 5 yrs. but less than 10 Balance of pay period and 6 pay periods 10 yrs. but less than 15 Balance of pay period and 8 pay periods 15 yrs. but less than 20 Balance of pay period and 10 pay periods 20 yrs. and over Balance of pay period and 13 pay periods
16.2 To be eligible under the provisions of this Article, an employee shall have accrued two years of continuous service. Reasonable evidence (including, in appropriate circumstances, a certificate from a licensed physician) of disability due to sickness or accident will be required of all employees. 16.3 Salary continuance in accordance with the above table shall constitute the maximum payments for an employee's absences from work due to one or more personal disabilities in any 12 month period; provided, however, that fractional initial pay periods for each disability for which salary is continued shall not be counted in the maximum salary continuance limitation set forth above. Should an employee receive his maximum salary continuance in a 12 month period, any succeeding maximum period shall not commence until another disability following his return to work. 16.4 Salary continuance payments shall be reduced by the amount of any Worker's Compensation payment but such payments shall not be reduced or discontinued as the result of any demotion or reduction in force which occurs during the applicable period set forth in the table of limitations. 16.5 Salary continuance shall not be paid during any period while an employee is on vacation. ARTICLE 17 TERMINATION This agreement shall become effective June 1, 1996, and remain in force until Midnight, May 31, 2001 and shall thereafter continue in force from year to year unless either party desires to modify the terms. The party desiring the modification must notify the other party in writing not less than sixty (60) days prior to the expiration date of this Agreement, or not less than sixty (60) days prior to an anniversary date hereof. Should either party serve such notice, a joint conference shall convene not later than thirty (30) days prior to the expiration date in the year in which the notice given. Notice shall be by registered mail to the other party. 32 IN WITNESS WHEREOF, and intending to be legally bound hereby, the proper and duly authorized officers of the Company and the Union have executed this Agreement effective this date and year June 1, 1996 -------------------------------- UNITED STEELWORKERS OF CP INDUSTRIES, INC. AMERICAN AFL-CIO-CLC - - --------------------------------- --------------------------------- Jack T. Croushore, President George F. Becker, Int'l President - - --------------------------------- --------------------------------- C. Herbert Ellis, Vice President Leon Lynch, Vice President Human Resources Human Affairs - - --------------------------------- --------------------------------- Roger L. Seese, Controller Leo W. Gerard, Sec./Treas. - - --------------------------------- --------------------------------- Kevin P. Collins, Vice President Richard H. Davis, Vice President Business Development Administration --------------------------------- Andrew V. Palm, Director District 10 --------------------------------- Dennis R. Fleming, Staff Rep. USWA - LOCAL UNION 1514 (O&T) --------------------------------- John McWhorter, Unit Chairman --------------------------------- Dan Witkowski, Unit Secretary 33 APPENDIX A LETTER OF AGREEMENT ON MISCELLANEOUS MATTERS June 4, 1992 Mr. Richard Pastore Staff Representative United Steelworkers of America Dear Mr. Pastore: This will confirm our understanding and agreement that the following matters were resolved as stated during the 1992 negotiations on behalf of USW Locals #1514 (hourly) and #3330 (salary): 1. Appendix D of the hourly 6/1/87 Agreement is modified as follows: Pay performance for Plan 4650-01 (Tool Grinders) is 114% and Plan 4900-03 (Heavy Forge) is 117%. 2. Appendix D of the salary 6/1/87 Agreement is modified to state the Service Bonus Plan provisions will remain in place for the duration of the 6/1/92 Agreement. 3. The terms and conditions of the SUB plan that previously existed will remain in effect. 4. The parties agree to meet to explore the feasibility of developing and installing a gain-sharing plan. 5. For retirements after Sept. 1, 1992, the minimum pension formula will be increased by $1.00 for each year of service worked as a CP Industries, Inc. employee, i.e. on or after August 1, 1986. 6. The parties recognize the "American With Disabilities Act" becoming effective 7/26/92 and pledge support for and conformance with the principles and intent of this legislation. Sincerely, (Signed) --------------------------------- C.H. Ellis, Vice President Human Resources and Administrative Services CONFIRMED: (Signed) - - --------------------------------- Richard Pastore USW Staff Representative 34 APPENDIX B MANNING AGREEMENT The parties recognize that existing narrow job descriptions necessarily limit the scope of employees' work activity; the need to revise manning procedures to permit more flexibility in job assignment is evident. To this end, the parties agree that job combinations will occur and employee utilization will be broadened. In order to realize this expansion of work function and overlapping of assignments, the parties will address jobs performed by CP Industries, Inc. employees. As those employees terminate (defined as quit, retire, die), functions may be combined with other jobs as determined by Management. Input from the Union representatives with respect to the most efficient manning arrangement will be sought prior to a pending combination. It is understood that the ability to combine work functions is at the discretion of Management; however, should Management decide that a replacement in kind is needed, those other employees on layoff who still retain recall rights will be considered prior to seeking new hires. It is agreed and understood that for a given week, Management will develop a schedule, placing recognized incumbents on a job if it is reasonably anticipated that performance of such work functions will be required. It is expected that these identified employees will work on scheduled jobs during the week as well as be available for reassignment as the need exists. This mobility is not subject to question during the week and only an appropriate challenge may be lodged alleging a continuing violation or abuse of the intent of the system after initial discussion by the parties to air the concern. Management will, in the course of reviewing anticipated work and related manning, consider the respective seniority status of a department's employees: however, it is recognized that where junior-in-service employees hold incumbency on certain primary, critical jobs, those individuals may work a portion of the time on the scheduled job and then may be reassigned for the duration while senior employees are on layoff. The parties agree that for purposes stated herein, there shall exist three (3) departments: (A) Production Engineering Planning, (B) Accounting, and (C) Maintenance. The Production Engineering Planning Department will still retain two (2) separate units. The Company's intention is to reassign within the department as the needs dictate, avoiding the crossing of departmental lines. There could be exceptions, however, depending on the circumstances; e.g. should a given work situation arise during a week where a need exists to get a particular job done and available departmental employees are being fully utilized, the options may be several: (1) A Management decision to postpone the job; (2) Use overtime to complete within the week; (3) With the approval of the Chairman or Secretary of the Grievance Committee, use employees from other departments; (4) Some combination of above. 35 Standard Biweekly Salary Rate Appendix C Job Effective Effective Effective Effective Effective Class 6/1/96 6/1/97 6/1/98 6/1/99 6/1/00 0-1 $1,059.60 $1,099.60 $1,139.60 $1,179.60 $1,227.60 2 $1,084.03 $1,124.03 $1,164.03 $1,204.03 $1,252.03 3 $1,108.47 $1,148.47 $1,188.47 $1,228.47 $1,276.47 4 $1,132.90 $1,172.90 $1,212.90 $1,252.90 $1,300.90 5 $1,157.34 $1,197.34 $1,237.34 $1,277.34 $1,325.34 6 $1,181.77 $1,221.77 $1,261.77 $1,301.77 $1,349.77 7 $1,206.21 $1,246.21 $1,286.21 $1,326.21 $1,374.21 8 $1,230.64 $1,270.64 $1,310.64 $1,350.64 $1,398.64 9 $1,255.08 $1,295.08 $1,335.08 $1,375.08 $1,423.08 10 $1,279.51 $1,319.51 $1,359.51 $1,399.51 $1,447.51 11 $1,303.95 $1,343.95 $1,383.95 $1,423.95 $1,471.95 12 $1,328.38 $1,368.38 $1,408.38 $1,448.38 $1,496.38 13 $1,352.82 $1,392.82 $1,432.82 $1,472.82 $1,520.82 14 $1,377.25 $1,417.25 $1,457.25 $1,497.25 $1,545.25 15 $1,401.69 $1,441.69 $1,481.69 $1,521.69 $1,569.69 16 $1,426.12 $1,466.12 $1,506.12 $1,546.12 $1,594.12 36 APPENDIX D June 17, 1987 William M. Halas President - Local #3330 United Steelworkers of America 2214 Walnut Street McKeesport, PA 15132 Dear Mr. Halas: This will confirm our understanding and agreement that the terms and conditions of the existing provisions of the Service Bonus Plan will remain in place for the duration of our 6/1/87 Agreement. (Signed) --------------------------------- C. H. Ellis, Director Human Resources & Administration Services CP Industries, Inc. CONFIRMED: (Signed) - - --------------------------------- William M. Halas President - Local #3330 USW 7/16/87 - - --------------------------------- Date 37 APPENDIX E Mr. William Halas June 24, 1987 President Local #3330 United Steelworkers of America Dear Mr. Halas: This will confirm our understanding and agreement that the following modifications are made to existing benefit programs: 1. Effective February 1, 1988, for retirements on or after July 31, 1986, increase minimum pension formula by $1.00. The percent pension calculation method is eliminated. 2. Effective for retirements on or after January 31, 1987, increase pension protection afforded short service employees by lowering eligibility for deferred vested pension from 10 years to 5 years of service. 3. Effective February 1, 1988, increase the minimum monthly surviving spouse's benefit by $10.00 for surviving spouses of active employees who die on or after July 31, 1986 and for the surviving spouses of employees who retire on or after July 31, 1986 and who die thereafter. 4. Effective July 1, 1987, adopt pre-certification of inpatient admissions and mandatory second surgical provisions. 5. Increase major medical deductible to $150 for individuals and $300 for families. 6. Extend subrogation provisions applicable to dental benefits to all health care benefits. Sincerely, (Signed) --------------------------------- C. H. Ellis, Director Human Resources and Administrative Services CP Industries, Inc. CONFIRMED (Signed) - - --------------------------------- William Halas, President USW Local #3330 38 APPENDIX F LETTER OF AGREEMENT - 1996 May 30, 1996 Mr. Dennis Fleming Staff Representative United Steel Workers of America Dear Mr. Fleming: In the interest of renewing our agreement effective June 1, 1996, the following contract modifications are proposed: 1.) The Steel Workers' Select Blue POS 100 Plan with mail order drug provisions will be implemented effective 8/1/96 for all CPI bargaining unit employees. Existing dental and vision coverage will be retained. 2.) Each active employee, other than probationary employees, as of 6/1/96, will receive a gross amount of $500.00 on or before 7/1/96. Another payment of $500.00 will be made in a similar manner in 1998. 3.) On July 1, 1997 and July 1, 1999, each employee, other than probationary employees who is required to wear safety shoes will be provided an allowance of $40.00 to purchase same. 4.) For retirements after September 1, 1996, the minimum pension formula will be increased an additional $1.00 for each year of service as a CP Industries, Inc. employee; i.e. on or after August 1, 1986. For retirements after September 1, 2000, the minimum pension formula will be increased an additional $1.00 for each year of service as a CP Industries, Inc. employee; i.e. on or after August 1, 1986. 5.) For future retirements, the company will not use the USX percent-calculated figure in determining the offset to be applied... the USX minimum formula-calculated amount will be used. 6.) The amount of weekly Sickness & Accident benefits will be $300.00 for payment after 6/1/1996. 7.) An increase in the hourly additive to the standard hourly wage scale rate as follows: 6/1/96 --- $ .50 6/1/97 --- $ .50 6/1/98 --- $ .50 6/1/99 --- $ .50 6/1/00 --- $ .60 8.) This agreement is effective June 1, 1996 through May 31, 2001. The above is contingent upon and in conjunction with an understanding that any and all issues presented by the Union in the form of contractual proposals, which have not been agreed to up to this point, are considered withdrawn. CONFIRMED Sincerely, (Signed) (Signed) - - --------------------------------- --------------------------------- Dennis R. Fleming C. H. Ellis VP Human Resources & Administrative Services 39 UNITED STEELWORKERS CP INDUSTRIES, INC. OF AMERICA CHRISTY PARK PLANT - - --------------------------------- --------------------------------- George Becker Jack T. Croushore President President - - --------------------------------- --------------------------------- Richard H. Davis C.H. Ellis Vice-President Vice-President Administration Human Resources - - --------------------------------- --------------------------------- Leon Lynch K.P. Collins Vice-President Vice-President Human Affairs Business Development - - --------------------------------- --------------------------------- Leo W. Gerard Roger L. Seese Secretary Controller - - --------------------------------- Andrew V. Palm Director District #10 - - --------------------------------- Dennis R. Fleming Staff Representative District #10 - - --------------------------------- John McWhorter Unit Chairman - - --------------------------------- Dan Witkowski Unit Secretary EX-10.8 3 EXHIBIT 10.8 40 TABLE OF CONTENTS Article Page* 1 Purpose 1 2 Management 2 3 Existing Working Conditions 3 4 Contracting Out 4 5 General Principles 5 6 Union Shop 6 7 Grievance Procedure 7 8 Safety and Health 9 9 Hours of Work 11 10 Overtime and Holidays 13 11 Vacations 15 12 Seniority 17 13 Military Service 21 14 Severance Allowance 21 15 Rates of Pay 23 16 Termination 24 Appendices A Letter of Agreement on Misc. Matters 26 B Manning Agreement 27 C Standard Hourly Wage Scale 29 C-1 Standard Hourly Wage Scale 30 D Memorandum - Indirect Incentives 31 E Memorandum - Benefits 32 F Letter of Agreement - 1996 33 * Page references are to the original, signed agreement and not the "EDGARized" version of the agreement as filed herein. 41 AGREEMENT This Agreement is between CP Industries, Inc. (Company) and the United Steelworkers of America on behalf of Local #1514 (Union). The Company recognizes the Union as the exclusive collective bargaining representative of all hourly production and maintenance employees for whom the Union is certified by the National Labor Relations Board as the exclusive collective bargaining representative. This agreement applies only to operations at the Christy Park Plant in McKeesport, PA. Any future business ventures which may be pursued and/or obtained by CP Industries, Inc. will be considered separate entities and not subject to the provisions of this Agreement. ARTICLE 1 PURPOSE The purpose of this agreement is to establish rates of pay, hours of work and other conditions of employment promoting a cooperative relationship among all employees, ensuring uninterrupted operations and achieving the highest level of employee performance consistent with safety, good health, and sustained effort. ARTICLE 2 MANAGEMENT 2.1 The Company retains the exclusive right to manage the business and to direct the work force. These rights include the right to hire, suspend or discharge for proper cause, or transfer, and the right to relieve employees from duty because of lack of work or for other legitimate reasons. 2.2 A supervisor will not perform work normally done by a bargaining unit employee except in the following types of situations: experimental and/or demonstrational work, work under emergency conditions where interference with operations, injury or damage to material or equipment could occur, and work under existing circumstances would be unreasonable to assign to bargaining unit employees or is negligible in amount. Work incidental to supervisory duties or a job normally performed by a supervisor, even though similar to duties in bargaining unit jobs, shall not be affected by this provision. 2.3 If a supervisor performs work in violation of the above and the employee who would have done the work and who has realized a loss of earnings can be identified, the Company shall pay that employee the applicable standard hourly wage rate for the time involved or for four hours, whichever is greater. 2.4 An employee who is assigned as a temporary foreman shall not cease to be an employee, although the terms and conditions of employment applicable to the position shall be solely determined by the Company. An employee assigned as a temporary foreman on a weekly basis will not work in the bargaining unit during that week; provided, however, if all employees are at work in a given department wherein a temporary foreman is so assigned, there shall be no prohibition in his performance of bargaining unit functions as required. An employee will not be assigned as a temporary foreman merely as a means of retaining him from layoff at a time when the application of his seniority would not otherwise result in his retention. 2.5 Crew leader assignments will be made at the discretion of management; 42 however, such assignments will not be made for a period exceeding four consecutive months. ARTICLE 3 EXISTING WORKING CONDITIONS A. Identified specific practices or customs in effect as of the date of this agreement will remain in effect except as they are changed or eliminated by mutual agreement or, if the basis for the existence of such practice or custom is changed or eliminated, the Company will have the right to void same. When such a change or elimination is made by the Company, any affected employee shall have recourse to the grievance procedure to have the Company justify its action. A three month period of time will be provided following the effective date of this agreement for the parties to agree to which, if any, practices exist. Any claimed practice, custom, or condition not identified and agreed to during this time will not be recognized. ARTICLE 4 CONTRACTING OUT 4.1 The Company intends to use its employees when reasonable and practicable for work on its property. The following shall govern the various types of contracting out situations: A. Where the practice has been to perform production, service, and day- to-day maintenance and repair work within the plant by bargaining unit employees, such will continue unless otherwise agreed to. B. Where the practice has been to contract out such work, it may continue unless otherwise agreed to. 4.2 Maintenance and repair work performed within the plant, other than that described above, and installation, replacement and reconstruction of equipment and productive facilities, other than that described below, may not be contracted out for performance within the plant unless contracting out can be demonstrated by the Company to have been the more reasonable course of action. 4.3 New construction including major installation, major replacement and/or reconstruction of equipment and productive facilities may be contracted out. 4.4 A joint committee will be established to discuss problems which may arise concerning the application of this Article. The Union representative(s) will be notified when the Company decides to contract out work for performance in the plant; such notice will be in advance of contracting out except where emergency requirements preclude same. 4.5 Should the Union representatives on the committee believe discussion is necessary, they shall request a meeting within 5 days after notice is given and a meeting shall be held within 3 days thereafter. If the matter is not resolved, a grievance challenging such action may be filed, if initiated within 30 days from the date of the Company's notice. If the Company fails to notify the Union on matters covered by paragraphs 4.4 and 4.5 and the reason was not due to an emergency situation, and such failure deprived the Union of a reasonable opportunity to suggest practicable alternatives, the Board of 43 Arbitration shall have the authority to fashion a remedy appropriately. 4.6 The Company will notify the Union of significant items of maintenance or repair work to be performed outside the plant but no requirement of notification shall exist concerning the purchase of goods, materials and equipment. The parties agree that if work which had been historically and exclusively done by bargaining unit employees is sent outside the plant to be performed and that activity prompts a pending layoff of employees who would have done the work, such layoff will not occur while the work continues to be performed outside the plant. 4.7 Janitorial services will be provided by an outside contractor. ARTICLE 5 GENERAL PRINCIPLES 5.1 The provisions of this agreement will be applied to all employees without regard to race, color, religious creed, national origin, sex or age. 5.2 There will be no Union activity on Company time. There will be no strikes, work stoppages, slow-downs, or other acts which would interrupt or impede operations. No officer or representative of the Union shall authorize, instigate, aid, or condone any such activities. 5.3 The Company agrees there will be no lockouts. 5.4 The right of the Company to discipline an employee for a violation of this agreement shall be limited to the failure of such employee to discharge his responsibilities as an employee and may not in any way be based upon the failure of such employee to discharge his responsibilities as a representative or officer of the Union. The Union has the exclusive right to discipline its officers and representatives. The Company has the exclusive right to discipline its officers, representatives, and employees. ARTICLE 6 UNION SHOP 6.1 Each employee in the bargaining unit on the date of this agreement and each person who becomes an employee shall, as a condition of continued employment, be required to be a member of the Union on the 30th day following the date of this agreement or the beginning of his employment, whichever is later. 6.2 The Company agrees to deduct, upon written authorization signed by the employee, initiation fees and/or monthly dues from employees' earnings. The amount of monthly dues shall be twice the employee's current hourly vacation rate. 6.3 The Union shall indemnify and save the Company harmless against any and all claims, demands, suits or other forms of liability that shall arise out of or by reason of action taken or not taken by the Company for the purpose of complying with any of the provisions of this article. 44 ARTICLE 7 GRIEVANCE PROCEDURE 1. Differences between the parties as to interpretation or application of, or compliance with, the provisions of this agreement should be addressed in an expeditious and effective manner. The following procedure for processing grievances will be applied: A. An Employee and/or his grievance committeeman will discuss complaints or grievances with his immediate supervisor within ten (10) calendar days after the occurrence or non-occurrence of the event prompting the grievance, or the date on which such event should reasonably have become known. B. If the issue remains unresolved, a grievance must be filed in writing, signed by the employee and his grievance committeeman, and submitted to his supervisor no later than ten (10) calendar days after a response from the supervisor. The written grievance will set forth the specific alleged infraction, facts relating thereto, and the contractual provisions claimed to have been violated. A grievance not conforming to this format will not be appropriate for processing. C. A meeting will be held with a Company representative from the area involved at mutually agreeable times. If an answer is not provided within ten (10) calendar days thereafter, the grievance will be granted. D. Should the grievance remain unresolved, it may be appealed within ten (10) calendar days for a hearing before the President and/or his representatives, the Grievance Committee and a Representative from the International Union, if desired. Meetings will be held at mutually agreeable times after the appeal is received. The resolution of grievances up to and including this level will be without prejudice to the position of either party. For any unresolved grievance, a summary of pertinent points discussed will be prepared by the Company and jointly signed. E. In the event the grievance is not settled, it may be appealed to an arbitrator mutually selected by the parties, provided such is so appealed within thirty (30) calendar days after (D) above. F. Hearings before an arbitrator will be held within thirty (30) calendar days after (E) above. G. An arbitrator will have jurisdiction and authority only to interpret, apply, or determine compliance with this agreement and may not add to, detract from, or alter this agreement. H. The costs of arbitration will be equally shared by the parties. I. If a grievance is not appealed in accordance with the above, it shall be considered settled on the basis of the last decision made. 7.2 A Grievance Committee will be designated by the Union and will number no more than four employees, one of whom will be the Chairman. 7.3 In all instances where the Company believes an employee's conduct justifies discharge, he will first be suspended for not more than five (5) calendars days and notified in writing that he will be discharged at the end thereof. During such five day period, if the employee believes his proposed discharge is unjust, he may request a hearing and discussion of the offense 45 before the Vice-President--Operations (or Director, if appropriate). Within five (5) calendar days thereafter, the suspension will be affirmed, modified, extended, revoked or converted to discharge. Should the determination result in discharge, the employee may file a grievance within five (5) calendar days after notice. A hearing before the President and/or his representatives will be held and decision rendered within ten (10) calendar days. This decision may be appealed to arbitration and heard in the manner set forth above. Additionally, the Arbitrator will not have jurisdiction to modify the degree of discipline imposed should it be determined that the employee has been suspended or discharged for proper cause. ARTICLE 8 SAFETY AND HEALTH 8.1 The safety and health of all employees is of great concern to the Company and Union of CP Industries, Inc. and all employees will accept "safety" as a part of their individual responsibility. 8.2 The Company will make all necessary repairs and adjustments to assure the safety of all its employees and shall comply with all applicable State and Federal regulations regarding job safety and health. The Union agrees to cooperate fully in providing a safe work environment. 8.3 Protective devices and other equipment deemed necessary by Management to protect employees from accidents and health hazards shall be provided by the Company. On July 1, 1997 and July 1, 1999, each employee, other than probationary employees, who is required to wear safety shoes or metatarsals will be provided an allowance of $40.00 to purchase safety shoes for wear at the plant. 8.4 The Company welcomes suggestions from all employees or from the Union which offer practical and feasible ways of improving plant safety. An employee may submit safety suggestions through his immediate supervisor. 8.5 The Company reserves the right to adopt reasonable plant rules and may impose appropriate discipline for the violation of such rules. Employees of CP Industries must recognize that compliance with safety rules and regulations is a condition of employment. To be effective, all employees must be constantly on the lookout for any condition or action which might be unsafe or careless. Both the Union and the Company agree to promote all rules necessary to insure safety on the job. 8.6 Both the Company and the Union agree that failure to report accidents, even if minor in nature, can result in a loss of a life or limb to other workers and also disrupt the efficient operation of the plant. 8.7 Consequently, employees are required to immediately report to their supervisor any accident or injury, major or minor, which may occur to them. If then directed by his supervisor, the employee will report immediately for medical treatment. 8.8 A Joint Union - Management Safety and Health Committee will be established. 46 ARTICLE 9 HOURS OF WORK 9.1 This Article defines the normal hours of work and shall not be construed as a guarantee of hours per day or per week, or as a guarantee of any amount of pay, or as a limitation on hours of work in a day or week. 9.2 The normal work day shall consist of eight (8) hours in a twenty-four (24) hour period with five (5) consecutive workdays constituting a normal work week. While forty (40) hours shall be considered a normal pattern, the Company may reduce the work week to thirty-two (32) hours at its option. 9.3 The eight (8) hours work day shall be consecutive with the following conditions applicable: (1) A ten (10) minute coffee break at 9:00 AM; (2) a twenty (20) minute lunch break at Noon, and (3) employees may leave their respective work areas for wash-up no earlier than fifteen (15) minutes to the hour at the end of the scheduled turn and may exit the plant no earlier than seven (7) minutes to the hour. The parties recognize that in the past there has been abuse of these privileges; in this light, the Union representatives and all employees pledge adherence to these regulations and will confine non-work time to the limitations so stated. If it is determined that abuse persists, the privilege of the fifteen (15) minute wash-up time will be revoked and employees will work to the end of the hour of the scheduled turn. 9.4 An employee who reports for work as scheduled and is sent home for lack of work shall receive four (4) hours pay at his standard hourly wage rate provided he was not otherwise notified not to report. The Company may assign the employee to other work for which he is qualified in lieu of being released. If the employee refuses the assignment, or lack of work is due to an emergency such as fire, flood, explosion, storm, utility failure, mechanical breakdown, work stoppage, labor dispute , act of God, or for any reason or condition beyond control of the Company, no compensation is due. 9.5 An employee who is called for jury service or subpoenaed as a witness shall be excused from work for the days on which he serves. Service includes required reporting whether or not he is used. In such case, the employee will be paid the difference between the amount paid by the court and his standard hourly wage rate for eight (8) hours for each day. The employee must present proof of service and of the amount of pay received. 9.6 When death occurs to an employee's legal spouse, mother, father, mother-in-law, father-in-law, son, daughter, brother, sister, grandparents or grandchildren (including stepfather, stepmother, stepchildren, stepbrother or stepsister when they have lived with the employee in an immediate family relationship), an employee, upon request, will be excused and paid for up to a maximum of three (3) scheduled shifts (or for such fewer shifts as the employee may be absent) which fall within a three (3) consecutive calendar day period; provided, however, that one such calendar day shall be the day of the funeral and it is established that the employee attended the funeral. Payment shall be eight (8) times his average straight-time hourly earnings (as computed for jury pay). An employee will not receive funeral pay when it duplicates pay received for time not worked for any other reason. Time thus paid will not be counted as hours worked for purposes of determining overtime or premium pay liability. 47 ARTICLE 10 OVERTIME AND HOLIDAYS 10.1 Overtime at the rate of 1-1/2 times the regular rate of pay shall be paid for: A. Hours worked in excess of eight (8) hours in a workday or forty (40) hours in a week. B. Hours worked on a sixth or seventh workday when work was performed on five (5) other workdays in a week. C. Hours worked on a sixth or seventh workday of a seven (7) consecutive- day period during which the first five (5) days were worked, whether or not all of such days fall within the same payroll week except as mutually agreed. Overtime must be claimed by notification of the employee's foreman within a week after the sixth or seventh day is worked. 10.2 Payment of overtime rates shall not be duplicated for the same hours worked. 10.3 The designated holidays are: January 1, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day, the day after Thanksgiving Day, the day before Christmas Day and Christmas Day. If the calendar holiday is on Sunday, the holiday shall be the following Monday. 10.4 For hours worked on any designated holiday, an overtime rate of 2-1/2 times an employee's regular rate of pay will be paid. 10.5 An eligible employee who does not work on a designated Holiday will be paid eight (8) times his current hourly vacation rate. If, however, he is scheduled to work and fails to report or perform work, he will be ineligible for pay unless his absence was due to sickness or because of death in the immediate family (parents including in-laws, children, brother, sister, spouse and grandparents) or because of similar good cause. 10.6 An eligible employee is one who: (a) Has completed thirty (30) turns of work since his last hire; (b) Performs work or is on vacation in the payroll period in which the Holiday occurs; or if he is laid-off for such payroll period, performs work or is on vacation in both the payroll period preceding and the payroll period following the payroll period in which the Holiday occurs; and (c) Works as scheduled or assigned both on his last scheduled workday prior to and on his first scheduled workday following the Holiday unless he has failed to so work because of sickness or because of death in the immediate family or because of similar good cause. 10.7 When a Holiday occurs during an eligible employee's scheduled vacation, he shall be paid for same in addition to his vacation pay. Such payment shall also apply to (1) an employee whose vacation has been scheduled prior to his layoff and who thereafter is laid off and takes his vacation as scheduled, or (2) an employee who is not at work at the time his vacation is scheduled, but who thereafter returns to work and is then absent from work during a Holiday week because of his scheduled vacation. However, an employee who is not at work at the time of scheduling his vacation and is not working at the time his vacation commences, is not eligible for Holiday pay for such Holiday occurring during his vacation. 48 ARTICLE 11 VACATIONS 11.1 Eligible employees shall receive vacation in accordance with the following:
Years of Continuous Service Weeks of Vacation 1 but less than 3 1 3 but less than 10 2 10 but less than 17 3 17 but less than 25 4 25 or more 5
Vacations will be taken on a calendar week basis. 11.2 Continuous service is that time calculated pursuant to Article 12 - Seniority, except that there shall be no accumulation of service in excess of the first two (2) years of any continuous period of absence on account of layoff or physical disability (compensable disability excepted, as provided in Article 12) in the calculation of service for vacation eligibility. 11.3 To be eligible, an employee must not have been absent from work for six (6) consecutive months or more in the preceding calendar year and must work some time in current calendar year. However, any period of absence while on vacation or due to a compensable disability in the year in which he incurred such disability or while in military service in the year of his reinstatement to employment, shall be deducted in determining the length of a period of absence from work. 11.4 An employee forfeits any vacation benefits if he quits, retires, dies or is discharged prior to January 1 of the vacation year. 11.5 Vacations will, so far as practicable, be granted at times most desired by employees (longer service employees being given preference as to choice); but the final right to allot vacation periods and to change such allotments is exclusively reserved to the Company in order to insure the orderly operation of the plant. 11.6 Vacations may be scheduled throughout the calendar year; however, the Company may designate certain weeks as vacation shutdown periods. 11.7 Each employee granted a vacation under this Article will be paid at his average rate of earnings per hour for the first two of the last four closed and calculated pay periods worked by the employee preceding the first week of the actual vacation period. Hours of vacation pay for each vacation week shall be the average hours per week worked by the employee in the first two of the last four pay periods worked by the employee preceding the first week of the actual vacation period, but not less than forty (40) hours per week nor more than forty-eight (48) hours per week. 11.8 The average rate of earnings per hour shall be computed by: A. Totaling pay received for all hours worked (total earnings, excluding premium for overtime, holiday, Sunday and shift differential) and pay for unworked holidays, and 49 B. Dividing such earnings by the total of hours worked and unworked holiday hours which were paid for. ARTICLE 12 SENIORITY 12.1 The parties recognize that promotional opportunity and job security in event of promotions, decrease of forces, and recalls after layoffs should increase in proportion to length of continuous service. 12.2 It is understood that the Manning Agreement will provide the guidelines for administration of work assignments and mobility of the work force to the extent stated therein. The Manning Agreement is Appendix B. The Production Engineering Planning Department has two separate units. 12.3 Plant continuous service shall be used for all purposes in which a measure of continuous service is utilized, except vacation preference purposes where continuous combined corporation service will apply. In the event two or more employees have identical plant continuous service, the tie will be broken on the basis of continuous combined corporation service. If they are the same, the tie will be resolved with the employee having the earliest birth date being recognized as the senior employee. 12.4 It is understood and agreed that in all cases of: A. Promotion the following factors as listed below shall be considered; however, only where factors "1" and "2" are relatively equal shall continuous service be the determining factor: 1. Ability to perform the work, 2. Physical fitness, 3. Continuous service. B. Decrease in forces or recalls after layoffs the following factors as listed below shall be considered; however, only where both factors "1" and "2" are relatively equal shall continuous service be the determining factor: 1. Ability to perform the work, 2. Physical fitness, 3. Continuous service. 12.5 Continuous service shall be calculated from date of first employment or reemployment following a break in continuous service. Continuous service shall be broken by: A. Quit B. Discharge, provided that if the employee is rehired within six (6) months the break in continuous service shall be removed. C. Termination in accordance with Article 14 - Severance Allowance. D. Absence in excess of two years, except as provided in 12.7 and 12.8 below. 12.7 If an employee is absent because of layoff or physical disability in excess of two (2) years, he shall continue to accumulate continuous service during such absence for an additional period equal to (i) three years, or (ii) the excess, if any, of his length of continuous service at commencement of such absence over two years, whichever is less. Any accumulation in excess of 50 two years during such absence shall be counted, however, only for purposes of this Article and shall not be counted for any other purpose under this agreement. In order to avoid a break in service within the above period after an absence in excess of two years, an employee absent because of layoff or physical disability must report for work promptly upon termination of either cause, provided, in the case of layoff, the Company has mailed a recall notice to the last address furnished to the Company by the employee. 12.8 Absence due to a compensable disability incurred during course of employment shall not break continuous service, provided such individual is returned to work within thirty (30) days after final payment of statutory compensation for such disability or after the end of the period used in calculating a lump-sum payment. 12.9 New employees and those hired after a break in continuity of service will be regarded as probationary employees for the first five hundred and twenty (520) hours of actual work and will receive no continuous service credit during such period. Probationary employees may be laid off or discharged as exclusively determined by Management. Probationary employees continued in the service of the Company subsequent to the first five hundred and twenty (520) hours of actual work shall receive full continuous service credit from date of original hiring. 12.10 When a decrease in force continues to the point at which a grievance committeeman would otherwise be laid off, he shall be retained in active employment (for such hours per week as may be scheduled for an employee on the job to which he is assigned) for the purpose of continuity in the administration of this Agreement in the interest of employees and the Company so long as a work force is at work in the plant area which he represents on the grievance committee. In any event, no grievance committeeman shall be retained in employment under this paragraph unless work which he can perform is available in the plant area which he represents on the grievance committee. 12.11 The principles set forth in the preceding paragraph shall apply on a plant-wide basis to employees who hold the following office: President or Vice-President. This applies only if not in conflict with the National Labor Relations Board's ruling. When there are not sufficient jobs available to provide employment in accordance with both this paragraph and the preceding paragraph, priority shall be given to employees covered by the preceding paragraph. 12.12 The Company shall make available for review by the local union concerned lists showing the relative continuous service of each employee in each seniority unit. Such lists shall be revised by the Company from time to time, as necessary, to keep them relatively up-to-date. The seniority rights of individual employees shall in no way be prejudiced by errors, inaccuracies, or omissions in such lists. 12.13 The procedure outlined below will govern assignments to permanent job vacancies if and when Management determines that such a vacancy exists and is to be filled: Within a given line of progression, a vacancy within such line would be filled by employees occupying jobs immediately below that job, by job class, on the basis of plant service. Then, to fill the ensuing vacancy in that job, employees in the next lower level job would be offered promotion. This procedure would continue until there remained a vacancy at the entry level job. At this 51 point, for departments where more than one line of progression exists, employees in other lines may submit applications for the posted entry level job. In the end, a department entry level job would be filled on a plant-wide basis. In department where all jobs are part of one line of progression, the entry level job will be posted and filled on a plant-wide basis. An entry level job will be posted for a period of seven (7) calendar days. Trade and craft vacancies will be posted for consideration on a plant-wide basis. Vacancies not filled within 45 days will be reposted. A successful bidder may decide to return to his former incumbent position within 45 days and such return will be without loss of his seniority standing. In such case, other applicants will be considered. ARTICLE 13 MILITARY SERVICE 13.1 Employees who enter military service shall receive all rights and privileges accorded them by the laws of the United States. 13.2 Employees called for encampment of the National Guard or Reserve shall receive the difference in their service pay and average rate of earnings (as calculated for vacation pay) for hours they would have worked for up to a maximum of two (2) weeks per year. ARTICLE 14 SEVERANCE ALLOWANCE 14.1 If the Company, in its sole discretion, decided to permanently close the plant or a department thereof, an employee with three (3) or more years of continuous Company service whose employment is terminated because he was not entitled to nor offered other employment shall be eligible for severance allowance in accordance with the following scale:
Continuous Company Service Weeks of Severance Allowance 3 years but less than 5 years 4 5 years but less than 7 years 6 7 years but less than 10 years 7 10 years or more 8
14.2 A week's severance allowance shall be the employee's vacation rate as calculated pursuant to Article 11. Payment shall be made in a lump sum at the time of termination and acceptance of same shall terminate employment and continuous service for all purposes. 14.3 An employee who is offered employment in another department of the plant shall not be entitled to severance allowance. If, however, he transfers and such transfer results directly in the permanent displacement of some other employee, the latter shall be eligible for severance allowance provided he otherwise qualifies. 14.4 Severance allowance shall not be duplicated for the same severance and any payment received from other sources shall be deducted from the amount to which the employee may be entitled under this article. 52 14.5 An employee whose employment would otherwise have been terminated may elect to be placed on layoff for thirty (30) days during which time he shall decide whether to remain on layoff or take severance allowance. If he elects to continue on layoff, severance allowance is permanently waived. Moreover, any SUB payments received during this time shall be deducted from any severance allowance to be paid. ARTICLE 15 RATES OF PAY 15.1 The standard hourly wage scale of rates for the respective job classes shall be those set forth in Appendix C and C-1 and shall continue in effect without change until the expiration date of this Agreement. 15.2 The starting rate for a newly hired employee will be $2.50 per hour less than the established rate for the particular job to which he is assigned. This rate will remain in effect for the first 2080 hours of work. 15.3 No basis shall exist for an employee to allege that a wage-rate inequity exists and no complaint or grievance on behalf of an employee alleging a wage-rate inequity shall be initiated or processed during the terms of this Agreement. 15.4 Notwithstanding any provisions of this Article, errors in application of rates of pay shall be corrected. 15.5 The Company will not establish performance standards for nonincentive jobs, except as such jobs are covered by incentives. 15.6 For hours worked on the afternoon shift there shall be paid a premium rate of $.30 per hour. For hours worked on the night shift there shall be paid a premium rate of $.45 per hour. Shifts are identified as follows: Day Shift - Turns starting between 6:00 AM and 8:00 AM inclusive. Afternoon Shift - Turns starting between 2:00 PM and 4:00 PM inclusive. Night Shift - Turns starting between 10:00 PM and 12 midnight inclusive. 15.7 Shift differential shall be included in the calculation of overtime compensation but shall not be included in the base hourly rate for calculating incentive earnings. 15.8 An employee shall be paid a premium of 50% based on his regular rate of pay for all hours worked on Sunday which are not paid for on an overtime basis. 15.9 Existing practices and procedures governing the administration of incentive applications and job descriptions and classifications will remain in effect for the duration of this Agreement unless modified by mutual consent. However, as set forth in Appendix D, employees covered by the identified indirect incentive applications will be paid the reference average rate. ARTICLE 16 TERMINATION This agreement shall become effective June 1, 1996, and remain in force until Midnight, May 31, 2001 and shall thereafter continue in force from year to 53 year unless either party desires to modify the terms. The party desiring the modification must notify the other party in writing not less than sixty (60) days prior to the expiration date of this Agreement, or not less than sixty (60) days prior to an anniversary date hereof. Should either party serve such notice, a joint conference shall convene not later than thirty (30) days prior to the expiration date in the year in which the notice given. Notice shall be by registered mail to the other party. 54 IN WITNESS WHEREOF, and intending to be legally bound hereby, the proper and duly authorized officers of the Company and the Union have executed this Agreement effective this date and year June 1, 1996 -------------------------------- UNITED STEELWORKERS OF CP INDUSTRIES, INC. AMERICAN AFL-CIO-CLC - - --------------------------------- --------------------------------- Jack T. Croushore, President George F. Becker, Int'l President - - --------------------------------- --------------------------------- C. Herbert Ellis, Vice President Leon Lynch, Vice President Human Resources Human Affairs - - --------------------------------- --------------------------------- Roger L. Seese, Controller Leo W. Gerard, Sec./Treas. - - --------------------------------- --------------------------------- Kevin P. Collins, Vice President Richard H. Davis, Vice President Business Development Administration --------------------------------- Andrew V. Palm, Director District 10 --------------------------------- Dennis R. Fleming, Staff Rep. USWA - LOCAL UNION 1514 (O&T) --------------------------------- Walter N. Grimes, President --------------------------------- Gerald R. Robinson, Vice President --------------------------------- Edward T. Aaron, Jr., Rec. Secretary --------------------------------- James McLaughlin, Grievance Comm. --------------------------------- Samuel Zenobi, Grievance Comm. 55 APPENDIX A LETTER OF AGREEMENT ON MISCELLANEOUS MATTERS June 4, 1992 Mr. Richard Pastore Staff Representative United Steelworkers of America Dear Mr. Pastore: This will confirm our understanding and agreement that the following matters were resolved as stated during the 1992 negotiations on behalf of USW Locals #1514 (hourly) and #3330 (salary): 1. Appendix D of the hourly 6/1/87 Agreement is modified as follows: Pay performance for Plan 4650-01 (Tool Grinders) is 114% and Plan 4900-03 (Heavy Forge) is 117%. 2. Appendix D of the salary 6/1/87 Agreement is modified to state the Service Bonus Plan provisions will remain in place for the duration of the 6/1/92 Agreement. 3. The terms and conditions of the SUB plan that previously existed will remain in effect. 4. The parties agree to meet to explore the feasibility of developing and installing a gain-sharing plan. 5. For retirements after Sept. 1, 1992, the minimum pension formula will be increased by $1.00 for each year of service worked as a CP Industries, Inc. employee, i.e. on or after August 1, 1986. 6. The parties recognize the "American With Disabilities Act" becoming effective 7/26/92 and pledge support for and conformance with the principles and intent of this legislation. Sincerely, (Signed) --------------------------------- C.H. Ellis, Vice President Human Resources and Administrative Services CONFIRMED: (Signed) - - --------------------------------- Richard Pastore USW Staff Representative 56 APPENDIX B MANNING AGREEMENT The parties recognize that existing narrow job descriptions necessarily limit the scope of employees' work activity; the need to revise manning procedures to permit more flexibility in job assignment is evident. To this end, the parties agree that job combinations will occur and employee utilization will be broadened. In order to realize this expansion of work function and overlapping of assignments, the parties will address jobs performed by CP Industries, Inc. employees. As those employees terminate (defined as quit, retire, die), functions may be combined with other jobs as determined by Management. Input from the Union representatives with respect to the most efficient manning arrangement will be sought prior to a pending combination. It is understood that the ability to combine work functions is at the discretion of Management; however, should Management decide that a replacement in kind is needed, those other employees on layoff who still retain recall rights will be considered prior to seeking new hires. It is agreed and understood that for a given week, Management will develop a schedule, placing recognized incumbents on a job if it is reasonably anticipated that performance of such work functions will be required. It is expected that these identified employees will work on scheduled jobs during the week as well as be available for reassignment as the need exists. This mobility is not subject to question during the week and only an appropriate challenge may be lodged alleging a continuing violation or abuse of the intent of the system after initial discussion by the parties to air the concern. Management will, in the course of reviewing anticipated work and related manning, consider the respective seniority status of a department's employees: however, it is recognized that where junior-in-service employees hold incumbency on certain primary, critical jobs, those individuals may work a portion of the time on the scheduled job and then may be reassigned for the duration while senior employees are on layoff. The parties agree that for purposes stated herein, there shall exist four (4) departments: (A) Cylinder Manufacturing, (B) Maintenance, (C) Stores, and (D) Quality Control. The latter department will still retain two (2) separate units (Metallurgical Lab and Inspection) for force reduction purposes only. The Company's intention is to reassign within the department as the needs dictate, avoiding the crossing of departmental lines. There could be exceptions, however, depending on the circumstances; e.g. should a given work situation arise during a week where a need exists to get a particular job done and available departmental employees are being fully utilized, the options may be several: (1) A Management decision to postpone the job; (2) Use overtime to complete within the week; (3) With the approval of the Chairman or Secretary of the Grievance Committee, use employees from other departments; (4) Some combination of above. 57 Standard Hourly Wage Scale Appendix C (Non-Incentive jobs) Job Effective Effective Effective Effective Effective Class 6/1/96 6/1/97 6/1/98 6/1/99 6/1/00 1-2 $13.245 $13.745 $14.245 $14.745 $15.345 3 $13.392 $13.892 $14.392 $14.892 $15.492 4 $13.539 $14.039 $14.539 $15.039 $15.639 5 $13.686 $14.186 $14.686 $15.186 $15.786 6 $13.833 $14.333 $14.833 $15.333 $15.933 7 $13.980 $14.480 $14.980 $15.480 $16.080 8 $14.127 $14.627 $15.127 $15.627 $16.227 9 $14.274 $14.774 $15.274 $15.774 $16.374 10 $14.421 $14.921 $15.421 $15.921 $16.521 11 $14.568 $15.068 $15.568 $16.068 $16.668 12 $14.715 $15.215 $15.715 $16.215 $16.815 13 $14.862 $15.362 $15.862 $16.362 $16.962 14 $15.009 $15.509 $16.009 $16.509 $17.109 15 $15.156 $15.656 $16.156 $16.656 $17.256 16 $15.303 $15.803 $16.303 $16.803 $17.403 17 $15.450 $15.950 $16.450 $16.950 $17.550 18 $15.597 $16.097 $16.597 $17.097 $17.697 19 $15.744 $16.244 $16.744 $17.244 $17.844 20 $15.891 $16.391 $16.891 $17.391 $17.991 21 $16.038 $16.538 $17.038 $17.538 $18.138 22 $16.185 $16.685 $17.185 $17.685 $18.285 23 $16.332 $16.832 $17.332 $17.832 $18.432 24 $16.479 $16.979 $17.479 $17.979 $18.579 25 $16.626 $17.126 $17.626 $18.126 $18.726 58 Standard Hourly Wage Scale Appendix C-1 (Incentive Jobs) Job Calculation Effective Effective Effective Effective Effective Class Rate 6/1/96 6/1/97 6/1/98 6/1/99 6/1/00 1-2 $4.600 8.645 9.145 9.645 10.145 10.745 3 $4.719 8.673 9.173 9.673 10.173 10.773 4 $4.838 8.701 9.201 9.701 10.201 10.801 5 $4.957 8.729 9.229 9.729 10.229 10.829 6 $5.076 8.757 9.257 9.757 10.257 10.857 7 $5.195 8.785 9.285 9.785 10.285 10.885 8 $5.314 8.813 9.313 9.813 10.313 10.913 9 $5.433 8.841 9.341 9.841 10.341 10.941 10 $5.552 8.869 9.369 9.869 10.369 10.969 11 $5.671 8.897 9.397 9.897 10.397 10.997 12 $5.790 8.925 9.425 9.925 10.425 11.025 13 $5.909 8.953 9.453 9.953 10.453 11.053 14 $6.028 8.981 9.481 9.981 10.481 11.081 15 $6.147 9.009 9.509 10.009 10.509 11.109 16 $6.266 9.037 9.537 10.037 10.537 11.137 17 $6.385 9.065 9.565 10.065 10.565 11.165 18 $6.504 9.093 9.593 10.093 10.593 11.193 19 $6.623 9.121 9.621 10.121 10.621 11.221 20 $6.742 9.149 9.649 10.149 10.649 11.249 21 $6.861 9.177 9.677 10.177 10.677 11.277 22 $6.980 9.205 9.705 10.205 10.705 11.305 23 $7.099 9.233 9.733 10.233 10.733 11.333 24 $7.218 9.261 9.761 10.261 10.761 11.361 25 $7.337 9.289 9.789 10.289 10.789 11.389 59 APPENDIX D May 27, 1987 Mr. Howard J. Allen President Local #1514 United Steelworkers of America Dear Mr. Allen: This will confirm our understanding that effective 6/1/87, employees covered by the following indirect incentive applications will be paid the average index of pay performance so indicated. This rate, which is the average of twenty six (26) pay periods from 4/6/86 through 4/4/87, will remain in effect until changed by mutual agreement. Plan 2952 (Assigned Maintenance) 114% Plan 2953 (Central Shops) 114% Plan 4650-01 (Tool Grinders) 107% Plan 4900-01 (Cylinder Finishing) 117% Plan 4900-02 (Roll Forge Finish) 114% Plan 4900-03 (Heavy Forge) 109% Sincerely, (Signed) --------------------------------- C. H. Ellis, Director Human Resources & Administration Services CP Industries, Inc. CONFIRMED: (Signed) - - --------------------------------- H. J. Allen, President USW Local #1514 60 APPENDIX E Mr. Howard J. Allen May 28, 1987 President Local #3330 United Steelworkers of America Dear Mr. Allen: This will confirm our understanding and agreement that the following modifications are made to existing benefit programs: 1. Effective February 1, 1988, for retirements on or after July 31, 1986, increase minimum pension formula by $1.00. The percent pension calculation method is eliminated. 2. Effective for retirements on or after January 31, 1987, increase pension protection afforded short service employees by lowering eligibility for deferred vested pension from 10 years to 5 years of service. 3. Effective February 1, 1988, increase the minimum monthly surviving spouse's benefit by $10.00 for surviving spouses of active employees who die on or after July 31, 1986 and for the surviving spouses of employees who retire on or after July 31, 1986 and who die thereafter. 4. Effective July 1, 1987, adopt pre-certification of inpatient admissions and mandatory second surgical provisions. 5. Increase major medical deductible to $150 for individuals and $300 for families. 6. Extend subrogation provisions applicable to dental benefits to all health care benefits. Sincerely, (Signed) --------------------------------- C. H. Ellis, Director Human Resources and Administrative Services CP Industries, Inc. CONFIRMED (Signed) - - --------------------------------- H. J. Allen, President USW Local #1514 61 APPENDIX F LETTER OF AGREEMENT - 1996 May 30, 1996 Mr. Dennis Fleming Staff Representative United Steel Workers of America Dear Mr. Fleming: In the interest of renewing our agreement effective June 1, 1996, the following contract modifications are proposed: 1.) The Steel Workers' Select Blue POS 100 Plan with mail order drug provisions will be implemented effective 8/1/96 for all CPI bargaining unit employees. Existing dental and vision coverage will be retained. 2.) Each active employee, other than probationary employees, as of 6/1/96, will receive a gross amount of $500.00 on or before 7/1/96. Another payment of $500.00 will be made in a similar manner in 1998. 3.) On July 1, 1997 and July 1, 1999, each employee, other than probationary employees who is required to wear safety shoes will be provided an allowance of $40.00 to purchase same. 4.) For retirements after September 1, 1996, the minimum pension formula will be increased an additional $1.00 for each year of service as a CP Industries, Inc. employee; i.e. on or after August 1, 1986. For retirements after September 1, 2000, the minimum pension formula will be increased an additional $1.00 for each year of service as a CP Industries, Inc. employee; i.e. on or after August 1, 1986. 5.) For future retirements, the company will not use the USX percent-calculated figure in determining the offset to be applied... the USX minimum formula-calculated amount will be used. 6.) The amount of weekly Sickness & Accident benefits will be $300.00 for payment after 6/1/1996. 7.) An increase in the hourly additive to the standard hourly wage scale rate as follows: 6/1/96 --- $ .50 6/1/97 --- $ .50 6/1/98 --- $ .50 6/1/99 --- $ .50 6/1/00 --- $ .60 8.) This agreement is effective June 1, 1996 through May 31, 2001. The above is contingent upon and in conjunction with an understanding that any and all issues presented by the Union in the form of contractual proposals, which have not been agreed to up to this point, are considered withdrawn. CONFIRMED Sincerely, (Signed) (Signed) - - --------------------------------- --------------------------------- Dennis R. Fleming C. H. Ellis VP Human Resources & Administrative Services 62 UNITED STEELWORKERS CP INDUSTRIES, INC. OF AMERICA CHRISTY PARK PLANT - - --------------------------------- --------------------------------- George Becker, President Jack T. Croushore, President - - --------------------------------- --------------------------------- Richard H. Davis, Vice-President C.H. Ellis, Vice-President Administration Human Resources - - --------------------------------- --------------------------------- Leon Lynch, Vice-President K.P. Collins, Vice-President Human Affairs Business Development - - --------------------------------- --------------------------------- Leo W. Gerard, Secretary Roger L. Seese, Controller - - --------------------------------- Andrew V. Palm, Director District #10 - - --------------------------------- Dennis R. Fleming Staff Representative District #10 - - --------------------------------- Walter N. Grimes President - - --------------------------------- Gerald R. Robinson Vice-President - - --------------------------------- James J. McLaughlin Grievance Comm. - - --------------------------------- Edward T. Aaron, Sr. Recording Secretary - - --------------------------------- Samuel J. Zenobi Grievance Comm. EX-10.44 4 EXHIBIT 10.44 63 AGREEMENT Between THE ALLIANCE MACHINE COMPANY of Alliance, Ohio and LOCAL UNION NO. 2361 UNITED STEEL WORKERS OF AMERICA AFL - CIO. CLC 1996 64 INDEX SECTION PARAGRAPH - - ------- --------- AGREEMENT 1 ARTICLE 1 - UNION RECOGNITION ----------------------------- 1 UNION SHOP 2 2a PROBATION PERIOD 3 2b DISCHARGE 4 2c DISCRIMINATION 5 3 DUES 6 4 BULLETIN BOARDS 7 ARTICLE 2 - MANAGEMENT RECOGNITION ---------------------------------- 1 MANAGEMENT DIRECTION 8 2 DISCIPLINARY ACTION 9 NUMBER OF COPIES 10 LENGTH OF TIME 11 3 DISCHARGE 12 FINAL DECISION 13 4a REPORT OFF 14 4b TIME ALLOWANCE 15 4c WORK FOR EMPLOYEE 16 5 MEDICAL REQUIREMENTS 17 6 UNION COOPERATION 18 7 RULES AND REGULATIONS 19 8 GENERAL TEMPORARY TRANSFER 20-23 ARTICLE 3 - SENIORITY --------------------- 1 PLANT SENIORITY 24 2 TEMPORARY EMPLOYEE 25 3 SENIORITY RECORDS 26 4 UNION OFFICER SENIORITY 27 5 UNION OFFICER LEAVE OF ABSENCE 28 6 SENIORITY TERMINATION 29 6a RESIGNATION 30 6b DISCHARGE 31 6c LAYOFF PERIOD 32 6d DISABILITY OR WORKERS' COMPENSATION 33 7 FORMER EMPLOYEE 34 8 TRANSFER NON-UNION 35 ASSIGNING TEMPORARY FOREMAN 36-44 ASSIGNING FOREMAN IN TRAINING 45-51 9 DUAL START EMPLOYEES 52 MEDICAL TIME SLIP FOR DUAL SENIORITY 53 10 LEAVE OF ABSENCE 54 FAMILY MEDICAL LEAVE ACT-LEAVE OF ABSENCES 54 11 MILITARY SERVICE DISABILITY 55 12 POST SENIORITY LIST 56 ARTICLE 4 - GRIEVANCE PROCEDURE ------------------------------- 1 GRIEVANCE DEFINED 57 FIRST STEP 58 65 SECOND STEP 59 THIRD STEP 60 FOURTH STEP 61 FIFTH STEP 62 2 GRIEVANCE COMMITTEE 63 2a TIME OFF TO ATTEND MEETINGS 64 2b TIME OFF TO DISCUSS GRIEVANCES 65 WHEN TO HOLD MEETINGS 66 3 TIME OFF FOR UNION MEETINGS 67 4 REPRESENTATION OF REPRIMANDS 68 5 TIME LIMITS 69 ARTICLE 5 - HOURS OF WORK ------------------------- 1 NORMAL HOURS 70 2 WORK WEEK 71 3 CHANGES 72 4 CALENDAR DAY 73 5 MINIMUM HOURS 74 6 CALL BACK HOURS 74 7 SHIFT PREFERENCE 76 DEPARTMENT OVERTIME AGREEMENT 77 8 OVERTIME DIVISION 78 9 ACCESS TO OVERTIME RECORDS 79 10 COFFEE BREAK 80 11 PAID 15 - MINUTE LUNCH BREAK 81-82 ARTICLE 6 - RATE OF PAY ----------------------- 1 WAGE RATES 83 2 SHIFT PREMIUM 84 3 REGULAR VACATION 85 4 PREMIUM PAY 86 4a OVERTIME IN EXCESS OF EIGHT HOURS 87 4b OVERTIME IN EXCESS OF FORTY HOURS 88 4c SATURDAY OVERTIME 89 5 PREMIUM PAY DOUBLE TIME 90 5a DOUBLE TIME 91 5b DOUBLE TIME IN ADDITION TO HOLIDAY PAY 92 6 DAILY AND WEEKLY 92 7a DESIGNATED PAID HOLIDAYS 93 7b CHRISTMAS WEEK SHUTDOWN 94 7c HOLIDAY PAY 95 7d EVIDENCE OF ABSENCE OR TARDINESS 96 7e HOLIDAY PAY FOR LAID-OFF EMPLOYEES 97 8 NATIONAL GUARD OR RESERVE TRAINING PROGRAM 98 9 RIOT PAY 99 10 JURY DUTY 100 SUBPOENAED/CIVIL MATTER 100 11 INJURY PAY 101 11 DOCTOR CALL FOR INJURY 101-102 PAY FOR APPEARANCE AT WORKER'S COMPENSATION HEARING 103 12 ALLOWANCE FOR FUNERAL LEAVE 104 GRANDCHILD, STEP, AND IN-LAW FUNERAL LEAVE 105 13 WELDER ON PRE-HEATED 106 14 BLOOD DONATION 107 66 ARTICLE 7 - VACATION -------------------- 1 ELIGIBILITY AND LENGTH OF VACATION 108 1 REGULAR VACATION 109 1 PERFECT ATTENDANCE 110 ADDITIONAL EARNED VACATION DAY 111 1 VACATION ELIGIBILITY 112-118 3 VACATION WAIVER 119 4 ILLNESS WAIVER 120 5 VACATION YEAR 121 6 VACATION PERIOD 122 7 PLANT SHUTDOWN 123 ARTICLE 8 - SAFETY & HEALTH --------------------------- 1 SAFETY PROVISIONS 124 COOPERATION 125 2 PROTECTIVE DEVICES 126 3 SAFETY COMMITTEE 127 4 COMMITTEE DUTIES 128-135 7 REGULAR SCHEDULED MONTHLY MEETINGS 136 ARTICLE 9 - APPRENTICE ---------------------- 1 APPRENTICE PROGRAM 137 "CO-OP" EDUCATIONAL PROGRAM 138 1 MONITOR GRADING OF TESTS 139 2 APPRENTICE FAILURE 140 ARTICLE 10 - JOB BIDDING ------------------------ 1a POSTING 141 1b AWARDING PREFERENCE 142 1c DECLINE OF JOB AWARD 143 JOB AWARDING 144 2 QUALIFYING 145 3a TEMPORARY TRANSFER BIDDING 146 3b OUT OF AREA BUMPING RIGHTS 147 3c LAYOFF 148 3i PERMANENT JOB 149 3ii TEMPORARY JOB 150 REPOSTING JOB 151 3d ELIMINATION OF JOB CLASSIFICATION 152 4 NO ELIGIBLE JOB BIDDERS 153 5 ELIGIBILITY FOR JOB BIDDING 154 5a PROBATIONARY EMPLOYEES 155 5b APPRENTICE OR TRAINING EMPLOYEES 156 5c PREVIOUSLY AWARDED JOB BID 157-162 5d TIME ALLOWANCE TO ACCEPT BID 163 6 EMPLOYEE ON VACATION 164 7 JOB POSTING DURING PLANT SHUTDOWN 165 ARTICLE 11 - LAYOFF ------------------- 1 LAYOFF PROVISION 166 2 ORDER OF REDUCTION 167-171 3 BUMPING RIGHTS 172-178 67 3e CHRISTMAS SHUTDOWN-NO BUMPING RIGHTS INTO MAINT. 179 4 RECALL 180-183 4iv NOTICE OF JOB 184-186 4c ERRORS IN RECALL 187 4d EFFICIENCY OF OPERATION AND SAFETY 188 5 EXTENSION OF RECALL 189-193 6 NOTIFICATION OF RECALL 194 7 PROPER EXERCISE OF SENIORITY 195 8 OVERTIME EQUALIZATION 196 ARTICLE 12 - EMPLOYEE BENEFITS ------------------------------ 1 INSURANCE 197 1 WEEKLY DISABILITY 198 1 LIFE INSURANCE 199 2 401K PLAN 200-210 ARTICLE 13 - GENERAL PROVISIONS ------------------------------- 1 SEVERANCE ALLOWANCE 211 1a CONDITIONS OF ALLOWANCE 212 1b ELIGIBILITY 213 1c SCALE OF ALLOWANCE 214 1d CALCULATION OF ALLOWANCE 215 1e PAYMENT OF ALLOWANCE 216 2 STRIKES AND LOCKOUTS 217 3 COMPANY AGREEMENT 218 4 DURATION 219 5 NOTICE 220-221 EXHIBIT A --------- JOB CLASS RATES BY JOB LEVEL 222 RATE PROGRESSIONS 223-230 RATE PROGRESSIONS - GRANDFATHERED 231-232 LETTERS OF UNDERSTANDING ------------------------ BEREAVEMENT PAY 233 BUMPING/LAYOFF PROCEDURE 234 RED CROSS TRAINING FOR BLOODBORN PATHOGENS 235 REMOVAL OF TWO (2) OCCURRENCES 236 SIDE SHIELD REQUIREMENT ON SAFETY GLASSES 237 TESTING FOR SKILLED POSITIONS 238 TRAINING 239 SECOND SHIFT EMPLOYEES ATTENDING UNION MEETINGS 240 A & B ASSEMBLERS 241 WELDER JOB BIDS FOR DEPT. CHANGES 242 COMMERCIAL DRIVERS LICENSE (CDL) 243 EXCUSED ABSENCE DUE TO ADVERSE WEATHER COND. 244 SUNDAY DOUBLE TIME PAY 245 68 AGREEMENT 1 This Agreement is made at Alliance, Ohio on the 17th day of June 1996 by and between THE ALLIANCE MACHINE COMPANY of Alliance, Ohio and/or its successors, hereinafter referred to as the Company and the UNITED STEELWORKERS OF AMERICA, AFL - CIO on behalf of themselves and the members of LOCAL UNION NO. 2361, hereafter referred to as the Union. WITNESSETH: That said Company and the said Union agree as follows: ARTICLE 1, UNION RECOGNITION 2 Section 1. The Company recognizes the Union as the sole collective bargaining agency for all production and maintenance employees, with the exceptions of foremen, assistant foreman, salaried office or clerical employees, plant guards, and engineering employees. Employees outside the bargaining unit shall not perform work performed by the production or maintenance employees, where it would have the effect of depriving such employees of work. Section 2. 3 (a) All present production and maintenance employees who are members of the Union and all who become members, shall as a condition of employment, maintain their membership in good standing with the Union for the duration hereof. All such employees, if any, who are not members of the Union, shall as a condition of employment, become members of the union not later than 60 calendar days following the date of their employment or the date of this contract, whichever be the later, and shall thereafter maintain their membership in good standing in the Union for the duration hereof. During the first 90 days they will not have any seniority rights and are not entitled to any fringe benefits., i.e., holidays and vacations. They will receive insurance benefits after 30 days of continuous employment. 4 (b) The Company will not be required to discharge an employee in any instance where such discharge would result in a violation of the National Labor Relations Act or any federal or state law. 5 (c) Discrimination because of race, color, age, sex, or national origin is prohibited under Title VII of the Civil Rights Act of 1964. 6 Section 3. The Company for their Union member employees, (pursuant to individually signed authorizations) shall deduct the initiation fee in the case of new employees, and the monthly dues and assessments as designated by the International Treasurer, from the first pay each month for each member, and promptly remit the same to the International Secretary - Treasurer of the Union. Dues for the current month will be deducted in the case of a quit or discharge. 7 Section 4. The Company agrees to furnish Bulletin Boards in each Work Area time clock location, to be used for the posting of official Union Notices. They shall be limited to official Union announcements provided that no material of a political, religious, or derogatory nature shall be placed on these Bulletin Boards. All notices must be signed by an Union Official. ARTICLE 2 - MANAGEMENT RECOGNITION 8 Section 1. The Management of the Company and the direction of the working forces, including but not limited to the rights to hire, suspend, transfer, or discharge for just and proper cause, and the right to relieve employees of duties because of lack of work, or for other legitimate reasons, 69 subject to the seniority provisions hereinafter contained, is vested exclusively in the Company. The Company will establish and post rules and regulations relating to the conduct and discipline of the employees. Provided, however, that the exercise of such rights shall not be used by the Company for the purpose of discrimination against any member of the Union. 9 Section 2. Disciplinary action by the Company shall be governed by the following procedure: 10 The Company shall prepare notices of disciplinary action in triplicate, one copy to be served upon the employee, one copy to be served on the President of the Union, and one copy shall be retained by the employing Company. From the Date the Company knows of a problem it will have fourteen (14) calendar days to issue a notice of disciplinary action or notice of discipline pending. 11 The Company shall not include in its disciplinary action any slip which is over 12 working months old. 12 Section. 3. Discharge: In the exercise of its rights as set forth in Article 2, Section 1, the Company shall not pre - emptorily discharge an employee. In all instances in which the Company may conclude that an employee's conduct may justify suspension or discharge, he shall first be suspended for a period not to exceed five (5) days. During the period of initial suspension, the employee may, if he believes he has been unjustly dealt with, request a hearing and a statement of the offense before the Department Head with a Grievance Committeeman present or the General Superintendent or the Manager of the plant with or without a member or members of the Grievance Committee present, as he may choose. At such hearing, the facts concerning the case shall be made available to both parties. After such hearing, the Company may conclude whether the suspension shall be confirmed into discharge or dependent upon the facts of the case that suspension may be extended or revoked. If the suspension is revoked the employee shall be returned to work with full rights and receive full compensation at his regular rate of pay for the time lost, but in the event a disposition shall result in either affirmation and extension of the suspension or discharge of the employee, the employee may allege a grievance with regard thereto. The grievance must be filed with his foreman, or in the foreman's absence, the foreman's substitute, within ten (10) days after such disposition and the grievance shall thereafter be handled commencing at Step 4 of the grievance procedure. 13 Should it be determined by an arbitrator in accordance with the Grievance Procedure, that the employee has been discharged unjustly, the company shall reinstate the employee and pay full compensation at the employee's regular rate of pay for the time lost, less any wages received from other employment during that period and less any Unemployment Compensation for the period determined by the arbitrator. Section 4. 14 (a) An employee who is unable to report for work shall notify the Company of the cause preventing him from working and shall advise said Company how long he expects to be absent from work, in order that he may temporarily be replaced in the work schedule, if the company finds it necessary. 15 (b) The employee must report off, or tardy, before the employee's shift starts, if possible, but must report off or tardy no later 70 than two (2) hours after shift starting time. Employee shall call 823-5279 to comply with this regulation. The Company will take into consideration health related emergencies that cause the employee to be hospitalized, circumstances arising through no fault of the employee that are beyond the control of the employee, and "Acts of God" preventing employees from complying with the two hour limitation. Employees who are tardy must report to their foreman after clocking in, but before beginning to work. 16 (c) The Company shall provide work for an employee who has complied with the above reporting requirements or for an employee whose tardiness is less than two (2) hours after shift starting time but not required to provide work if the above reporting requirements are not complied with or if the tardiness exceeds two (2) hours after shift starting time. 17 Section 5. An employee who is absent from his work for over seven (7) calendar days, is required to present the Company a medical certificate of a qualified physician, evidencing said employee's physical fitness to return to work. Provided however, that should said employee during any part of said absence be gainfully employed, then in such event, a medical certificate referred to above shall not preserve his seniority. The Company reserves the right to have an employee who seeks to resume his work referred to the Company's medical representative, at the Company's expense, to determine the question of physical fitness. 18 Section 6. The Union and the members thereof agree at all times to cooperate to the fullest extent with the Company and the members agree to perform their work to the end that the utmost efficiency in the manufacture of the Company's products shall be obtained and promote the general interest of the Company and its employees. 19 Section 7. The Union and members thereof agree to abide by all the rules and regulations of the Company not in conflict with this Agreement. Such rules and regulations are to be reasonable and applied reasonably, and the Union reserves the right to challenge the reasonableness of the rules and/or their application by way of the Grievance Procedure provided for in this Agreement. 20 Section 8. Temporary Transfers: The Company shall have the right to transfer individuals at their discretion based on needs, for periods of sixty (60) days or less, as long as the individual's pay is not reduced or his safety or the safety of others is in question. If an individual is transferred into a higher paying classification, he will be paid the minimum rate for that classification (without taking any reduction) or if he had previously held that job he will be paid his previous rate. 21 However, if the temporary transfer is less than two (2) days, seniority will not necessarily be a consideration in who is transferred. 22 However, if the temporary transfer is over two (2) days, then the Company will attempt to transfer the least senior employee in the department that the individual is being transferred from. If the transfer is to a higher paying job, consideration will be given to seniority as to who is to be transferred. Consideration will also be given to production and in any event the person being transferred must be capable of performing the work. 23 If an employee is working out of his job classification in a lower classification and there is a need to temporary transfer someone into 71 his classification that person will be temporary transferred first. ARTICLE 3 - SENIORITY 24 Section 1. It is agreed that an employee shall have plant wide seniority computed from his last date of hire by the Company. Such seniority, subject to the employee's ability to perform the work, shall govern in cases of job bidding, layoff and recall, subject to the separate provisions of this Agreement governing job bidding, layoff and recall. In the event an employee is transferred from one job classification to another, he shall retain and continue to be credited with his total plant - wide seniority from his last date of hire by the Company. 25 Section 2. Any employee having less than ninety (90) calendar days of continuous service with the Company shall be deemed to be a probationary employee, and is entitled to no seniority rights. During the period that an employee is probationary he shall be regarded as a temporary employee and no grievances regarding his discharge from employment shall be presented or processed. Probationary employees are subject to Article 5, Section 7 (Shift Preference) after a maximum of (30) calendar days. If such probationary employee is continued in employment after the expiration of the 90 day probationary period, his service shall date from the beginning of such period. There shall be no obligation on the part of the Company to re - employ a probationary employee who is discharged. laid off, or who resigned during such a period. 26 Section 3. The Company will at all times maintain records as to seniority of its employees, which records will be available for inspection by the individual employee at reasonable and proper times. 27 Section 4. The Union President and the six (6) most senior grievance men, two from each department, shall have seniority over other employees in the event of layoffs or reduction in the working force within their respective Areas as long as production is not affected. The Union President will have plant wide seniority as long as he can perform the work required or that's available. 28 Section 5. Any local Union officer shall be given upon his request, a leave of absence not to exceed a period of three (3) years for the purpose of working for the International Union, and during such period, his seniority rights hereunder shall be maintained. Only one (1) employee at any given time will be permitted to have such a leave of absence. 29 Section 6. Seniority shall terminate due to any of the following reasons: 30 (a) resignation; 31 (b) discharge for reason; 32 (c) layoff for a period equal to his seniority at the time of layoff, up to thirty - six (36) months maximum. If recalled during this period, his seniority shall be deemed to have accumulated during such layoff. 33 (d) Physical disability or Worker's Compensation for periods of 36 months or longer will cause his seniority to be frozen at that point until he returns to active employment. Any employee who is on Worker's Compensation or Disability as of June 13, 1993 will have thirty - six (36) months before his seniority is frozen. 72 34 Section 7. When former employees who have lost their seniority thereunder are re - employed, their service shall be computed as though they were new employees. However, if the company re-employs a former employee who has lost their seniority under Article 3, Section 6. (c) who has fulfilled their probationary period in Article 3, Section 2, then this employee will not be considered a probationary or a temporary employee. The new seniority date of a re-employed person previously losing their seniority under Article 3, Section 6 will be set at 90 days prior to the re-hire date. 35 Section 8. In the event an employee is transferred to foreman or assistant foreman which is directly under shop management, he shall, in the event the Company transfers him back into the seniority unit, be subject to the following: (i) He will retain and be transferred back with only the seniority he had at the time he left the bargaining unit; (ii) He must be transferred back within five (5) years of his original promotion; (iii) He may be returned to the bargaining unit two (2) times within the five (5) year period; (iv) He may not be transferred back to any job classification higher than the one he held at the time he left the bargaining unit; (v) If any more senior employee in that job classification is on layoff status, the employee transferred back will also assume layoff status; (vi) Upon transfer back to the bargaining unit he will be required to immediately pay the monthly Union dues and assessments. 36 An employee who is assigned to a temporary foreman position shall not cease to be a member of Local 2361 USWA, although assignment to such position and the terms and conditions of employment applicable to the position shall continue to be as determined by the company. Such assignments shall be limited to: 37 a.The short term absence of a foreman for reasons of sickness, jury duty, or vacation. 38 b.A foreman position resulting from increases in operating requirements above normal levels. 39 c.An employee assigned as a temporary foreman on a weekly basis will not work in the bargaining unit that week - vacation. 40 d.An employee assigned as a temporary foreman on a daily basis will not work in the bargaining unit that day - jury duty and sickness. 41 e.During lay-off a temporary foreman will fall in line with his seniority and will not have seniority over other employees in the bargaining unit. 42 f.An employee assigned as a temporary foreman will not issue discipline to other employees. He will not be called by either party in grievance procedures or arbitration hearings to testify as a witness regarding any events involving discipline which occurred while the employee was assigned as a temporary foreman. 43 g.Temporary foreman's positions may be filled on a daily, weekly, or monthly basis, by those employees who sign an annual sign-up form indicating their desire, on a rotating basis, by seniority. The time limit for such temporary foreman job will not be more than one (1) month maximum per employee, starting with the first day of assignment and continuing for one (1) month thereafter, unless the employee does not want the position anymore, or the company is no longer in need of the employee in the position of temporary 73 foreman, in which case he will be transferred back to his bargaining unit job. 44 h.An employee assigned as temporary foreman will receive $.50/hr. over the standard rate of the highest job classification that he supervises. 45 An employee who is assigned to a foreman in training position shall not cease to be a member of Local 2361 USWA, although assignment to such position and the terms and conditions of employment applicable to the position shall continue to be as determined by the company. Such assignments shall be listed to: 46 a.A foreman position resulting from increases in operating requirements above normal levels. 47 b.An employee assigned as a foreman in training on a weekly basis will not work in the bargaining unit that week - vacation. 48 c.During lay-off a foreman in training will fall in line with his seniority and will not have seniority over other employees in the bargaining unit. 49 d.An employee assigned as a foreman in training will not issue dicipline to other employees. He will not be called by either party in grievance procedures or arbitration hearings to testify as a witness regarding any events involving dicipline which occurred while the employee assigned as a foreman in training. 50 e.The time limit for such foreman in training job will not be more than six months, starting with the first day of assignment and continuing for six months, thereafter, unless the employee does not want the position anymore; or the company is no longer in need of the employee in the position of foreman in training, in which case he will be transferred back to his bargaining unit job. 51 f.An employee assigned as foreman in training will receive $.50/hr. over the standard rate of the highest job classification that he supervises. 52 Section 9. When two or more employees start on the same day, they shall be listed on the seniority lists in accordance to starting hour with the Company. When two or more employees start on the same hour, the Company will list the employee with the " Medical Report Acceptance Slip " with the earlier date and time stamp as the more senior employee. 53 Where no medical time slip is available to determine seniority, the Company shall revert to the time card to determine which employee rang in first and he shall be listed as the more senior employee. 54 Section 10. Whenever the requirements of the plant will permit an employee, upon written request and for reasons satisfactory to the Company, may be granted a leave of absence for a limited time, not to exceed one hundred eighty (180) days. Such leave may be extended by mutual agreement between the Company and the Union. The Company will notify the Union of leave of absence when granted. Upon employee request for absences, that falls within the guidelines of the Family and Medical Leave Act, employees may be granted leave of absences. All Family and Medical Leave of Absences must meet the Alliance Machine Company's Family and Medical Leave of Absence Policy. 74 55 Section 11. Any employee entitled to reinstatement under this Section who returns with service connected disability incurred during the course of his service shall be assigned to any vacancy which shall be suitable to such impaired condition during the continuance of such disability; provided, however, that such impairment is of such nature as to render the veteran's returning to his own job or department onerous or impossible; and provided further, that the veteran meets the minimum physical requirements. 56 Section 12. The Company will post a complete plant - wide seniority list on all bulletin boards in each of the three Areas (Machine Area, the Assembly Area, and the Structural Area) twice a year in January and July. ARTICLE 4 - GRIEVANCE PROCEDURE 57 Section 1. Should differences arise between the parties hereto as to the meaning and application of this Agreement, there shall be no suspension of work, either by direction or authorization of the Company or by direction or authorization of the Union on account of such differences, but an earnest effort shall be made by all parties to settle such differences immediately in the following manner: 58 Step One: Between the employee who has been aggrieved, with or without his Committeeman/Steward, and the employee's foreman or Company representative. 59 Step Two: If the complaint has not been satisfactorily settled at Step One, the complaint shall then be reduced to writing and signed by the grievant, the grievance may then be presented to the foreman not later than ten (10) working days after the occurrence of the event upon which the complaint is based, or after the time the employee should have had reasonable knowledge of such occurrence. The date on which the grievance is given to the foreman shall be the filing date. The foreman shall be required to answer in writing within ten (10) working days. 60 Step Three: If the answer obtained from the foreman is not satisfactory to the grievant, the grievance may then be presented to the foreman within ten (10) working days of the foreman's answer at Step Two. Within ten (10) working days of the presentation of the rejected grievance to the foreman, the Company shall set up a hearing with the grievant, his Committeeman and/or Steward, the president of the Union or chairman of the Grievance Committee. The Grievance Committeeman shall be determined by the Union President or the Grievance Chairman. The Company's answer shall be given within ten (10) working days of said meeting. 61 Step Four: If the decision of the Company under Step Three is not satisfactory to the grievant, his Steward (if he chooses) and the Grievance Committee shall within ten (10) working days request a hearing with the International Representative and Representatives of the Company. The Company and the International Representative shall set a hearing date within twenty (20) working days of the presentation of the rejected grievance to the foreman at this Step. The company representatives shall give their decision within ten (10) working days after such hearing. 62 Step Five: In the event the dispute shall not have been satisfactorily settled under the above Steps of the Grievance procedure, then, upon written notice of either party served upon the other, after receipt of the decision of the Company Representatives after the Step Four hearing, the matter shall be appealed to an impartial arbitrator. Such written notice must 75 be served within thirty - two (32) calendar days after the receipt of the decision of the Company Representative after the Step Four hearing in all cases. The impartial arbitrator is to be selected by mutual agreement. In the event the Company and the Union cannot mutually agree on the selection of an arbitrator, a list of seven (7) arbitrators shall be requested from the Federal Mediation and Conciliation Service; Request for list will not exceed two (2). The expense of the arbitrator shall be borne equally by the Company and Union. The arbitrator's decision must be based upon the express terms of this Agreement, and he may not add to, subtract from, or modify such express terms by implication or otherwise. The decision of the arbitrator reached within the above authority shall be final and binding upon all parties. 63 Section 2. The Grievance Committee of the employing Company shall consist of not less than three (3) nor more than six (6) employees of said Company designated by the Union and divided as follows: Up to two (2) from Structural Area, up to two (2) from Machine Area and up to two (2) from Erection Area. Where Grievance Committeemen are not scheduled on a shift, the Union will arrange with the Company to hold an election in the shop for a steward who will serve only on that shift not having scheduled Grievance Committeemen, Said Steward to be elected by the shift in the area which he is to serve. In the event a steward leaves the shift or area he had been serving, he immediately ceases to be a steward. There shall be no more than one (1) steward per shift in the Structural Area, Machine Area, and Erection Area. These men shall be afforded such time off without pay as may be required for the following purposes: 64 (a) To attend meetings pertaining to discharge or other matters which cannot be reasonably delayed. 65 (b) To present and discuss with persons hereinabove designated, grievances or complaints in the manner set forth above. 66 Whenever possible, such meeting shall be held outside working hours. It is furthered agreed that members of said Grievance Committee shall be in compliance with Article 3, Section 4 and Article 7, Section 9a of the Constitution of the International Union, United Steelworkers of America, AFL - CIO dated September 21, 1978. 67 Section 3. Committeemen and Steward working the afternoon shift shall be permitted time off, without pay, to attend Union meetings. 68 Section 4. An employee who feels he is being reprimanded unjustly by a foreman may request and receive the representation of a Committeeman or Steward from his area. 69 Section 5. The time limits herein are of essence, but can be extended by mutual agreement between the parties on a given grievance. Any grievance not filed or appealed within the established or extended time limits shall no longer be processed as a grievance. Any answer from the Company not received within the established or extended time limits shall be deemed a granting of the grievance, but not thereby setting precedent. ARTICLE 5 - HOURS OF WORK 70 Section 1. This section defines the normal hours of work and shall not be construed as a guarantee of hours of work per day or week. 71 Section 2. The normal work week shall consist of five (5) consecutive eight (8) hour days; starting with the shift change nearest to 76 12:00 p.m. Sunday. (For the purposes of this Agreement, the majority of the hours worked on a regularly scheduled shift shall determine the day in question.) 72 Section 3. Working hours, work days, or work week shall be established by the Company, However if there is a permanent change in the present starting time of the shifts, it will be by mutual agreement. The Company will always reserve the right to add or delete shifts. 73 Section 4. A day may be a calendar day or any twenty - four (24) hour continuous period. Starting time of employees shall not materially change during the week, however, if the Company has a critical breakdown job that requires a shift change during a given week the Union will make its best effort to accommodate the needs of the Company. 74 Section 5. Employees required to report for work at the regular starting time and prevented from performing services that day by reasons solely within the control of the Company, shall be paid for actual time held, but in no event shall be paid less than a minimum of four (4) hours at regular rates. 75 Section 6. Minimum call - back time will be two (2) hours. 76 Section 7. Workers shall be given preference to work on either first, second, or third shifts in accordance with their seniority status, provided, however, the proper balance of skills, within each work classification is maintained for efficient operation on each shift, as determined by circumstances and the work load. If an employee has exercised shift preference he must remain on that shift for the entire three (3) month quarter beginning January 1, April 1, July 1, and October 1. Also any employee has the option to exercise the above mentioned shift preference on (1) time at any other time during the year. 77 Each department must have their own overtime agreement on how overtime equalization is to be administered. These agreements will be posted in the respective departments. These agreements will be in force during the length of the Contract unless mutually agreed that it should be revised. 78 Section 8. Overtime: (i) Daily overtime in excess of eight hours in any work day will normally be assigned to the employee in the job classification who has been performing that work during that day. However, the Company will attempt to equalize over the course of a calendar year such daily over time within the job classification within those departments that allow this type of scheduling of the available work. (ii) Saturday and Sunday overtime: Saturday and Sunday overtime within an area that allows it will be assigned and divided as equally as possible within that job classification in those areas over the course of a calendar year. (iii) The employee assigned to work overtime must in any case have the ability to perform the work as demonstrated by that employee's past performance on the type of work the overtime is being offered on. (iv) For equalization purposes, an employee will be charged with all overtime made available to him. (v) When the Company posts Saturday or Sunday overtime assignments, any employee who is unable to accept that assignment must notify his foreman not later than the end of his shift on the day of posting. 79 Section 9. Employees or Committeemen are entitled to reasonable access to the overtime records for their job classification. The Company will make available each quarter to the Committeeman from each Area a written list 77 of the running amount of overtime charged to each employee in that Area, totaling the employee's amount of overtime worked, refused and assigned during absence. 80 Section 10. One (1) ten (10) minute coffee break after two (2) hours from start of shift, will be granted in all three Areas. However, the past practice in the Machine Area of machines continuing to run during the coffee break will continue. 81 Section 11. A fifteen (15) minute paid lunch break will be granted in the Structural Area (2900), the Erection Area (3300), the Machine Shop (3100), and the Maintenance Department (3200). 82 Unless the employee is scheduled for more than five (5) hours on Saturday or Sunday, he will not receive a paid lunch. ARTICLE 6 - RATE OF PAY 83 Section 1. For all eligible employees hereinafter during the term of this Agreement, wages shall be as shown in Exhibit A. 84 Section 2. It is agreed that all employees working on the second shift shall receive twenty cents ($.20) per hour, and employees working on the third shift shall receive twenty-five cents ($.25) per hour as shift differentials. 85 Section 3. Regular vacation pay is based on an eight (8) hour day, computed on the current rate of pay for the job classification in which the employee worked a majority of hours in the previous calendar year. 86 Section 4. Premium Pay: time and one - half shall be paid for on the following basis: 87 (a) All overtime any employee works in excess of eight hours in any twenty - four hour employee pay period. 88 (b) All overtime any employee works in excess of forty (40) hours in any one week. Vacation days and holiday. Time off for compensable injuries in the week they occur will count toward computing overtime. 89 (c) Saturday overtime will not be based on forty (40) hours but rather five (5) consecutive work days or partial work days prior to Saturday. 90 Section 5. Premium Pay Double Time: Double time shall be paid for on the following basis: 91 (a) Double time shall be paid for all work performed on Sunday 92 (b) Double time, in addition to Holiday Pay, shall be paid for all work performed on Holidays designated in Section 7 Section 6. No employee shall be paid both daily and weekly overtime for the same hours worked. 93 Section 7. Holiday Pay: (a) Effective June 17, 1996, the designated paid holidays shall be New Year's Eve, New Year's Day, Good Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, day after Thanksgiving, Christmas Eve, Christmas Day. These Holidays will fall on the following dates: 78 Year 1 Year 2 Year 3 Fourth of July 07/04/96 07/04/97 07/03/98 Labor Day 09/02/96 09/01/97 09/07/98 Thanksgiving Day 11/28/96 11/27/97 11/26/98 Day After Thanks 11/29/96 11/28/97 11/27/98 Christmas Eve 12/24/96 12/24/97 12/24/98 Christmas Day 12/25/96 12/25/97 12/25/98 New Year's Eve 12/31/96 12/31/97 12/31/98 New Year's Day 01/01/97 01/01/98 01/01/99 Good Friday 03/28/97 04/10/98 04/02/99 Memorial Day 05/30/97 05/29/98 05/31/99 94 (b) The Company shall have the rights to schedule a Christmas week shutdown. This schedule will be posted prior to April of the applicable year whenever possible. The company will allow employees to schedule one (1) week of their vacation on a daily basis so that some days may be used for the Christmas week shutdown, if so scheduled. Employees will not be required to schedule their regular vacation days to coincide with the Christmas shutdown. However, if they do not, they will be required to take that time off without pay. 95 (c) Whether or not work is performed on a holiday, employees shall receive their straight time hourly rate of eight (8) hours of Holiday Pay, provided the employee works the last scheduled work day prior to the Holiday or the first scheduled work day following the Holiday. 96 (d) In the event appropriate evidence is submitted showing that absence or tardiness from work prior to subsequent to the Holidays referred to is occasioned by no fault of the employee in question or is the result of actions beyond the control of said employee, the qualifying provisions may be waived by the Company. The foreman's permission for an employee to work less than either of the qualifying days shall entitle the employee to payment for the holidays. An employee absent due to industrial injury shall receive pay for the first Holiday following the injury, but shall not be eligible for additional Holidays until he returns to work. 97 (e) Laid off employees will receive Holiday Pay for those holidays falling within the first two (2) weeks of a layoff. Provided he has worked his entire last scheduled work day prior to the Holiday. The only exception to working the entire last day is the instance of an employee missing part of that day due to an industrial injury. An employee will receive Holiday Pay for the first Holiday falling during a period he is receiving Sickness and Accident insurance benefits. 98 Section 8. In the event that any employee who is a member of the National Guard or a member of any Reserve Training Program is called for his regular training period, the Company will compensate said employee for the difference between the amount paid said employee by the government and the amount he otherwise would have earned during said period. This compensation will be paid, however, on the basis of an eight (8) hour day, the number of days the employee would have actually worked had he not been absent, but at no time shall the compensation for absence because of military training for one week exceed five (5) days, nor the maximum weekly hours exceed forty (40), nor shall the total compensation for lost time because of absence due to military training exceed ten (10) regular work days for any one period of training. 99 Section 9. Any Union employee being a member of the National 79 Guard or any other branch of the service, upon being called to duty in case of a riot or other disorders, the Company will compensate the said employee for the difference between the amount paid said employee by the government and the amount which he would have earned during said period. This compensation will be paid, however, on the basis of an eight (8) hour day, the number of days the employee would have actually worked had he not been absent, but at no time shall the compensation for absence exceed five (5) days, or the maximum weekly hours exceed forty (40) hours. This provision will not exceed more than one (1) week in any one year. 100 Section 10. In the event any employee is called for jury duty or is subpoenaed to appear as a witness in a lawsuit other than one to which he is a party, the Company will compensate employee time lost provided said employee brings signed receipt from court that he did appear and for what time. This compensation, however, will be paid on the basis of an eight (8) hour day for the number of days the employee would actually have worked had he not been called for jury or witness duty, but at no time shall the compensation for one week of absence because of jury or witness duty exceed five (5) days nor the maximum weekly hours exceed forty (40). It is agreed further that any employee called for jury or witness duty on any day, and who is excused from jury or witness duty during said day or portion of said day shall immediately thereafter report to work at his regular employment for the balance of said day, if his jury or witness duty on said day has not exceeded one - half day. Employees on the second and third shift who are called for jury or witness duty are to notify the Company of the weeks in which they are to serve on jury or witness duty and the Company may, if advisable, shift those employees to first shift to provide work on days which they are released or served less than four hours. In the event an employee is subpoenaed by the courts for a civil matter, the time missed will not be counted as an occurrence provided the employee brings a signed receipt accounting for all the time missed. Also if the employee is subpoenaed for a criminal matter, the time will not be counted if he brings a signed receipt; as described above, and if he is innocent of the charges. In both instances the receipt must be presented to his foreman at the time he returns to work following the absence. 101 Section 11. Should the employee be so injured that it is necessary for him to go to a doctor, and if after visiting the doctor he returns to complete the balance of the shift, the time lost by him in going to the doctor shall be treated as hours worked. Should the doctor provide the employee with a written statement that return to work during the remaining shift period is inadvisable and such statement is presented to his foreman, then even though he does not work in the shift hours remaining after his injury, such remaining shift hours, but only up to the eighth (8th) hour of such shift, shall be treated as hours worked. This provision shall apply only to the first visit to the doctor made on either the date of injury or on the first day after the injury. 102 If an employee must return to the doctor for treatment of an on - the - job injury and he must miss part of his shift in order to make this appointment, he shall, if he notifies his foreman in advance, be excused and will be paid for this portion of his shift as long as a form letter from the Company has been verified by the doctor that he is unable to schedule the employee at anytime after or before normal working hours or on a Saturday. Also, if an employee is scheduled for an Independent Medical Exam by the Company and in order to make that appointment he must miss part of his shift, he will be paid for that portion of his shift. 103 An employee will be paid up to eight (8) hours at his regular 80 rate of pay for only the hours missed to attend the hearing while appearing at his own Worker's Compensation hearings, but only if specific request for appearance is received from the State agency. 104 Section 12. Allowance for Funeral Leave. When death occurs in an employee's immediate family (i.e. employee's legal spouse, mother, father, current mother - in - law, current father - in - law, son, daughter, brother, sister, grandparent, step - parent, or step - child) an employee, upon request, will be excused for up to three (3) consecutive scheduled work days as fall either immediately before or on or immediately after the day of the funeral. The employee shall receive pay for such excused scheduled shift, up to a maximum of 8 hours, provided it is established that he attended the funeral, unless such attendance is deemed impracticable. Payment shall be eight times his basic hourly rate. An employee will not receive funeral pay when it duplicates pay received for the time not worked for any other reason. 105 Subject to the same conditions as above, an employee, will be excused on and receive pay for one (1) scheduled work day on the day of the funeral of the grandchildren, current sister - in - law, current brother - in - - - law, current son - in - law, current daughter - in - law, step brother, step sister. Subject to the same conditions as above the employee will also be excused without pay for up to two (2) scheduled work days as fall immediately before or immediately after the day of the funeral. 106 Section 13. On weldments preheated above 225 degrees F, where the welder is assigned to work directly over the preheated area, upon the request of the welder, he will be changed after two (2) hours of such work and be assigned other work. On weldments preheated above 150 degrees F, where the welder is assigned to work inside the weldment, upon request of the welder he will be changed after two (2) hours of such work and be assigned other work. 107 Section 14. Employees will be paid for time missed to donate blood if they are on the first shift. The maximum amount of time paid will be two (2) hours once a calendar year. ARTICLE 7 - VACATIONS 108 Section 1 - Eligibility and Length of Vacation 1 or more yrs. (12 mos.) = 40 hrs. (1 week) 13 or more yrs. (36 mos.) = 80 hrs. (2 weeks) 10 or more yrs. (120 mos.) = 120 hrs. (3 weeks) 15 or more yrs. (180 mos.) = 160 hrs. (4 weeks) 109 Vacation may be requested on a day at a time basis if wanted. If one or two days are being requested the employee must request 48 hours in advance. If more than two days are being requested then the request must be one week in advance. 110 Any employee who has perfect attendance in any 12 consecutive working months will receive one additional day of vacation eligibility. The only excused absences under this plan are the following: 1. Bereavement Leave, paid per contract 2. Jury Duty 3. Military Leave 4. Industrial Injury, day of injury only, one injury in a twelve month period 81 5. Tellers for International Election (President, Recording Secretary, and Financial Secretary of the Local Union) 111 The additional vacation day may be taken in the calendar year it was earned or the folliwing calendar year if the employee submits in writing his desire to do so at the time he is notified of the additional vacation day. 112 To be eligible for a fully paid vacation, an employee must have worked 1400 hours in the previous calendar year. In the event of layoff, sick leave or personal leave of absence, an employee who has accumulated service under the vacation schedule shall be paid pro rata for each hour worked in the previous calendar year. Holiday and vacation days will be counted as hours worked in this computation. Time off due to a workman's compensation injury the year in which the injury occurs only, will be counted for the subsequent year's vacation only. 113 Section 2. An employee who is discharged for cause prior to December 31st shall not be entitled to vacation or vacation pay in the coming year. 114 For each week of vacation entitlement the employee will receive forty (40) hours pay computed at the current rate of pay for the job classification in which the employee worked a majority of hours in the previous calendar year. 115 As far as practical, the employees will be granted their vacation time off at times they desire between January 1st and December 31st in accordance with their seniority. In the event, the plant is shut down for the vacation period, maintenance and inventory employees may be kept at work during the shut down, but must be granted their vacation at some other time. 116 Employees shall receive all vacation pay due them the pay following their termination. 117 Vacation notice slips to be passed out by March 15th. Vacation notice slips to be returned by April 15th. Company to post vacation schedule by May 15th. 118 After the vacation schedule has been posted, vacations may be changed only with written permission of the Company. Anyone not scheduling their vacation at that time, will have to take whatever vacation dates are available. 119 Section 3. Employees receiving vacations or pay in lieu thereof, will not be entitled to overtime for any part of said vacation. The Union and the Company agree that their mutual objective is to afford maximum opportunity to the employees to obtain their vacations and to attain maximum production. All employees eligible for vacation shall be granted their vacation from work, except that the Company may, due to operating requirements and employment conditions, arrange with the written consent of an employee, that such employee receive vacation allowance in lieu of any part of all of his actual vacation. A copy of each consent shall be filed with the representative designated by the Local Union. 120 Section 4. In the event any employee who has in excess of ten (10) days vacation and is absent because of illness that is substantiated by a doctor's certificate for five (5) or more consecutive working days at any time during the calendar year in which the vacation is payable, such days of 82 absence at the employee's option may be considered as vacation time. 121 Section 5. Vacations will be taken as much as possible at a single period and shall not be cumulative. Vacations must be taken prior to December 31, unless an emergency has made it impossible to grant vacations in special individual cases, in which event the Plant Manager shall allow such vacations to be taken the first six (6) months of the following year. 122 Section 6. Weeks of regular vacation not covered by a vacation shutdown, as per Article 7, Section 7, shall be granted according to seniority and job classifications on each shift within each department. The Company shall make an earnest effort to grant an employee his extra weeks of vacation per the employee's request. The actual period in which vacations shall be taken by eligible employees shall be determined by the Company to insure the orderly operation of business of the Company. 123 Section 7. If the company deems it advisable to close the plant for a vacation shutdown, the notice of such a shutdown shall be posted by March 15th of the year in question. When a shutdown falls between the dates of June 6 to August 15 employees will be required to schedule one (1) week of their vacation days to coincide with the shutdown. In the event there is a vacation shutdown, the Company will attempt to schedule it during the 2nd full work week of the month of August, beginning in 1997. ARTICLE 8 - SAFETY AND HEALTH 124 Section 1. The Company shall make provisions for the safety and health of its employees at their place of employment during the hours of their employment. 125 The Union shall cooperate with the Company in expanding the effectiveness of the Safety and Health program for the employees. The Company will reimburse any employee who provides certification for successfully completing the Red Cross course in Standard First Aid provided at the Alliance Red Cross Center. The reimbursement will be for the $15.00 fee and will increase for any increases in the fee. 126 Section 2. Protective devices, wearing apparel and other equipment necessary to properly protect employees from injury shall be provided by the Company. The Company will provide for each shotblast operator reasonable foot shields and hood, reasonable furnishing of coveralls for Painters and Sandblasters. Reasonable glove protection for Burners up to twice a year on a turn - in - basis, welder's gloves for submerged arc application with reasonable controls on distribution, coveralls when required for maintenance employees, $60.00 maximum after one (1) year of service for metatarsal safety shoes or $30.00 for steel - toed safety shoes, for a employee that has a medical condition prohibiting the employee from wearing metatarsal safety shoes, non prescription safety glasses three (3) per year at no cost to employee, Company - issued prescription safety glasses with glass lens in single vision, bifocals, trifocals or occupationals. Any special prescriptions, such as progressives and special lens coatings, which is an additional fee, will be the responsibility of employee. Reasonable replacement for on - the - job damage once a year at no cost to the employee. Employees on lay-off or off on leave, (sickness & accident or Workers' Compensation) are not entitled to purchase glasses through the company program. If the employee chooses to buy his own prescription safety glasses, he may do so through the Company approved sources and the Company will reimburse him based on the following schedule, 83 * Single vision $21 * Bifocal $32 * Trifocal $41 * Occupationals $72 Note: These amounts will be increased subject to any change in the cost of company supplied prescription safety glasses. 127 Section 3. There shall be established a Safety Committee for said Company composed of three Union members and one Company representative. 128 Section 4. The duties of the Safety Committee are as follows: 129 (a) To hold regular scheduled monthly meetings; 130 (b) To consider recommendations and requests relative to health and safety measures; 131 (c) To make inspections of machinery and safety conditions through the plant of the Company; 132 (d) Upon recommendation of the Committee, the findings of said committee shall be reported to the Company. 133 Advice of the Safety Committee, together with supporting suggestions, recommendations, and reasons, shall be submitted to the designated Company representative for his consideration and for such action as he may consider consistent with the Company's responsibility to provide for the safety and health of its employees during the hours of their employment and the mutual objectives. 134 Section 5. The Company agrees to permit members of the Compensation Committee to have access to reports which the Company is required by law to keep to submit to the State Workmen's Compensation Agency upon request to the Company's Safety Representative. 135 Section 6. The Company agrees that the Safety Committeemen on the shift will be given the right to investigate lost time accidents with the Company representative. 136 Section 7. Safety Committeemen will be paid for time spent on the regular scheduled monthly meeting of the Safety Committee, up to a maximum of two (2) hours, at straight time rates, whether or not the meeting time occurs during their scheduled shift. ARTICLE 9 - APPRENTICE 137 Section 1. The Company and Union will establish an apprentice/ training committee who will establish requirements and programs to fulfill those requirements. This committee will provide for the apprenticeship program in the machine shop and training programs in the assembly and structural departments. There will not be ratio requirements associated with these programs, but instead the goal is to satisfy the changing needs of the Company's work load requirements by improving the skills of our present employees. The Union will designate two (2) union employees and the Company will designate two (2) management employees in each area where a program is to be utilized to determine goals, requirements, implementation, qualifications and costs. 138 In addition, the Company and Union will work together to develope 84 a "co-op" educational program with local educational institutions, as mutually acceptable to both the Company and the Union. 139 If the Union desires they may appoint one (1) person in each department to monitor the grading of job related tests. 140 Section 2. In the event an Apprentice/Trainee fails to meet school and work requirements Section 2. In the event an Apprentice/Trainee fails to meet school and work requirements, he will be eliminated from the Apprenticeship/Trainee Program. Any employees on the active employee roster will be permitted to exert their seniority rights. Apprentices/Trainees who were hired into the department as an Apprentice/Trainee having no former seniority, will be terminated. ARTICLE 10 - JOB BIDDING Section 1. 141 (a) In the event of the creation of a new job classification or the existence of the permanent vacancy in an existing job classification or range, notice of availability of the jobs will be posted on the bulletin boards plant - wide forthe period of three working days. The number of job vacancies shall be specified at each posting. The Company agrees to post general qualifications for all jobs posted for bid. Eligible employees throughout the plant shall have the opportunity to apply for such openings by filling out a job bid slip in triplicate form (one copy for the Company, one for the Union and one for the employee). The awarding of the job shall be made within seven (7) days after the end of the posting period. The name of the employee awarded the job shall be given to the Union and posted on the bulletin boards. 142 (b) In awarding the job, preference will be given in the following order: (i) Employees in the Area in which the job opening exists: then (ii) All employees, plant - wide 143 (c) Any employee awarded the job bid will have up to five (5) work days to accept the job. If an employee decides to turn the job down, he will return to his previous job. Any employee who bids on a job and is awarded will be subject to the criteria that falls under paragraph 157. 144 Within these preferences, the job will be awarded on the basis of the necessary previous knowledge, experience, skill and apparent ability to perform the job in question. If two or more bidders are relatively equal in those regards, the job will be awarded on the basis of plant - wide seniority. The employee awarded the job will be assured of a fair trial of up to fifteen (15) working days. This period may be extended by mutual agreement of the Company and Union in classifications having multiple grades, an employee will not be considered for any grade other than the lowest grade, unless he has had prior experience on the job in question, or experience in similar work. The determination of the ability of an employee to satisfactorily perform the work is to be the function of Management. 145 Section 2. If the employee awarded the job does not qualify during the trial and training period, he shall be set back to his former job classification and Area, and all employees affected thereby shall be set back accordingly. Section 3. 146 (a) If an employee is on a temporary transfer out of his regular 85 Area under Article 2, Section 8, for bidding preference purposes he shall be deemed to be an incumbent in his regular Area. 147 (b) If an employee is working in another Area as a result of bumping under Article 11 in connection with a workforce reduction, for bidding preference purposes, he shall be deemed to be an incumbent in his regular Area. If he is awarded a job through this bidding procedure, he will no longer have recourse to recall under Article 11 to his previous job classification and Area, but will thereafter follow the regular routine of job bidding as applied to all employees and will have bidding preference only in the Area of this job he was awarded. 148 (c) If an employee is laid off as a result of a reduction in the workforce, he will be notified by telephone or letter of all jobs posted for bid. He shall have bidding preference in his regular Area. If he is awarded the bid, he shall be required before taking the job to state whether he is taking the job (i) as a permanent job or (ii) as a temporary job. 149 (i) Permanent Job: He shall assume the new job without recourse to recall to his former job classification under Article 11, and thereafter shall have bidding preferences only in the Area of the new job. 150 (ii) Temporary Job: He shall assume his new job classification on a temporary basis only and continue to have recourse to recall under his former job classification under Article 11. While on such temporary job, he shall be entitled to overtime equalization in that job classification and Area under Article 5, Section 8, and shall have bidding preference only in the Area of his former regular job classification. 151 Once a job has been posted in accordance with the job posting procedure and has been filled by an employee as a temporary job, the Company shall repost the job if that temporary employee is recalled to his regular job classification. 152 (d) If an employee's job classification in his Area is permanently eliminated, he may exercise his seniority rights under Article 11, and that employee shall, for bidding purposes, have preference under Section 1 (b) of this Article in any and all Areas just as if he were an incumbent in the Area where the vacancy occurs. If that employee is subsequently awarded a job through the bidding procedure, he shall thereafter be deemed to be an incumbent only in and having preference only in that Area. 153 Section 4. If there are no eligible, qualified employees who have bid on the job, the job may be filled without regard to the job bidding procedure. The Company will post and update every 90 days. 154 Section 5. Eligibility for job bidding will be governed as follows: 155 (a) Probationary employees may bid for posted jobs but since they have no seniority rights, they shall not have any of the rights of seniority employees. If, but only if, there are not qualified bidders the Company may, but is not required to, consider the bid of probationary employees and award them the job. 156 (b) Employees on an Apprentice or training program are not entitled to bid on any job. 86 157 (c) Employees awarded a job may not bid for another posted vacancy within 1 year of the award, except: 158 (i) to bid on another job due to sickness and physical condition; 159 (ii) to bid on a newly - created job classification. 160 (iii) to bid on a job classification with an immediate higher hourly rate of pay; or to bid on a job classification which may have an immediate lower rate of pay, but which has a potential higher rate of pay in a higher class; 161 (iv) to bid on a job which has been vacated due to death or termination; 162 (v) to bid for shift preference. 163 (d) Employees awarded the job must accept it within five (5) work days as per Article 10, Section 1, paragraph 143. 164 Section 6. Employees on vacation may call or visit the Company to be informed of what jobs have been posted for bid while on vacation, and they may come to the Company to complete job bid slips. Before leaving on vacation, other than during a plant shutdown, employees may complete and sign job bid slips for specific jobs which may be posted during their absence, and leave the same with their foreman or Committeeman, who will be authorized to submit the bid slip, should such jobs be posted. 165 Section 7. No job vacancies shall be posted for bid during any vacation plant shutdown. ARTICLE 11 - LAYOFF 166 Section 1. The Company will notify the Union of any anticipated reduction of the work force or the work week five (5) working days in advance of the date on which it is anticipated to begin, unless the cause and need for such reduction was not known to the Company five (5) days in advance, in which case the notice will be given as soon as the cause and the resultant need for the reduction is known to the Company. Five (5) days does not constitute a guarantee. 167 Section 2. Order of Reduction: In the event of a reduction in the work force of a given job classification in a given Area, employees shall be reduced from that job classification in that Area in the following order of categories. Within each of these categories employees will be reduced in the reverse order of their plant - wide seniority. 168 (a) First, employees who have not completed their probationary period under Article 3, Section 2. 169 (b) Next, employees who had been on layoff, but who bid on the job classification out of their Area and who declared they were taking it on at temporary basis only under Article 10, Section 3 (c). 170 (c) Next, employees who had been on layoff, but who bid into that job classification within their Area, and who declared they were taking it on a temporary basis only under Article 10, Section 3 (c). 87 171 (d) Next, all other employees in that job classification in that Area. Section 3. Bumping: 172 (a) An employee who is reduced from his job classification within his Area under Section 2 shall have the following rights which must be exercised within twenty - four (24) hours of notification of layoff: 173 (i) He may elect layoff; or 174 (ii) He may bump the least senior employee in any job classification equal to or lower than his present job classification anywhere in the plant which he is capable of then performing at the time he goes on the job without training as determined by the Company based upon his work record at the Company. He shall then have the recall rights set forth in Section 4 (a). 175 (iii) He may bump the least senior employee in any higher higher - - - rated job classification in this Area or in a higher rated job classification anywhere in the plant which job classification he has held on a permanent basis and which he is still capable of performing at the time he goes on the job. He will be placed in the highest pay grade that he had previously held in that job classification. If he has held the top rate he will be placed at level A and move up on merit or within six (6) months maximum. However, he may bump the least senior employee in Job Class 1 without any regard to prior experience. 176 (b) Any employee who is bumped by another, more senior employee under the above provisions shall have the right to exercise his seniority to elect layoff or to bump another employee under the same term as above. 177 (c) An employee being reduced from his classification or being bumped by another employee shall have twenty - four (24) hours after being notified of being reduced or being bumped to notify the Company whether he is electing layoff or electing to bump. Once he has made his selection to elect layoff or bump, he may not change it. An employee who fails to give the Company notice of his election within said twenty - four (24) hours will be considered to have elected layoff. However, the employee(s) to be laid off will be those affected by the last bump election received by 4:00 p.m. on the day of the end of the shift the layoff is to be in effect, Article 5, Section 5 shall not apply to the affected employee. 178 (d) In all cases, the right to bump must be consistent with the efficiency of the operation and the safety of the employees, in the sole discretion of the Company. 179 (e) Employees may not exercise the bumping rights of this Section 3 into any Maintenance job classification during the Christmas plant shutdown or during any vacation plant shutdown up to two (2) weeks. 180 Section 4. Recall: If, while any employees are laid off or are working outside of their regular job classification as the result of exercising their seniority rights to bump under Section 3 of this Article, the work force in a job classification in any Area is again to be increased or a vacancy occurs therein, employees will be recalled in accordance with the following: 181 (a)(i) The most senior employee who is capable of then 88 performing that job classification at the time he goes on the job without training as determined by the Company based upon his work record at the Company shall be offered recall thereto. 182 (a)(ii) Employees who are laid - off (not working) shall have the right to be recalled into the plant under (a) (i). 183 (a)(iii) Employees working outside of their regular job classification (either by reason of having bumped under Section 3 or as a result of his first recall under this Section 4 (a) (ii) shall have the right to recall under (a) (i): provided it is to a job in an equal or higher job classification and also shall have the further right to be recalled to their regular job classification. 184 (a)(iv) The company will post notice of the availability of a job classification for recall, marked with date and time of posting. Employees working outside of their regular job classification shall have twenty - four (24) hours to inform the company of their willingness to be recalled to that job classification, and, if so recalled, must accept the same. Any employee working outside of their job classification going on vacation may fill out a recall slip listing the job classifications to which they wish to be recalled. This recall slip may be given to their foreman or committeeman. If this recall occurs during their vacation, they must accept it upon the end of their scheduled vacation. 185 (a)(v) The Company will post the availability of a job classification for recall. Employees who are laid off, who have filled out a recall slip, listing the jobs they would like recall rights to prior to posting of recall notice will be recalled by seniority. If so recalled, employee must accept. 186 (b) If the job is not filled through the above recall procedure, the Company will post the job as a permanent opening available for bid under Article 10. 187 (c) The Company shall not be responsible for any error made in recall, except to correct that error by the start of the next work day after that error is called to its attention by the union or the employees affected by the error. 188 (d) In all cases, the right to recall must be consistent with the efficiency of the operations and the safety of the employees, in the sole discretion of the Company. Section 5. Extension of Recall: 189 (a) An employee who is recalled to his regular job classification in his Area under Section 4, must accept recall to his regular job classification. 190 (b) If the recall is to his regular job classification in his area he must accept recall within 24 hours or he will be considered as having quit. However, if he is employed somewhere else, and it is estimated that the recall is for a short period of time (four (4) weeks or less), he may elect to extend his layoff and let the Company call back the next qualified employee on the seniority list in accordance with Section 4, if there is one. In the event, he shall not be entitled to notices of bids under Article 10 of this current Agreement. He must also make such a selection immediately upon receiving the notice of recall or it will be assumed he is returning to work, 89 or in the event he is not accepting recall in 24 hours he will be considered as having quit. If such employee is notified of recall under Section 4 a second time, and does not report for work or signify within 24 hours of his intention of doing so, he shall be considered as having quit. 191 If a person is recalled and he has accepted recall, he must begin work within five (5) calendar days after receipt of the notification. 192 It must be emphasized that the four weeks does not constitute a guarantee. 193 The 24 hours referred to in the above paragraphs will commence upon time of receipt of notification. If an employee cannot be reached by telephone and certified mail (with return receipt requested) is used and it is returned unopened, then the employee will be terminated. Employees planning to be away from home for 24 hours or more should contact the Company's Personnel Department and provide phone number where they can be reached. 194 Section 6. Employees who are on layoff shall be notified by certified mail (with receipt requested) of recall to work. All notices shall be sent to the last known address of the employee as stated on the Company's records. The employees are responsible for having the address and telephone number at which the Company may reach them on file at all times. The Company may rely upon these addresses and telephone numbers for all purposes. All notices to employees affecting their employment with the Company will be sent and/or telephoned to the address or telephone number on file. 195 Section 7. It is agreed that in the event the Union believes that an employee has not been properly allowed to exercise his seniority under Section 2, 3, 4, or 5 of this Article, the Union will verbally bring the matter to the attention of the Company for correction. Within five (5) working days after such notification, should the Union believe that the employee was not permitted to properly exercise his seniority under Section 2, 3, 4, or 5, the matter may be brought to the attention of the Company in writing at Step Three of the Grievance Procedure for correction, but no claim or grievances shall be retroactive beyond the date such written notice is first received by the Company. 196 Section 8. Employees who are working outside their regular job classification due to the application of this Article shall have the right to overtime equalization under Article 5, Section 8 and to exercise shift preferences under Article 5, Section 7 in the new classification in which they are working. ARTICLE 12 - EMPLOYEE BENEFITS 197 Section 1. Insurance: The Company will provide an insurance Benefit Program, which will include the following: - - -$1,000,000 Major Medical - - -$225 Deductible per person, $675 per family - - -80% co-insurance on the next $3,500 of eligible expenses - - -100% payment thereafter - - -Mandatory second surgical opinion through health care re-view systems - - -Mandatory out-patient surgery for specific procedures - - -Hospital pre-certification review through health care review systems - - -Maximum per year $1,000 drug addiction treatment - - -$1,000 alcoholism addiction treatment and $3,000 mental & nervous treatment. Combined lifetime maximum $25,000 - - -Pre-existing clause for new hires only 90 198 Weekly Disability: 1st day Accident - 26 weeks 8th day illness - 26 weeks Weekly Disability: Effective June 17, 1996 $273.00 per week Effective June 17, 1997 $281.00 per week Effective June 17, 1998 $289.00 per week 199 Life Insurance: Effective June 17, 1996 $18,000 Effective June 17, 1997 $19,000 Effective June 17, 1998 $20,000 Section 2 - 401 - K Plan 200 In keeping with Alliance Machine Company's (the Company) commitment to a long range retirement program, we are pleased to announce that a 401 (k) plan has been established effective June 1, 1987. This Company - sponsored program has been designed in accordance with Section 401 (k) of the Internal Revenue Code. 201 A 401 (k) plan is a qualified deferred compensation plan which enables you to save money, lower taxes and invest in your financial future. Under a 401 (k) plan, your elective contributions are made on a before - tax basis, that is, the amount deferred will be excluded from your taxable income. This may place you in a lower tax bracket and lower your taxes. The following are some advantages of our 401 (k) plan: 202 1.Elective contributions may be made up to 15% of your salary, not to exceed a maximum amount established by the Internal Revenue Service. 203 2.Your elective contributions lower your taxable in-come, federal tax withholding, and you will currently pay less tax. 204 3.Due to lower taxes, elective contributions to our Plan will increase your take - home pay in comparison with some other ways of saving. 205 4.The Company will contribute an amount equal to the following schedule in any plan year in accordance with the bargaining unit agreement. June 17, 1996 .35/Hr. Worked June 17, 1997 .35/Hr. Worked June 17, 1998 .40/Hr. Worked 206 5.Normally, under current federal tax laws, you will not be taxed on any contributions to the plan, or any interest earned, until you receive the money. When you finally receive your retirement benefit, you may be in a lower tax bracket than you are now. 207 6.Cash payments may receive favorable tax treatment. 208 7.The Company will pay all plan expenses. 209 An important point to understand is that to fully benefit from this program you must be prepared, by means of salary reduction, to contribute to your financial future. 210 We realize that it may be difficult for some of you to commit a portion of your income to this program, but we strongly encourage you to participate at some level. We believe this program will allow you the 91 opportunity to accumulate more for your future than under any other plan we can offer. Only you can determine whether you can afford the financial commitment. We are confident that you will participate and benefit from the program. ARTICLE 13 - GENERAL PROVISIONS 211 Section 1. Severance Allowance: 212 (a) Conditions of Allowance: When in the sole judgement of the Company, it decides to close permanently the plant or discontinue permanently a department of the plant or substantial portions thereof and terminate the employment of individuals, an employee whose employment is terminated either directly or indirectly as a result thereof because he was not entitled to other employment with the Company under the provision of Article 3, Seniority, of this Agreement, shall be entitled to a severance allowance in accordance with and subject to the following provisions: 213 (b) Eligibility: Such an employee, to be eligible for a severance allowance, shall have accumulated three or more years of continuous Company service from the date of the contract. 214 (c) Scale of Allowance: An eligible individual shall receive severance allowance based upon the following weeks for the corresponding continuous Company service: Weeks of Continuous Company Service Severance Allowance 3 years to 5 years 1 week Over 5 years 2 weeks 215 (d) Calculation of Allowance: A week's severance allowance shall be determined in accordance with the provisions for calculations of vacation allowance set forth in Article 6, Section 3, Rate of Pay, for vacation. 216 (e) Payment of Allowance: Payment shall be made in a lump sum at the time of termination. Acceptance of severance allowance shall terminate employment and continuous service for all purposes under this Agreement. 217 Section 2. Strikes and Lockouts: During the term of this Agreement, or any of the extensions thereof, the Union, its agents and representatives, will not engage in, authorize, instigate, aid or condone a strike or work stoppage, nor will any employee or employee member of said Union take part in a strike, individual slowdown in the rate of production, or any interference with or stoppage of the Company's work. Any individual employee who violates the provisions by reasons of an individual slow - down or interference with the rate of production of the Company's work shall be subject to disciplinary action. 218 Section 3. The Company agrees that during the period of this Agreement there shall be no lockouts. 219 Section 4. Duration: The provisions of this Agreement shall become effective June 17, 1996, and shall continue in effect to and including 11:59 p.m. of June 20, 1999. This agreement shall continue in effect for yearly periods after its termination date unless notice in writing of termination shall be given by either party to the other, not less than sixty (60) days prior to June 20, 1999. Either party may, on or before April 20, 1999, give notice to the other party of a desire to negotiate with respect to 92 the terms and conditions of a new agreement. If such notice is given, the parties shall meet within thirty (30) days thereafter to negotiate with respect to a new agreement. If the parties shall not agree with respect to a new agreement by 11:59 p.m. of June 20, 1999, either party may thereafter resort to strike or lockout, as the case may be, in support of its position, with respect to such matters, as well as any other matters in dispute. 220 Section 5. Notice hereunder shall be given by certified mail and shall be completed at the time of mailing. If addressed to the contracting Company at Alliance, Ohio, and to the Union as follows: United Steelworkers of America, AFL - CIO, Five Gateway Center, Pittsburgh, Pennsylvania 15222. 221 Either party hereto may be like written notice change the address to which certified mail notices required hereunder shall be sent. EXHIBIT A JOB CLASS RATES BY JOB LEVEL 6/17/96 6/17/97 6/17/98 LEVEL RATE/HR RATE/HR RATE/HR JOB CLASS 1 General Laborer STD 9.099 9.472 9.756 A 8.797 9.161 9.436 B 8.495 8.850 9.116 C 8.195 8.541 8.797 D 7.893 8.230 8.477 JOB CLASS 2 Grinder STD 10.413 10.825 11.150 Shot Blast Operator A 10.113 10.516 10.831 B 9.811 10.205 10.511 C 9.509 9.894 10.191 D 9.207 9.583 9.870 JOB CLASS 3 Material Handler STD 11.060 11.492 11.837 Crane Operator A 10.757 11.180 11.515 Spray Painter B 10.457 10.871 11.197 Cat Operator C 10.156 10.561 10.878 Straightener D 9.880 10.251 10.559 Truck Driver JOB CLASS 4 Burner STD 11.969 12.428 12.801 A 11.667 12.117 12.481 B 11.365 11.806 12.160 C 11.064 11.496 11.841 D 10.761 11.184 11.520 JOB CLASS 5 Machine Operator STD 12.124 12.588 12.966 Layout Man A 11.822 12.277 12.645 B 11.521 11.967 12.326 C 11.219 11.656 12.006 D 10.918 11.346 11.686 93 JOB CLASS 6 Small Machine STD 12.434 12.907 13.294 Tool Operator A 12.132 12.596 12.974 Welder B 11.832 12.287 12.656 Assembler "B" C 11.530 11.976 12.335 Electrician "B" D 11.227 11.664 12.014 JOB CLASS 7 Assembler "A" STD 12.747 13.229 13.626 Electrician "A" A 12.447 12.920 13.308 Fitter B 12.144 12.608 12.986 Template Maker C 11.843 12.298 12.667 D 11.541 11.987 12.347 JOB CLASS 8 Maintenance Man STD 12.899 13.386 13.788 Large Machine A 12.597 13.075 13.467 Tool Operator B 12.296 12.765 13.148 C 11.993 12.453 12.827 D 11.693 12.144 12.508 JOB CLASS 9 Machinist STD 13.214 13.710 14.121 Lead Maintenance A 12.911 13.398 13.800 Man B 12.610 13.088 13.481 C 12.309 12.778 13.161 D 12.009 12.469 12.843 APPRENTICE 6th Apprentice 12.309 12.778 13.161 5th Apprentice 11.573 12.020 12.381 4th Apprentice 10.851 11.277 11.615 3rd Apprentice 10.127 10.531 10.847 2nd Apprentice 9.392 9.774 10.067 1st Apprentice 8.657 9.017 9.288 RATE PROGRESSIONS 223 The pay rates will reflect general increases of 3% in the first year, 3% + $.10/hr. in the second year and 3% in the third year. 224 In job classes 1 through 3, progression will be automatic from D to STD. These increases will be based on six (6) months worked on any job in any job class. 225 In job classes 4 through 9, progression will be automatic from D to A but A to STD will be based on merit. Automatic increases will be based on six (6) months worked on a job but the merit increase can be granted at any time based on the discretion of the foreman. 226 * Rate changes resulting from bidding and bumping job classes 1 through 3 Any employee who bids or bumps on a job in a higher or lower job class will receive the rate of pay at the level equal to his time worked in any job class. Example, six (6) months worked equals level C or eighteen (18) months worked equals level A. 227 * Rate changes resulting from bidding and bumping job classes 4 through 9 94 Any employee who bids on and receives a job in a higher job class or bumps into a higher job class will receive the level of pay equal to or the next higher level of pay up to level A. Example, employee in job class 4 level C making $11.064 bids and receives a job in job class 6. His pay level in 6 will be D at $11.227 since that is the next highest level of pay. 228 Any employee who bids or bumps on and receives a job in a lower or equal job class will receive the level of pay equal to the next lower level of pay or level B whichever is lower. Example, employee in job class 9 level A making $12.911 bids or bumps on and receives job class 7 job. His pay level in 7 will be $12.144. 229 Employees who fall below STD level will be allowed to progress under the terms of exhibit A. Apprentice will be listed as a separate job class. 230 * Exception to the above will be made for employees falling under Article 11, Section 3, Paragraph 159. PROGRESSION - GRANDFATHERED Job Classes 1, 2 and 3 231 1.If a grandfathered employee bumps down or up to avoid layoff he will be paid the following corresponding rates. A lateral bump will cause no rate change. 232 2.If a grandfathered employee bids up or down he will be paid the following corresponding rates. 233 3.If a grandfathered employee bids lateral, he will be paid his same present rate. Effective Effective Effective June 17, 1996 June 17, 1997 June 17, 1998 Job Class 1 11.025 11.456 11.800 Job Class 2 11.329 11.769 12.122 Job Class 3 11.387 11.828 12.183 234 4.Other than Job Classes 1, 2, and 3, if a grandfathered employee bids down or lateral he will be paid under new pay scale. 95 THE ALLIANCE MACHINE COMPANY BY: Christopher Sause - President Larry Grossi - Vice President of Finance and Administration Gene Stroia - Manager of Manufacturing Margaret Swisher - Personnel Administrator UNITED STEELWORKERS OF AMERICA AFL - CIO - and its LOCAL NO. 2361 BY: George Becker, International President Leo W. Gerard, Internatinal Secretary - Treasurer Richard H. Davis - International Vice President, Administration Leon Lynch - International Vice President, Human Affairs Frank Vickers, District Director Lee Hilson - Staff Representative Larry Dramble - President, Local 2361 Larry Freeman - Vice President, Local 2361 Gary Barnes - Recording Secretary, Local 2361 COMMITTEEMEN: Charles Augustein Larry Freeman James Grimm Robert Hahn Rick Heestand Larry Lashley EX-10.51 5 EXHIBIT 10.51 96 Charles E. Bradley c/o Stanwich Partners, Inc. One Stamford Landing 62 Southfield Avenue Stamford, Connecticut 06902 June 18, 1996 Chatwins Group, Inc. 300 Weyman Plaza Suite 340 Pittsburgh, PA 15236 Dear Sirs and Madams: Reference is made to the Promissory Note, dated June 14, 1995 (the "Parkdale Note"), in the original principal amount of $5,800,000 issued by Chatwins Group, Inc. ("CGI") to Parkdale Holdings Corporation, N.V. ("Parkdale"), the Allonge dated September 14, 1995, attached to the Parkdale Note and the subsequent transfer by Parkdale of all its right, title and interest to the Parkdale Note to Charles E. Bradley, Sr. ("Bradley"), and the Allonge dated January 31, 1996. Bradley agrees with CGI to amend the Parkdale Note as follows: the Maturity Date set forth in Section 1 thereof shall be extended to December 31, 1996. The other terms of the Parkdale Note shall remain in full force and effect and shall not be altered or amended in any respect. The parties agree that to effect the foregoing an allonge executed by CGI in the form of Attachment A hereto shall be attached to and become a part of the Note. This letter agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the application of principles of conflicts of laws. Sincerely, --------------------------------- Charles E. Bradley, Sr. Accepted and agreed as of June 18, 1996. CHATWINS GROUP, INC. By: ---------------------------- Name: Russell S. Carolus Title: Vice President 97 ATTACHMENT A Third Allonge To Be Attached To Promissory Note Dated June 14, 1995 Of Chatwins Group, Inc. 1. The "Maturity Date" set forth in Section 1 of the attached Promissory Note is hereby amended to be December 31, 1996. Dated: June 18, 1996 CHATWINS GROUP, INC. By: ---------------------------- Name: Russell S. Carolus Title: Vice President EX-10.52 6 EXHIBIT 10.52 98 JOINT VENTURE AGREEMENT THIS AGREEMENT is between Klemp de Mexico, S.A. de C.V. a corporation organized under the laws of the United Mexican States ("Klemp"), Consolidated Fabricators Inc, a corporation organized under the laws of Massachusetts ("CFI"), Mr. Gary Johnson, Mr. Ernest Balazs, and Mr. Alfred Beaulieu, and is made in reference to the following facts and other recitals: A. The parties are in the business of metal fabrications and have substantial and valuable experience in such business. B. The parties wish to incorporate a Mexican corporation, (the "Company"), so that the Company, owned by the parties be engaged in manufacturing of metal fabrications. THEREFORE, in consideration of the foregoing and the mutual promises contained in this Agreement, the parties hereto agree as follows: 1. PURPOSE OF THIS AGREEMENT. 1.1 Purpose. This Agreement is intended to govern the present and future business relationship of the parties solely with respect to the ownership and operation of the Company, and to provide for the future management and operation of the Company. The Company shall be formed to operate in the United Mexican States and to own and operate related real estate and related businesses. 1.2 Charter. The parties agree that the charter (including the Articles of Incorporation and Bylaws) of the Company shall be substantially the same as those attached hereto as Exhibit 1.2. 1.3 Required Filings. Each of the parties hereto shall make, execute, register and file all charter documents, certificates, deeds, agreements and other instruments as may be necessary or appropriate for the incorporation, management and operation of the business of the Company as contemplated by this Agreement. 2. CAPITALIZATION, SHARE ISSUANCE, GUARANTIES. 2.1 Composition of Capital Stock. 2.1.1 The capital stock of the Company shall consist of both fixed Shares and variable Shares. The minimum fixed capital stock of the Company without the right of withdrawal shall be $375,000 Pesos, represented by 375,000 totally subscribed Shares of capital stock. 2.1.2 Each Share of capital stock of the Company (the"Shares") will have one vote and shall be alike in all respects, and the holders thereof shall be entitled, in proportion to their respective holdings of such Shares, to identical ownership rights and privileges, except as otherwise provided herein or in the Articles of Incorporation and Bylaws of the Company. 99 2.2 Ownership of Shares. The ownership of the Shares of the Company shall be owned by the parties hereto as follows: Klemp de Mexico, S.A. de C.V. 50.10% Consolidated Fabricators Inc. 43.90% Gary Johnson 2.00% Ernest Balazs 2.00% Alfred Beaulieu 2.00% 2.3 Cash Payments. All payments for Shares hereunder shall be in cash, unless in-kind payments are agreed upon by the parties. 2.4 Preemptive Rights to Acquire New Shares. If the capital stock of the Company is increased by contribution of new capital, the Shareholders of such company shall have preemptive rights to subscribe for any new Shares, provided such rights will not exist when new Shares are issued under Section 2.6.2 below. 2.5 Additional Capital Contributions. 2.5.1 The parties shall make additional capital contributions and/or loans to the Company in the amounts and at the times decided by the affirmative vote of not less than seventy percent (70%) of the total issued and outstanding capital stock of the Company. 2.5.2 The parties have decided and agreed that they shall make additional capital contributions in the aggregate amount of U.S.$200,000, at the exchange rate of $7.5 Pesos per Dollar in the time and manner specified in the initial plan in Exhibit 2.5.2. 2.6 Failure to Make Additional Capital Contributions. In the event that any of the parties (the "Non-Contributing Party") fails to make or advance all or any portion of an additional capital contribution such party is required to make under Section 2.5.1 or Section 2.5.2 ("Delinquent Advance"), such party shall be in breach of its obligations hereunder and, provided that the other parties (the "Contributing Parties") have advanced the full amount that the Contributing Party was obligated to make, the Contributing Parties shall have the following remedies exercisable by written notice within thirty (30) Days following the date of delinquency: 2.6.1 The Contributing Parties by unanimous agreement among themselves, may give notice of an election to invoke immediately the Buy-Out provisions of Section 7.3 hereof ("Buy-Out Notice") and Section 7.3 shall then apply, but only with respect to the interest of the Non-Contributing Party or Parties in the Company, or 2.6.2 The Contributing Parties may advance to the Company in cash an amount equal to the Delinquent Advance, and treat the advance either as (i) a capital stock contribution, in which event such parties shall be issued additional Shares in the Company at the subscription value determined at the time the additional capital stock contribution was decided (or, if no subscription value 100 was so determined, at the par value), or (ii) a loan to the Company, in which event the loan shall be repayable upon demand and shall bear interest at its then current borrowing rate from its principal lender (which may be an interest rate) plus two percent (2%). If the Company does not have a principal lender at the time, such loan shall bear interest at US prime plus two percent (2%) per annum. The foregoing election must be made by the Contributing Parties in writing at the time they make such advance and such election shall be irrevocable. 2.6.3 In the event the Contributing Parties or any of them, elect to make an advance pursuant to Section 2.6.2, above, as either a capital stock contribution or a loan, each such Contributing Party shall have the right (but not the obligation) to make such an advance in an amount equal to the amount of the Delinquent Advance multiplied by a fraction the numerator of which is the number of fixed and variable shares of capital stock of the Company owned by such Contributing Party and the denominator of which is the total number of shares owned by all the Contributing Parties desiring to make an advance. If any Contributing Party elects not to advance its full prorata portion of the Delinquent Advance as determined above, the remaining Contributing Parties may (but shall not be obligated to) make additional advances in accordance with the foregoing until the full amount of the Delinquent Advance has been advanced. 2.7 Loans, Credits and Guaranties. 2.7.1 All loans or credits required by the Company shall be structured to be financed solely by the Company and, if possible, on a non-recourse basis. 2.7.2 The parties shall not be required to provide leasing, mortgage or other guaranties in favor of third-party creditors of the Company. 2.7.3 However, if unanimously approved in writing by the parties hereto, or, if approved by any party or parties hereto, such guaranties shall be provided by the party or parties approving such guaranties proportionally among such approving parties based on the ratio that the fixed and variable capital of the Company owned by each approving party bears to the total of the fixed and variable capital of the Company owned by all the approving parties, and such guaranties shall not terminate without the written agreement of the guaranteeing parties. 2.8 Non-Transferability of Shares. 2.8.1 The parties shall not voluntarily sell, transfer, assign, pledge or otherwise dispose of all or any portion of their Shares in the Company, without the prior approval of the Company's Board of Directors, except (1) to an Affiliate of any of the parties or to a wholly owned 101 subsidiary of any of the parties, as the case may be, that has assumed and agreed to be bound by the provisions of this Agreement by an assumption agreement in form and substance satisfactory to the other party, or (2) in connection with a "Buy-Out" pursuant to Section 7.3 hereof. 2.8.2 If a party violates or attempts to violate Section 2.8.1, the other parties may give notice of an election to invoke immediately the Buy-Out provisions of Section 7.3 hereof ("Buy-Out Notice") and Section 7.3 shall then apply. 2.9 Other Remedies. The exercise by any party of any remedy provided in Sections 2.6 or 2.8 shall be cumulative and in addition to any other remedy available to the Company or to such party, such as arbitration under Section 10.8.2 hereof. 2.10 Governmental Consents. The Company and the parties hereto shall file such notices and shall obtain, or cause to be obtained, any permits, consents, approvals, authorizations, qualifications or registrations required by any governmental authority (whether in the United States of America or in the United Mexican States) to issue any Shares. 2.11 Notices and Legends. The certificates representing the Shares shall bear a legend reflecting the restrictions on transfer provided for in Section 2.8.1 above as well as any other notices or written legends required by the charter of the Company. 2.12 Shareholder Advances. A party may make a voluntary advance to the Company at any time, but solely to fund working capital needs of the Company's operations incurred in the ordinary course of business and solely with the prior written approval of the Board of Directors. Such advance will be made in U.S Dollars and treated as a loan, and it will earn interest at the applicable rate provided under Section 2.6.2 (ii). 3. OPERATIONS. 3.1 Manner of Operation. The Company shall be operated in accordance with the objectives of the Business Plan. 3.2 Location of Principal Office. The principal office of the Company shall be located in Lerma, State of Mexico. Other offices of the Company shall be located at such places as the Board of Directors shall determine. 3.3 Accounting. 3.3.1 The fiscal year of the Company will begin on January 1 and end on December 31 of each calendar year, except the first fiscal year which will begin on the date of incorporation and will end on December 31 of the same year. 3.3.2 The accounting methods and systems employed by the Company shall conform to the generally accepted 102 accounting principles of the United Mexican States as customarily employed by corporations of a similar nature. 3.4 Payment of Expenses. All expenses of the business and operations of the Company shall be paid out of the capital or earnings of the Company and shall not be the responsibility of the parties hereto. 3.5 Insurance. The Company shall maintain in force policies of insurance, insuring its assets and business against such losses and risks in such amounts as its Board of Director shall determine and in accordance with the laws of the United Mexican States. 3.6 Business Plan. 3.6.1 The parties hereby agree to the Business Plan, which shall consist of the initial plan set forth in Exhibit 3.6 hereof, and to the additional capital contributions established under Section 2.5.2 above. 3.6.2 The General Director will communicate to the Board of Directors of the Company, no later than July 31, 1996, a more detailed plan which, if adopted by the Board of Directors, will become part of, or modify, the Business Plan. 3.7 Auditors. The external auditors shall be selected by the Board of Directors and shall be a major international accounting firm with offices in Mexico City. 3.8 Examiners. The parties shall each be entitled respectively to appoint one examiner ("comisario"), or may for any period agree to appoint any other party's examiner. 3.9 Taxes. The parties acknowledge that the Company shall be included in Klemp's consolidated tax returns. However, any tax benefits accruing to the Company shall be allocated to the parties in accordance with their percentages in the capital stock of the Company. 4. MANAGEMENT. 4.1 Board of Directors. 4.1.1 The Company shall be managed by a four member Board of Directors. Each party hereto holding 35% or more of the Shares of the capital stock shall designate two members of the Board of Directors. The parties may mutually agree to name alternates. 4.1.2 At each Shareholders' Meeting held for the purpose of electing members to the Board of Directors, the parties shall vote their Shares to ensure such designees shall be elected. 4.1.3 The chairman of the Board of Directors of the Company shall always be chosen from among the directors 103 designated by Klemp, but the Chairman shall not have a tie-breaking vote or any other special or extraordinary rights or privileges. 4.1.4 The Board of Directors of the Company shall meet not less than one time per year. The powers, duties, compensation and other terms and conditions of the members of the Board of Directors shall be as set forth in the charter of the Company. 4.2 Board Quorum & Voting. No meeting of any Board of Directors of the Company shall occur unless four directors are present and unless at least two of the directors designated by each party, who has the right to designate, are present. All decisions of the Board of Directors of the Company shall require the affirmative unanimous vote of the entire Board of Directors. 4.3 Officers. 4.3.1 At each meeting of the Board of Directors of the Company at which officers are elected, the parties shall cause their designees on the Board of Directors to vote for the Management Personnel, and, thus, to elect these persons to the positions for which they have been designated. 4.3.2 Officers who are Management Personnel shall have authority to undertake and enter into any Obligation (i) that is provided for in the Business Plan or (ii) that has been approved by the Board of Directors. They shall also be given Powers of Attorney in the form of Exhibit 4.3.2. 4.4 Shareholders' Meetings. Ordinary Shareholders' Meetings of the Company shall deal only with the matters mentioned in Article 181 of the General Corporation Law of the United Mexican States, Extraordinary Shareholders' Meetings shall deal with all other matters to be considered by the shareholders. The affirmative vote of at least seventy percent (70%) of the total capital stock of the Company shall be required for action by the shareholders at an Extraordinary Shareholders' Meeting. 4.5 Corporate Resolutions. To give effect to the purposes of this Agreement, the parties shall promptly cause shareholder resolutions and Board of Directors resolutions in a form substantially the same as set forth in Exhibit 4.5 to be adopted respectively by the shareholders and Board of Directors of the Company. 4.6 Access to Information. The officers of the Company shall keep its Board of Directors informed of the material financial, business, marketing and other general information necessary for the Board of Directors to fulfill its responsibilities and duties. 4.7 Audits. Each party shall have the right, at its own expense, to have an independent audit of the financial condition of the Company performed by auditors of its own selection at any time during the term of this Agreement and for a period of three years 104 thereafter. 4.8 Training of Employees. The parties will jointly and cooperatively train employees of the Company (1) in its daily operations and (2) in the discharge of the Company's administrative, financial, marketing and related needs. 4.9 Other Agreements. Other agreements between the parties hereto or any of their Affiliates may be negotiated by the parties in good faith and on a mutually convenient basis. 5. REPRESENTATIONS AND WARRANTIES. 5.1 Representation and Warranties of Klemp. Klemp represents and warrants to the other parties that: 5.1.1 Organization and Standing. Klemp is a corporation organized, existing and in good standing under the laws of the United Mexican States, with the requisite power to enter this Agreement and to fulfill its obligations hereunder. 5.1.2 Authority. Klemp has the right, power and authority to execute, deliver and perform this Agreement and has taken all required corporate action to approve this Agreement. This Agreement constitutes a valid and binding obligation of Klemp enforceable in accordance with its terms, except to the extent that enforcement may be subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 5.1.3 Absence of Conflicts. Entering this Agreement and performing all of its obligations hereunder does not (1) violate or conflict with the Articles of Incorporation or Bylaws of Klemp or any agreement or instrument binding on Klemp (2) violate or conflict with any law, rule, judgment, order or the like applicable to Klemp, or (3) require the consent or approval of any other person or entity. 5.1.4 Pending Proceedings. There is no dispute, investigation, litigation or other proceeding pending or overtly threatened against Klemp which, if unfavorably concluded, would adversely affect the ability of Klemp to enter this Agreement or to fulfill its obligations hereunder. 5.2 Representations and Warranties of CFI. CFI hereby represents and warrants to the other parties that: 5.2.1 Organization and Standing. CFI is a corporation organized, existing and in good standing under the laws of Massachusetts, with the requisite power to enter this Agreement and to fulfill its obligations hereunder. 5.2.2 Authority. CFI has the right, power and authority to execute, deliver and perform this Agreement and has taken 105 all required corporate action to approve this Agreement. This Agreement constitutes a valid and binding obligation of CFI enforceable in accordance with its terms, except to the extent that enforcement may be subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 5.2.3 Absence of Conflicts. Entering this Agreement and performing all of its obligations hereunder does not (1) violate or conflict with the Articles of Incorporation or Bylaws of CFI or any agreement or instrument binding on CFI, (2) violate or conflict with any law, rule. 5.2.4 Pending Proceedings. There is no dispute, investigation, litigation or other proceeding pending or overtly threatened against CFI which, if unfavorably concluded, would adversely affect the ability of CFI to enter this Agreement or to fulfill its obligations hereunder. 5.3 Representations and Warranties of Mr. Gary Johnson. Mr. Johnson hereby represents and warrants to the other parties that: 5.3.1 Authority. Mr. Johnson has the right, power and authority to execute, deliver and perform this Agreement. This Agreement constitutes a valid and binding obligation of Mr. Johnson enforceable in accordance with its terms, except to the extent that enforcement may be subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 5.3.2 Absence of Conflicts. Entering this Agreement and performing all of its obligations hereunder does not (1) violate or conflict with any agreement or instrument binding on Mr. Johnson, (2) violate or conflict with any law, rule, judgment, order or the like applicable to Mr. Johnson, or (3) require the consent or approval of any other person or entity. 5.3.3 Pending Proceedings. There is no dispute, investigation, litigation or other proceeding pending or overtly threatened against Mr. Johnson which, if unfavorably concluded, would adversely affect the ability of Mr. Johnson to enter this Agreement or to fulfill his obligations hereunder. 5.4 Representations and Warranties of Mr. Ernest Balazs. Mr. Balazs hereby represents and warrants to the other parties that: 5.4.1 Authority. Mr. Balazs has the right, power and authority to execute, deliver and perform this Agreement. This Agreement constitutes a valid and binding obligation of Mr. Balazs enforceable in accordance with its terms, except to the extent that enforcement may be subject to bankruptcy, insolvency and other laws of general 106 applicability relating to or affecting creditors' rights and to general equity principles. 5.4.2 Absence of Conflicts. Entering this Agreement and performing all of its obligations hereunder does not (1) violate or conflict with any agreement or instrument binding on Mr. Balazs, (2) violate or conflict with any law, rule, judgment, order or the like applicable to Mr. Balazs, or (3) require the consent or approval of any other person or entity. 5.4.3 Pending Proceedings. There is no dispute, investigation, litigation or other proceeding pending or overtly threatened against Mr. Balazs which, if unfavorably concluded, would adversely affect the ability of Mr. Balazs to enter this Agreement or to fulfill his obligations hereunder. 5.5 Representations and Warranties of Mr. Alfred Beaulieu. Mr. Beaulieu hereby represents and warrants to the other parties that: 5.5.1 Authority. Mr. Beaulieu has the right, power and authority to execute, deliver and perform this Agreement. This Agreement constitutes a valid and binding obligation of Mr. Beaulieu enforceable in accordance with its terms, except to the extent that enforcement may be subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 5.5.2 Absence of Conflicts. Entering this Agreement and performing all of its obligations hereunder does not (1) violate or conflict with any agreement or instrument binding on Mr. Beaulieu, (2) violate or conflict with any law, rule, judgment, order or the like applicable to Mr. Beaulieu, or (3) require the consent or approval of any other person or entity. 5.5.3 Pending Proceedings. There is no dispute, investigation, litigation or other proceeding pending or overtly threatened against Mr. Beaulieu which, if unfavorably concluded, would adversely affect the ability of Mr. Beaulieu to enter this Agreement or to fulfill his obligations hereunder. 6. NON-COMPETITION AND OTHER COVENANTS. 6.1 Non-competition by Klemp. Without the prior written approval of the parties during the term of this Agreement (and, if it is a defaulting party under Sections 7.2 and 8.4, for a period of five years thereafter), neither Klemp nor any of its Affiliates shall directly or indirectly, purchase products, equipment or services of a kind competitive with those of the Company from any other company or entity in Mexico. 6.2 Non-competition by CFI. Without the prior written approval of the parties, during the term of this Agreement (and, if it is a 107 defaulting party under Sections 7.2 and 8.4, for a period of five years thereafter), neither CFI nor any of its Affiliates shall directly or indirectly, purchase products, equipment or services of a kind competitive with those of the Company from any other company or entity in Mexico. 6.3 Non-competition by Mr. Gary Johnson. Without the prior written approval of the parties, during the term of this Agreement (and, if he is a defaulting party under Sections 7.2 and 8.4, for a period of five years thereafter), Mr. Johnson shall not purchase products, equipment or services of a kind competitive with those of the Company from any other company or entity in Mexico. 6.4 Non-competition by Mr. Ernest Balazs. Without the prior written approval of the parties, during the term of this Agreement (and, if he is a defaulting party under Sections 7.2 and 8.4, for a period of five years thereafter), Mr. Balazs shall not purchase products, equipment or services of a kind competitive with those of the Company from any other company or entity in Mexico. 6.5 Non-competition by Mr. Alfred Beaulieu. Without the prior written approval of the parties, during the term of this Agreement (and, if he is a defaulting party under Sections 7.2 and 8.4, for a period of five years thereafter), Mr. Beaulieu shall not purchase products, equipment or services of a kind competitive with those of the Company from any other company or entity in Mexico. 6.6 Best Efforts. The parties shall use all reasonable efforts to carry out the terms and purposes of this Agreement. 6.7 Cooperation. The parties shall cooperate with each other and shall cause their employees to cooperate to support the businesses and operations of the Company, in accordance with the Business Plan. 7. DEADLOCK, DEFAULT, & BUY-OUT. 7.1 Deadlock of Shareholders or Directors. 7.1.1 Deadlock Notice. If at any time, the Shareholders or Board of Directors of the Company become (or remain) deadlocked over or, because of a lack of a quorum or a required majority, are unable to act or agree upon any matter including any inability to agree on additional capital requirements or the provisions of guaranties for the Company (a "Deadlock"), any party may give a notice of deadlock to the other party ("Deadlock Notice"). 7.1.2 Consultation Period. Within sixty (60) Days after any Deadlock Notice is given ("Consultation Period"), chief executive officers of the parties shall meet personally and attempt to resolve the Deadlock, and any resolution shall be set forth in a written agreement among the parties. 7.1.3 Mediation Period. If the Deadlock is not resolved by a written agreement during the Consultation Period, then 108 within the immediately following sixty (60) Days ("Mediation Period") the parties will attempt to have the Deadlock resolved by non-binding mediation under Section 7.5 below. 7.1.4 Buy-Out Notice. If the Deadlock is not resolved by a written agreement during the Consultation Period and Mediation Period, either may give notice of an election to invoke the Buy-Out provisions of Section 7.3 hereof ("Buy-Out Notice") and Section 7.3 shall apply. 7.2 Default and Insolvency. 7.2.1 Default Notice. Upon a Default by any party (the "Defaulting Party"), any other party may give written notice of the Default ("Default Notice") to the Defaulting Party specifying the Default. The Default Notice shall be given within a reasonable time (but in any event within 90 Days) after discovery of the Default. 7.2.2 Consultation Period. Within sixty (60) Days after any Default Notice is given ("Consultation Period"), chief executive officers of the parties shall meet personally and attempt to resolve the Default, and any resolution shall be set forth in a written agreement among the parties. 7.2.3 Mediation Period. If the Default is not resolved by a written agreement during the Consultation Period, then within the immediately following sixty (60) Days ("Mediation Period") the parties will attempt to have the Default resolved by non-binding mediation under Section 7.5 below. 7.2.4 Buy-Out Notice. If the Default (i) is not resolved by a written agreement during the Consultation Period and Mediation Period and (ii) is not cured within 120 Days of the Default Notice, the non-defaulting party may give notice of an election to invoke the Buy-Out provisions of Section 7.3 hereof ("Buy-Out Notice") and Section 7.3 shall apply. 7.2.5 Arbitration Remedy. Any party may in any case seek a remedy by arbitration under Section 10.8 below. Any bona fide dispute between the parties over the existence or nature of a Default or the cure thereof shall be resolved pursuant to the terms of Section 10.8. 7.2.6 Insolvency Notice. If a party is insolvent, has been declared bankrupt, has had a receiver or trustee appointed to manage its assets or affairs, or is the subject or a petition for insolvency of bankruptcy that has not been discharged within sixty (60) Days of its filing ("Insolvent Party"), any other party may give the insolvent Party written notice thereof and elect to invoke the Buy-Out provisions of Section 7.3 hereof ("Insolvency Notice") and Section 7.3 shall apply. 109 7.3 Buy-Out. 7.3.1 Determine Fair Market Value. In the event of a Buy-Out Notice under Sections 2.6.1, 2.8, 7.1.4, 7.2.4, 7.8 or an Insolvency Notice under Section 7.2.6 above, the Fair Market Value of the Company as of the date the Buy-Out Notice is given shall be determined under Section 7.4 below. 7.3.2 Klemp Election. Klemp shall then have thirty (30) Days from the date upon which the Fair Market Value shall have been determined in which to elect (for itself or an Affiliate), by written notice, to purchase all of the Shares of the other parties in the Company for a price equal to one hundred percent (100%) of the Fair Market Value multiplied by the other parties' percentage ownership of the Shares of the Company. 7.3.3 CFI Election. If within the 30-Day period described in Section 7.3.2 Klemp has not elected to purchase the other parties' Shares, CFI shall thereupon have a further thirty (30) Days in which to elect (for itself or an Affiliate), by written notice, to purchase all of the Shares of the other parties in the Company for a price equal to one hundred percent (100%) of the Fair Market Value multiplied by the other parties' percentage ownership of the Shares of the Company. 7.3.4 Mr. Gary Johnson Election. If within the 30-Day period described in Section 7.3.3 CFI has not elected to purchase the other parties' Shares, Mr. Johnson shall thereupon have a further thirty (30) Days in which to elect (for himself), by written notice, to purchase all of the Shares of the other parties in the Company for a price equal to one hundred percent (100%) of the Fair Market Value multiplied by the other parties' percentage ownership of the Shares of the Company. 7.3.5 Mr. Ernest Balazs Election. If within the 30-Day period described in Section 7.3.4 Mr. Johnson has not elected to purchase the other parties' Shares, Mr. Balazs shall thereupon have a further thirty (30) Days in which to elect (for himself), by written notice, to purchase all of the Shares of the other parties in the Company for a price equal to one hundred percent (100%) of the Fair Market Value multiplied by the other parties' percentage ownership of the Shares of the Company. 7.3.6 Mr. Alfred Beaulieu Election. If within the 30-Day period described in Section 7.3.5 Mr. Balazs has not elected to purchase the other parties' Shares, Mr. Beaulieu shall thereupon have a further thirty (30) Days in which to elect (for himself), by written notice, to purchase all of the Shares of the other parties in the Company for a price equal to one hundred percent (100%) of the Fair Market Value multiplied by the other parties' percentage ownership of the Shares of the Company. 110 7.3.7 Adjustment of Fair Market Value. If no election has been made under Sections 7.3.2 to 7.3.6 above, then, immediately upon expiration of the 30-Day period described in Section 7.3.6, the Fair Market Value shall become an amount that is ninety percent (90%) of the previous Fair Market Value, and the procedures of Sections 7.3.2, to 7.3.6 and this 7.3.7 will continue to be repeated in sequence until an election is made under Section 7.3.2, Section 7.3.3, Section 7.3.4, Section 7.3.5. or Section 7.3.6. 7.3.8 Purchase Terms. Once an election is made under Section 7.3.2, Section 7.3.3, Section 7.3.4, Section 7.3.5. or Section 7.3.6, then (i) the parties shall promptly perform all acts required of them and use their best efforts to cause third parties to perform all acts required to enable the purchaser to consummate forthwith its purchase of the Shares (the "Required Acts"), and (ii) the purchaser shall pay the purchase price in cash and in U.S. Dollars within 120 Days after the date of the election or within twenty (20) Days after completion of the Required Acts, whichever occurs earlier. 7.4 Fair Market Value. 7.4.1 Proposed & Agreed Values. Within thirty (30) Days after any Buy-Out Notice is given under Section 7.3 above, Klemp and CFI shall communicate to each other by written notice a proposed fair market value in U.S. dollars (the "Proposed Value") and attempt to arrive at an agreed Fair Market Value in U.S. dollars for the Company. Any such agreed-upon value, when approved in writing by the parties, shall be deemed to be the Fair Market Value. 7.4.2 Appraiser Determines Fair Market Value. If no such agreement has been reached within the 30-Day period described in Section 7.4.1, then the Fair Market Value in U.S. dollars shall be determined in writing by an independent appraiser. 7.4.3 Selection of Appraiser. The Company's external auditors shall serve as the appraiser or, if unwilling to do so, appoint the appraiser or, if no appraiser has been appointed within sixty (60) Days after the Buy-Out Notice is given, the President of Mexico's Association of Charted Accountants or other authority agreed on in writing by the parties shall at the request of any party appoint the appraiser. The appraiser shall in all cases be a member of a major international accounting firm with offices in Mexico City. 7.4.4 Cost. The fees and expenses of the appraiser shall be borne equally by the parties. 7.4.5 Basis of Appraisal. The appraiser is to make his or her own determination in writing of the fair market value in U.S. dollars of the Shares of the Company, based on what an arm's length purchaser would pay for the Shares taking 111 into account the going concern value of the Company (if still carrying on business). 7.4.6 Assistance. The parties shall give all reasonable assistance to the appraiser, and require the officers, directors and auditors of the Company to give such assistance. The parties may make written representations to the appraiser, but the appraiser will not be obligated to agree with them. 7.4.7 Appraised Value. Within sixty (60) Days after the appointment of the appraiser (or as soon thereafter as it can be accomplished), the appraiser shall submit to the parties the fair market value as determined by the appraiser (the "Appraised Value") together with a copy of a written appraisal report prepared by such appraiser with respect to such value. 7.4.8 Use of Proposed or Appraised Value. If the appraised value determined in the Appraised Value is higher than the higher of either party's Proposed Values (or, if only one Proposed Value was timely communicated, that Proposed Value), then the second higher Proposed Value shall be the Fair Market Value. Otherwise, the Appraised Value determined by the appraiser shall be the Fair Market Value. 7.4.9 Date Fair Market Value Determined. The Fair Market Value shall be deemed determined on (i) the date of any written approval of an agreed Fair Market Value under Section 7.4.1, or (ii) the date the written appraisal report prepared by the appraiser under Section 7.4.7 is given to the last party to receive it, or (iii) if the Fair Market Value has been reduced under Section 7.3.7, the time described in Section 7.3.7. 7.5 Mediation Procedure. Mediation under this Agreement shall occur under the then current Center of Public Resources ("CPR") Model Procedure for Mediation of Business Disputes (Model Procedure). The mediator will be selected from the CPR Panels of Neutrals under the Model Procedure, unless the parties have first selected a different mediator. 7.6 Interim Operation. During any period of Deadlock, Default, Dispute, existence of an Insolvent Party, Consultation Period, Mediation Period, Buy-Out and any period thereafter until a sale is concluded under Section 7.3, the parties shall continue to operate the Company in accordance with all matters that have been agreed upon including this Agreement, the Management Agreement and the Business Plan, and otherwise in the best interests of the shareholders. 7.7 Other Remedies Upon Default or Sale. The provisions of this Section 7 are not intended to be penal clauses, and the rights therein shall be in addition to and not in substitution for any other remedies that may be available to a non-defaulting party. No sale under Section 7.3 shall relieve any party from any obligations accrued to the date of such sale or relieve a 112 defaulting party from liability and damages to any other party for breach of this Agreement, except that such defaulting party shall have no further liability with respect to any Delinquent Advance of such party. 7.8 Change in Control. If there is a change in control with respect to either party, the other parties may within thirty days of receiving notice of the change in control elect by written notice to invoke immediately the Buy-Out provisions of Section 7.3 hereof ("Buy-Out Notice") and Section 7.3 shall then apply; provided that: 7.8.1 The election must be made within one (1) year of the effective Date of this Agreement, and 7.8.2 The party making the election may not be in Default under this Agreement and the Deadlock, Default and Buy-Out procedures of Sections 7.1, 7.2 or 7.3 shall not otherwise have commenced. 8. TERM, TERMINATION & DISSOLUTION 8.1 Term. The term of this Agreement shall be from the Effective Date until terminated under Section 8.2. 8.2 Termination of Agreement. This Agreement shall be terminated on the date: 8.2.1 The parties agree in writing to terminate the Agreement; 8.2.2 A sale is completed by Klemp or CFI of all its Shares in the Company by written agreement or under the "Buy-Out" provisions of Section 8.3 above; 8.2.3 120 Days after the charter of the Company expires, or is revoked provided it is not reinstated (or a new charter is not issued) within these 120 Days. 8.3 Survival of Provisions. Sections 6, 7.5, 7.7, 8.4, 8.5, 9, 10, any other provision hereof which specifically so provides, and any provision hereof where the context so requires, shall survive any termination of this Agreement. Termination shall not affect any liability or obligation accrued before the date of termination. 8.4 Post-Termination Competition. After the date of a termination, the parties and their affiliates may compete with one another in the United States of America and the United Mexican States subject to the provisions of this Agreement including the provisions of Section 9 hereof relating to confidentiality and return of materials embodying Confidential Information (as defined in Section 9.2); provided, however, that in the event of termination of this Agreement upon a Buy-Out of a party's Shares following a Default or other breach hereof, the defaulting or breaching party shall remain bound by the provisions of Section 6.1, 6.2, 6.3, 6.4 or 6.5 hereof (as applicable) for a period of five years following the date of termination. 113 8.5 Dissolution. Dissolution of the Company shall occur only in accordance with the applicable provisions of law and the charter of the Company. 9. CONFIDENTIALITY. 9.1 Duty of Confidentiality. Each party acknowledges that it will be made aware of and have access to Confidential Information (as defined in Section 9.2). No party hereto shall disclose, during the term of this Agreement or thereafter, any Confidential information to any person other than an affiliate, agent or employee of the parties, and only in furtherance of the interests of the Company, unless prior written consent to such disclosure has been obtained from other party. 9.2 Confidential Information. For purpose of this Section 9, Confidential Information shall mean all confidential or proprietary information owned, possessed or used by the parties or their affiliates, including, but not limited to, trade secrets and know-how and other such information or data which is declared to be confidential or proprietary by any party to this Agreement prior to its disclosure. Such information must be in writing or, if disclosed orally, must be reduced to writing within 10 days after such oral disclosure. Any such written material must be marked "confidential" or "proprietary". Confidential Information for purposes of this Section 9 shall not include information which: (1) was in the public domain at the time it was disclosed, (2) was already validly in a recipients's possession at the time it was disclosed, and the evidence of such possession is reasonably satisfactory to the party seeking to restrict disclosure, (3) was independently from a source other than a disclosing party without the disclosing party breaching its obligations hereunder. 9.3 Measures by Affiliates. The parties shall cause their affiliates, the Company, and the employees and agents of each of the foregoing, not to disclose, and to exercise the same degree of care to protect, the Confidential Information of the parties that it would use to preserve and safeguard its own confidential information. Such care shall include, but not be limited to, requiring any such entities, or their agents and employees, to execute a reasonable confidentiality agreement in a form submitted by one party to any other party. 9.4 Return of Confidential Information. Upon the termination of this Agreement, each party shall return to the others, and shall cause the Company to so return all materials embodying Confidential Information which such party has received from any of the others since the execution of this Agreement. 10. MISCELLANEOUS. 10.1 Assignment. No party to this Agreement may assign, transfer or otherwise convey any or all of its rights or obligations hereunder without the prior consent of the others, except to an affiliate to whom the Shares have been conveyed as permitted by Section 2.8 above. No such assignment to an affiliate shall relieve the assigning party of any of its obligations hereunder. 114 10.2 Entire Agreement. This Agreement (including all exhibits hereto), together with the Management Agreement, sets forth the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior discussions, understanding and agreements relating to the subject matter hereof. 10.3 Severability. If any one or more of the provisions contained in this Agreement or in any document executed in connection herewith shall be held invalid, illegal or unenforceable in any respect under applicable law, the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired; provided, however, that in such case the parties shall use their best efforts to achieve the purpose of the affected provision in a manner which is not invalid, illegal or unenforceable. 10.4 Governing Law. This Agreement and all actions and arbitrations contemplated hereby shall be governed by and construed and enforced in accordance with the internal laws of the United Mexican States, excluding the principles of conflict of laws thereof. 10.5 Governing Text and Language. The parties shall execute five English language originals of this Agreement, one to be held by each party. The parties understand and agree that this document has been prepared in the English language and that the English language is the official language of this Agreement. The parties shall also promptly cause an official certified Spanish language text to be prepared, but should any discrepancy of interpretation occur between the English original and the Spanish text, the English original shall be controlling. 10.6 No Waiver of Rights. Except as otherwise provided herein, no failure or delay on the part of either party in the exercise of any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude other or further exercise thereof or of any other right or power. 10.7 Force Majeure. 10.7.1 Failure on the part of a party to perform any of its obligations hereunder will not be deemed to be a breach of the Agreement to the extent that such failure arises from force majeure. If through force majeure the fulfillment by either party of any obligation set forth in this Agreement will be delayed, the period of such delay will not be counted in computing periods prescribed by this Agreement. 10.7.2 Any party failing to perform its obligations under this Agreement because of force majeure shall give notice in writing of such force majeure as soon as possible after the occurrence to the other party. 10.7.3 Force majeure will mean any war, civil commotion, strike, lockout, accident, epidemic, or other event (whether similar of dissimilar to the foregoing) that is fully 115 beyond the reasonable control of the parties, and that directly prevents a party from performing an obligation hereunder. 10.7.4 Any party hereto who fails because of force majeure to perform an obligation hereunder will upon the cessation of the force majeure take all reasonable steps within its power to resume with the least possible delay compliance with that obligation. 10.8 Dispute Resolution. 10.8.1 The parties shall attempt to settle any Dispute between them by consultation and non-binding mediation, during a Consultation Period and Mediation Period, as provided by Sections 8.1.2, 8.1.3, 8.2.2, 8.2.3, and 8.5 above. If no Notice of Deadlock or Notice of Default has been given, a party shall first give a written notice specifying the Dispute and the Consultation Period will begin with that notice. 10.8.2 If the Dispute is not resolved by written agreement within the Consultation Period and the Mediation Period, it shall be resolved by binding arbitration under the Center for Public Resources Rules for Non-Administered Arbitration of Business Disputes, in English at New York City, NY before one neutral arbitrator who may be a national of any party and who shall be a lawyer with at least 15 years experience in commercial law. In the event the parties are unable to agree on a neutral arbitrator within thirty days after any party's demand for arbitration, the Center for Public Resources shall be authorized to appoint an arbitrator from the CPR Panels of Neutrals. All documents and information relevant to the claim or dispute in the possession of any party shall be made available to the other party not later than sixty (60) Days after the demand of arbitration is served, and the arbitrator may permit such deposition or other discovery deemed necessary for a fair hearing. The hearing may not exceed two Days. The award shall be rendered within 120 Days of the demand. The arbitrator may not award interim and final injunctive relief and other remedies, and may not award punitive damages. No time limit herein is jurisdictional. Any award of the arbitrator shall be final and not subject to appeal or review, and may be confirmed or enforced in any court having jurisdiction and under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 10.8.3 Notwithstanding Sections 10.8.1 and 10.8.2 above, the parties may bring court proceedings or claims against each other only (i) as part of separate litigation commenced by an unrelated third party, or (ii) if not first sought from the arbitrator, solely to obtain preliminary injunctive relief of other interim remedies pending conclusion of the arbitration. 116 10.8.4 The arbitrator shall be authorized to allocate the costs of the arbitration proceedings among the parties in a manner deemed equitable by the arbitrator. Notwithstanding the foregoing, each party shall bear its own costs for lawyers or witnesses. 10.9 Notices. All notices and other communications hereunder shall be in writing in the English language and may be personally delivered or sent by telefax and the confirmed by certified or registered first class air mail. Any such notice or other communication shall be deemed effectively given (a) on the date of delivery if personally delivered; or (b) on the first business day after being sent by telefax. All such notices and communications shall be delivered or sent to the addresses below or such other address(es) as a party may specify in a written notice: a) If to Klemp: Rio Balsas No. 80 - 3rd. Floor Col. Cuauhtemoc 06500 Mexico, D.F. Tel.: 533-6162 Fax: 514-5362 b) If to CFI: Route 3, Box 581 Old Laurens Highway Clinton, South Carolina 29325 Tel.: 803-833-4472 Fax: 803-833-4899 c) If to Mr. Gary Johnson: Route 3, Box 581 Old Laurens Highway Clinton, South Carolina 29325 Tel.: 803-833-4472 Fax: 803-833-4899 d) If to Mr. Ernest Balazs: 17 St. Mark Street Auburn, Massachusetts 01501 Tel.: 508-832-9686 Fax: 508-832-7369 e) If to Mr. Alfred Beaulieu: 17 St. Mark Street Auburn, Massachusetts 01501 Tel.: 508-832-9686 Fax: 508-832-7369 10.10 Exhibits. The exhibits hereto are an integral part of this Agreement and all references herein to this Agreement shall encompass such Exhibits. 117 10.11 Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.12 Headings. The headings of the sections and paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement. 10.13 Amendment and Modification. This Agreement may be amended or modified only by a writing executed by all parties. 10.14 Further Instruments and Acts. The parties hereto will execute and deliver such further instruments and do such further acts as may be necessary or proper to carry out more effectively the purposes of this Agreement. INTENDING TO BE LEGALLY BOUND, the parties have caused this Agreement to be executed by their duly authorized officers as of the _____ day of ________________, 1996. By:____________________________ By:____________________________ ____________________________ ____________________________ 118 EXHIBIT 1.2 CFI-KLEMP DE MEXICO, S.A. DE C.V. CHAPTER I NAME, DOMICILE, PURPOSE AND DURATION. FIRST.- NAME. The name of the Company is CFI-KLEMP DE MEXICO. This denomination shall always be followed by the words SOCIEDAD ANONIMA DE CAPITAL VARIABLE or their abbreviation S.A. DE C.V. SECOND.- DOMICILE. The domicile of the Company is Lerma, State of Mexico, but the Company may establish agencies or branches elsewhere in the Republic of Mexico and designate conventional domiciles for the execution of specific acts and contracts. THIRD.- PURPOSES. The purposes of the Company are: a) To manufacture, purchase, sell, import and export of metal fabrications, and in general all kind of products. b) To establish agencies or branches in the United Mexican States or abroad. c) To render technical, professional, administrative and consultant services related to the purpose, as well as to hire workers, technicians, distributors and administrative personnel. d) To acquire, hold and dispose of, in any legal manner, all kinds of shares, interests or participations in other corporations or associations, whether of a civil or mercantile nature, consistent with these corporate purposes. e) To acquire, own, lease and encumber in any legal manner such real or personal properties as may be required by or convenient for the corporate purpose. f) To represent all kinds of companies and individuals within or outside of the Republic of Mexico as agent, commission agent, representative or attorney-in-fact. g) To lend and borrow money with or without mortgage or pledge security or in any other legal manner and to guarantee the obligations of third persons by means of bond, mortgage, pledge, or otherwise. h) To sign and grant all kinds of credit instruments and other documents and contracts of indebtedness and to guarantee the payment thereof in any legal manner. i) To acquire and dispose of in any legal manner such patents, patent rights, inventions, trade-marks, copyrights and trade names as may be required or convenient for attainment of the corporate purpose. j) To render any and all services whether of a civil, administrative or mercantile nature relating to the corporate purpose, and k) In general, to carry out and perform any and all business or 119 activities relating to the corporate purpose. FOURTH.- DURATION. The term of duration of the Company shall be ninety-nine years, counted from the date of the Articles of Incorporation. CHAPTER II CAPITAL STOCK AND SHARES FIFTH.- CAPITAL STOCK. The capital stock of the company shall be variable, with a minimum of $375,000.00 (THREE HUNDRED AND SEVENTY FIVE THOUSAND PESOS, MEXICAN CURRENCY), represented by 375,000 shares with a par value of $1.00 (ONE PESO, MEXICAN CURRENCY), each, and an unlimited maximum. SIXTH.- SHARES. The shares which represent the capital stock shall be of free subscription and may be subscribed or acquired by Mexican or foreign individuals, companies or economic entities. The shares shall be represented by provisional and, subsequently, by final stock certificates. The final stock certificates shall be printed, taken from stub-books and cover one or more shares; they shall be numbered consecutively and shall bear the autograph signatures of the President and of the Secretary of the Board or of any two Directors. The recitals of Article 125 of the General Corporation Law and Clauses Sixth, Seventh and Thirty-Fifth of these By-Laws shall be transcribed on the final and provisional stock certificates. Save in the case of legal issuance of more than one series for reasons of preferential rights of different participation in dividends or other reasons, shares will confer on their holders the same rights and impose the same obligations with respect to: a) profit participation; b) distribution of losses up to the amount of the par value of each share subscribed and not paid in; c) participation in General Shareholder's Meetings; and d) any other rights or responsibilities set out in these By-laws and in the law. Every shareholder as such submits and is subject to the stipulations of the Articles of Incorporation and the resolutions duly adopted by the Shareholders in a General Meeting or by the Board of Directors. SEVENTH.- REGISTRATION OF SHAREHOLDERS AND STOCK TRANSFERS. The Company shall deem as owner of the shares any person who is registered as such in the Stock Register to be kept by the Company. Upon request of any interested party, the Company shall record in said Register any transfers made. No shareholder may sell, encumber or transfer his shares, unless the shareholder obtains prior written approval from the Board of Directors. The transfer of shares will be executed by endorsement and delivery of the share certificate, without prejudice to any other legal means of transfer, and the transfer will take effect from the date it takes place, with respect to the signatory, and from the date of its registration in the Stock Registry book with respect to the corporation. When the Company receives notice of a share transfer, signed by the endorser, or when it is presented with the certificate bearing the endorsement, in compliance with the procedure established in the preceding paragraph, the Secretary of the Board of Directors will record the transfer in the Stock Registry book. At the request of the owner and at its expense, share certificates can be exchanged for others of different denominations, provided that the new certificate or certificates represent the same number of shares as the old 120 ones given in exchange. In case of loss, theft, total destruction, mutilation or serious deterioration of share certificates, their cancellation and replacement will be subject to the dispositions of the Second Section of the First Chapter, of the First Title of the General Law of Credit Instruments and Operations in force and effect, with the corresponding expense being for the account of the interested party. EIGHTH.- CAPITAL STOCK INCREASES AND REDUCTIONS. The variable capital stock of the Company may be increased or reduced without need of amending the Corporate By-Laws. The only formality required for said increase or reduction will be the approval by the shareholders in an Extraordinary Meeting. Every increase or reduction of the capital stock of the Company shall be recorded in a Stock Register kept for such purpose by the Company. a) Capital increases. In a capital stock increase the shareholders shall have the preferential right to subscribe the shares issued in proportion to the number of shares held by them. No capital increase may be declared until all shares previously issued by the Company have been fully subscribed and paid for. b) Capital Reductions. Reductions of the capital stock of the Company shall be carried out by amortization of whole shares, by reimbursement to the shareholders. The shares to be canceled shall be determined by unanimous resolution of the shareholders or, in default thereof, by drawing before a Notary or Licensed Broker. In this case, after said shares have been determined a notice shall be published in the Federal Daily Gazette and the amount of the reimbursement shall from said date remain at the disposal of the respective shareholders, in the Company offices, without drawing interest. The shareholders shall have the right to withdraw all or any part of their contributions, and obtain reimbursement for their shares, in accordance with Articles 220 and 221 of the General Law of Mercantile Corporations, provided they so notify the Company five years in advance. Reimbursement of the shares shall be made in proportion to the net worth of the Company in accordance with the last approved balance sheet and against delivery and cancellation of the respective shares. The right to withdraw said contributions may not be exercised when as a result of same the capital stock of the Company is reduced to less than the minimum. CHAPTER III SHAREHOLDERS' MEETINGS NINTH.- SUPREME AUTHORITY. The supreme authority of the Company is vested in the shareholders convened in a General Meeting, who may adopt all kinds of resolutions and appoint and remove any officer. Their resolutions shall be enforced by the Board of Directors or the person or persons expressly designated therefore by the shareholders. The resolutions of the shareholders shall be binding even on absentees or dissenters except for the right of opposition provided in the General Corporation Law. 121 TENTH.- TYPES OF SHAREHOLDERS' MEETING. General Shareholders' Meetings shall be Ordinary and Extraordinary. Ordinary Shareholder' Meetings are those held to deal exclusively with the matters mentioned in paragraphs noted with roman numerals one, two and three of Article 181 of the General Corporation Law. Extraordinary Shareholders' Meetings are those held to deal with any of the matters mentioned in Article 182 as well as any other matter that is not reserved for Ordinary Shareholder's Meetings. ELEVENTH.- MEETINGS. Ordinary and Extraordinary Shareholders' Meetings shall be held in the corporate domicile at any time when called, except in case of fortuitous circumstances or force majeure, and except as provided in the last paragraph of Clause Twelfth. Ordinary Meetings shall be held at least once each year, within four months following the close of the fiscal year, to discuss, approve or modify the report of the Board of Directors, the financial statements, the report of the Examiner, the distribution of profits if any, as well as to appoint the members of the Board of Directors and the Examiner, and determine their remuneration, if any. Extraordinary Shareholders' Meetings shall be held as many times as called, according to these By-laws and the law. TWELFTH.- CALLS. Calls for Ordinary and Extraordinary Shareholders' Meetings shall be made by the President and the Secretary of the Board or by two Directors or the Examiner. The call shall be made by means of a notice published in a newspaper of wide circulation in the corporate domicile thirty calendar days before the date set for the Meeting and by means of a notice sent with the same anticipation by telex, fax or telegram and confirmed by air mail confirmed receipt or courier addressed to each shareholder at his domicile or to the place that he may have designated for such purpose. The call shall set forth the hour, date and place of the Meeting and the agenda, and shall be signed by the person issuing the call. No call shall be required when all the shares of the capital stock of the Company are represented in a Shareholders' Meeting nor in the case that a duly convened Meeting is to be continued, provided that when the Meeting was postponed, the date and hour for its continuation were determined. Resolutions adopted outside of a duly convened Meeting, even if they are adopted outside of the corporate domicile, by unanimous vote of all the shareholders entitled to vote, shall be as valid and binding as if such resolutions had been passed at a duly convened General or special Shareholders' Meeting, if such resolutions are confirmed in writing. THIRTEENTH.- QUORUM IN ORDINARY SHAREHOLDERS' MEETINGS. Ordinary Shareholders' Meetings shall be deemed as duly convened pursuant to first call when at least 50% plus one of the shares of capital stock of the Company are represented therein. In case of second or subsequent calls, said Meetings shall be deemed as duly convened irrespective of the number of shares represented therein. In both cases resolutions shall be adopted by majority vote of the shares represented in said Meetings. FOURTEENTH.- QUORUM IN EXTRAORDINARY SHAREHOLDERS' MEETINGS. Extraordinary Shareholders' Meetings shall be deemed as duly convened 122 pursuant to first or subsequent call when at least 60% of the shares of capital stock of the Company are represented therein. In order to be valid resolutions taken in Extraordinary Shareholders' Meetings shall require the affirmative vote of shares representing at least 70% of the capital stock of the Company. FIFTEENTH.- REQUISITES FOR ATTENDING SHAREHOLDERS' MEETINGS. Shareholders can attend Shareholder's Meetings in person or through a representative holding a general or special power of attorney, a letter proxy signed by the shareholders being sufficient in the latter case. For the shareholders to be admitted to the Meetings, their registration as shareholders in the Stock Registry book or other proof of their legal capacity, will be sufficient. SIXTEENTH.- PROCEDURE IN SHAREHOLDERS' MEETINGS. The procedure in General Ordinary and Extraordinary Shareholders' Meetings shall be as follows: a) The President and the Secretary of the Company shall act as President and Secretary, respectively, of Shareholders' Meetings, and in default thereof, the person appointed therefore by the shareholders. b) The President shall appoint one or more tellers to verify the number of shares represented at the Meetings and to count the votes. c) If the required quorum is present, the President shall declare the Meeting duly convened and proceed to transact the business on the agenda. d) Minutes of all Shareholders' Meetings shall be drawn up, entered in the respective book and signed by the President and the Secretary of the Meeting and by the attending Examiners. The documents evidencing that the call, if any, was made as required by the Corporate By-Laws, shall be attached to the minute file, as well as the attendance list, the letter powers of attorney or an extract of the power of attorney prepared by the tellers, the reports, opinions and other documents submitted for consideration of the shareholders, and a copy of the minutes. The Minutes shall be sent to all the shareholders by the Secretary by registered air mail within 21 days after the date of Meeting. CHAPTER IV ADMINISTRATION SEVENTEENTH.- ADMINISTRATION. The administration of the Company shall be entrusted to a Board of Directors. The Board of Directors shall be composed of four Regular Directors. Each Shareholder or group of Shareholders representing 20% of the capital stock of the Company shall have the right to appoint a Regular Director and an Alternate Director. The Regular Directors shall be substituted during their temporary absences by the Alternates specifically designated to substitute each Regular Director, but if no such special designation has been made, the Regular Director shall designate the Alternate who shall substitute for him. The shareholders in a Meeting may at any time appoint and remove any Director, observing, however, the right of the minority shareholders. EIGHTEENTH.- DIRECTORS. The Directors may but need not be shareholders 123 of the Company, they shall hold their position for one year as a general rule, but may be reelected and in any case shall continue to discharge their duties until their successors take office. NINETEENTH.- PRESIDENT AND SECRETARY. The shareholders, in a General Ordinary Shareholders' Meeting, or the Board of Directors may appoint the President of the Board from among the members of said body, who shall not have the casting vote in case of a tie in the voting of the Board. A Board Secretary may also be appointed, who may but need not be a Director or shareholder. The President of the Board shall have exclusively those powers conferred upon him by the Board of Directors. TWENTIETH.- POWERS. The Board of Directors shall have the following powers: a) General power of attorney for lawsuits and collections, in the terms of the first paragraph of Article 2554 of the Civil Code for the Federal District, with all general and such special powers as are mentioned in Article 2587 of said Code, including but not limited to the following: To exercise all types of rights and actions before any and all authorities and Boards of Conciliation and arbitration; to submit to any jurisdiction; to desist from injunction (amparo) proceedings; to file charges and complaints as aggrieved party and assist the District Attorney; and to sign such documents as may be required in the exercise of this power of attorney; b) General power of attorney for acts of administration, in the terms of the second paragraph of said Article 2554, with powers to carry out all operations inherent in the corporate purpose; c) General Power of attorney for acts of dominion, in the terms of the third paragraph of said Article 2554; d) Power to grant and sign credit instruments in accordance with Article 9 of the General Law of Credit Instruments and Operations; e) Power to carry out and enforce the resolutions adopted in General Shareholders' Meetings; f) Power to revoke and confer general and special powers of attorney within the scope of the aforementioned powers. TWENTY-FIRST.- BOARD MEETINGS. Board of Directors' Meetings shall be held in the corporate domicile or in any other place in the Republic of Mexico or abroad that may be previously determined in the respective call. Board Meetings may be held at any time but not less than once each year and shall be convened by the President or the Secretary of the Board or by two Directors or the Examiner of the Company. The person convening the Meeting shall inform the Board Secretary, who shall immediately issue the respective call. Calls shall be made in writing and sent by telex, fax or telegram, confirmed by registered air mail, to each of the Regular Directors and 124 Examiners, at least 30 calendar days in advance, to their domicile or the place which each Director has designated for such purpose. Calls shall specify the hour, date and place of the Meeting and its purpose or the agenda, and shall be signed by the person issuing the call. TWENTY-SECOND.- QUORUM AND VOTING. A Board Meeting may be validly held pursuant to first or subsequent calls when at least four Board members are present, and resolutions shall be adopted by a vote of at least four Board members. If a Board Meeting cannot be held for lack of a quorum on second call, the President and the Secretary or any two Board members shall convoke to an Extraordinary Shareholders Meeting for the specific purpose of dealing with the proposed agenda of the Board Meeting. A resolution of the Board adopted by all members shall be as valid and binding as if such resolution had been passed at a duly convened Meeting of the Board if it is confirmed in writing. TWENTY-THIRD.- MINUTES. From each Meeting of the Board the minutes will be placed in the corresponding book and shall be signed by the person presiding, the acting secretary and the examiner in attendance. TWENTY-FOURTH.- GENERAL MANAGER. The Extraordinary Shareholders' Meeting or the Board of Directors shall appoint the General Manager, who may, but need not be, shareholder of the Company. CHAPTER V EXAMINER TWENTY-FIFTH.- FINANCIAL REVIEW. The financial review of the Company shall be entrusted to one or more Examiners and their alternates, as may be determined by the shareholders in a General Meeting. Any shareholders representing 25% of the capital stock of the Company may appoint an Examiner and his alternate in addition to those already appointed. TWENTY-SIXTH.- EXAMINER. The Examiners may but need not be shareholders of the Company and shall hold their position for one year, as a general rule, but shall continue to discharge their duties until their successors take office. The remuneration of the Examiners, if any, shall be fixed by the shareholders in a General Ordinary Meeting. TWENTY-SEVENTH.- POWERS AND DUTIES. Examiners shall have the powers and duties provided in the General Corporation Law. CHAPTER VI FISCAL YEAR, BALANCE SHEET, PROFITS AND LOSSES TWENTY-EIGHTH.- FISCAL YEAR. The fiscal year of the Company shall be a calendar year. TWENTY-NINTH.- BALANCE SHEET. A Balance Sheet shall be prepared within three months following the close of the fiscal year and kept in the principal offices of the corporate domicile, available to the Company shareholders and officers, together with its supporting documents, one month before the 125 respective Annual Shareholders' Meeting is held. THIRTY.- PROFITS. The profits obtained in each fiscal year shall be applied as follows: a) First the amount agreed upon by the General Ordinary Shareholders' Meeting will be set aside for the establishment or reconstitution, as the case may be, of the Legal Reserve Fund, an amount that at minimum will be 5% of the net profit, until an amount equal to one fifth of the capital stock is accumulated. b) Such sum as may be determined by the shareholders shall be set aside for creating or increasing reinvestment, contingency or such special reserves as may be deemed advisable; c) Such sum as may be determined by the shareholders shall be distributed to the shareholders in proportion to the number of their shares; d) The remainder, if any, shall be passed to the Undistributed Profits account. THIRTY-FIRST.- LOSSES. The shareholders shall be liable for the Company losses but their liability shall be limited to payment of the unpaid portion of their shares; hence, the owners of fully-paid shares shall have no liability whatsoever. CHAPTER VII DISSOLUTION AND LIQUIDATION THIRTY-SECOND.- CAUSES FOR DISSOLUTION. The Company shall be dissolved: a) Upon expiration of the term fixed in these By-Laws; b) If continued execution of the corporate purposes shall become impossible; c) By resolution of the shareholders adopted in accordance with these By-Laws and the Law; d) If the number of shareholders shall be reduced to less than two; e) In case of loss of two-thirds of the corporate capital unless the shareholders restore or reduce same. THIRTY-THIRD.- LIQUIDATION. a) Upon dissolution, the Company shall be placed in liquidation which shall be entrusted to one or more Receivers, as determined by the shareholders in an Extraordinary Meeting. b) The Directors shall continue in the discharge of their duties until the appointment of the Receivers shall have been recorded in the Public Registry of Commerce and the Receivers shall have taken office. c) The liquidation shall be conducted as prescribed in the General Corporation Law but the shareholders, upon determining to liquidate, shall establish the rules which, in addition to the provisions of Law and these 126 By-Laws, shall govern all action taken by the Receivers. d) The General Shareholders' Meeting wherein the final balance sheet is approved must be presided over by one of the Receivers. The Receivers shall have the authority vested in the Board of Directors and the duties and obligations granted to the Receivers by the General Corporation Law. The Examiners shall discharge the same duties during the liquidation as during the normal existence of the Company. CHAPTER VIII GENERAL PROVISIONS THIRTY-FOURTH.- FOUNDERS. The founders do not reserve to themselves any special participation in the Company profits. THIRTY-FIFTH.- FOREIGNERS. Any foreigner who upon incorporation or at any time thereafter acquires an interest or participation in the Company and/or the property rights, concessions, participations or interests owned by such companies or the rights and obligations derived from the agreements to which such companies are parties with Mexican authorities, shall be considered ipso facto as a Mexican citizen with respect to such interest, participation, concession, right obligation and agreement and it shall be understood that he agrees not to seek the protection of his government under penalty, in case of breaching said agreement, of forfeiting such interest or participation to the Mexican Nation. THIRTY-SIXTH.- SUPPLETORY LAW. In all matters not specifically provided for herein, the provisions of the General Corporation Law shall govern. 127 EXHIBIT 2.5.2 The parties shall pay the aggregate amount of $750,000.00 (SEVEN HUNDRED FIFTY THOUSAND PESOS 00/100) upon incorporation of the Company. The parties shall pay the aggregate amount of $350,000.00 (THREE HUNDRED FIFTY THOUSAND PESOS 00/100) on April 15, 1996. The parties shall pay the aggregate amount of $350,000.00 (THREE HUNDRED FIFTY THOUSAND PESOS 00/100) on May 15, 1996. The parties shall pay the aggregate amount of $350,000.00 (THREE HUNDRED FIFTY THOUSAND PESOS 00/100) on June 15, 1996.
Payment Schedule Detail Incorporation April 15 May 15 June 15 CFI $329,250 $153,650 $153,650 $153,650 Klemp 375,750 175,350 175,350 175,350 Gary Johnson 15,000 7,000 7,000 7,000 Ernest Balazs 15,000 7,000 7,000 7,000 Alfred Beaulieu 15,000 7,000 7,000 7,000 -------- -------- -------- -------- TOTAL $750,000 $350,000 $350,000 $350,000 ======== ======== ======== ========
Exchange Rate: $7.5 Pesos per Dollar. 128 EXHIBIT 3.6 CFI - KLEMP DE MEXICO 1996 - 1998 BUSINESS PLAN CFI-KLEMP DE MEXICO is being formed as a Joint Venture to take advantage of worldwide market opportunities in large fabrications associated with power plant and related infrastructure development. Such fabrications include turbine enclosures, platforms and railings. Both CFI and Klemp have expertise in the manufacture and marketing of fabricated metal products and the Joint Venture represents a sound combination of the respective company abilities. The Joint Venture will work directly with CFI (U.S.) and major OEM's such as Westinghouse, GE and Siemens in the development of orders that may be shipped globally. Product manufacture will be done at a 3,200 M2 facility in Lerma, Edo. de Mexico. Mr. Rudi Samuel will be Director General responsible for operations. Business start-up will begin in March, 1996 and will accelerate to the first phase of full production by end of June, 1996. Key managers will be in place by early April 1996. Approximately $400,000 of orders are in hand at business start-up. Sales, cost and profit projections are shown in the attached exhibit. Sales are projected at $1,025,000 in 1996, expanding to $3,500,000 in fiscal 1998. Material and labor cost percentages will remain relatively constant at a combined 62% of sales, while fixed and administrative costs will decline from 26% in 1996 to 11% in 1998. The business is projected to be profitable throughout the plan period except in the initial plan period.
BUSINESS PLAN FINANCIAL PROJECTIONS 1996-1998 1996 1997 1998 SALES $1,025,000 $2,200,000 $3,500,000 COST: MATERIAL 461,000 (45%) 990,000 (45%) 1,575,000 (45%) LABOR 174,000 (17%) 374,000 (17%) 595,000 (17%) ---------- ---------- ---------- 635,000 (62%) 1,364,000 (62%) 2,170,000 (62%) ---------- ---------- ---------- OVERHEAD: FACILITY 100,000 (10%) 120,000 (6%) 120,000 (3%) SALARY 120,000 (12%) 150,000 (7%) 200,000 (6%) OTHER 45,000 (4%) 55,000 (2%) 65,000 (2%) ---------- ---------- ---------- 265,000 (26%) 325,000 (15%) 385,000 (11%) ---------- ---------- ---------- TOTAL 900,000 (88%) 1,689,000 (77%) 2,555,000 (73%) ---------- ---------- ---------- PBT 125,000 (12%) 511,000 (23%) 945,000 (27%) ========== ========== ==========
129
1996 MONTHLY OPERATING PROJECTIONS ($ IN 000'S) MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ------ SALES $ 20 $ 65 $ 90 $ 90 $120 $120 $130 $130 $130 $130 $1,025 MTL 9 30 40 40 55 55 58 58 58 58 461 LABOR 3 11 16 16 20 20 22 22 22 22 174 RENT 10 10 10 10 10 10 10 10 10 10 100 SALARY 12 12 12 12 12 12 12 12 12 12 120 TRAVEL 2 2 2 2 2 2 2 2 2 2 20 EQ. LEASE 1 1 1 1 1 1 1 1 1 1 10 SECURITY 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 5 OTHER 1 1 1 1 1 1 1 1 1 1 10 TOTAL 38.5 67.5 82.5 82.5 101.5 101.5 106.5 106.5 106.5 106.5 900 NET CASH (18.5) (2.5) 7.5 7.5 18.5 18.5 23.5 23.5 23.5 23.5 CUMULATIVE (18.5) (21)(13.5) (6) 12.5 31 54.5 78 101.5 125
130 EXHIBIT 4.3.2 It is resolved that a power of attorney is granted to Messrs. Ruid Samuel Birkenfeld, Walter Kellogg and Gary Johnson jointly any two of them, to act in the name and on behalf of the Company, with the following authority: General power of attorney for acts of administration pursuant to the second paragraph of article 2554 of the Civil Code for the Federal District and the corresponding Articles of the Civil Codes for the other States of the Republic of Mexico. General power of attorney for lawsuits and collections pursuant to the first paragraph of Article 2554 of the Civil Code for the Federal District and the corresponding Articles of the Civil Codes for all the other States of the Republic of Mexico, with all of the general authority and such authority as may require a special clause pursuant to Article 2587 of the Civil Code for the Federal District and the corresponding Articles of the Civil Codes for all the other States of the Republic of Mexico, such as but not limited to the following authority: to exercise all kinds of rights and actions before any authorities of the Federation, the States, the Federal District and the Municipalities, whether under voluntary, adversary or joint jurisdiction, and whether they are civil, judicial or administrative authorities or labor authorities, whether Conciliation Boards or Arbitration Courts, whether local or federal; to answer complaints and file exceptions and counterclaims; to submit to any jurisdiction; to answer and propound interrogatories; to challenge magistrates, judges, clerks, experts and other persons challengeable under Law; to withdraw from the main cause of action, its incidentals, any appeal and amparo proceedings, which they may file as many times as they may deem advisable; to produce all kinds of evidence; to acknowledge signatures and documents, and to object to them and to challenge them on the grounds that they are false; to attend meetings, proceedings and actions; to bid and outbid and to obtain for the grantor company to award of all kinds of properties, and assign rights under any title; to file accusations, denunciations and complaints; to grant acquittals and to join criminal causes of action or assist the public prosecutor, in which causes of action they may exercise the fullest authority that may be required. This power of attorney is also granted for the purpose of Articles 11, 692, Section II; 786 and 876 of the Federal Labor Law. Power of attorney to intervene in credito operations and to execute all types of credit instruments pursuant to article 9 of the General Law for Credit Instruments and Operations, to open bank accounts and to issue checks against the bank accounts opened or to be opened by the Company and to designate the persons authorized to sign the checks. Power of attorney in labor matters pursuant to articles 11, 692, sections II and III, and others of the Federal Labor Law, with the authority such as but nor limited to; represent the Company in the hearings referred to in articles 876 and 878 of the above mentioned law and in general in any stage of labor proceedings against the Company; to appear before all types of labor authorities referred to in article 523 of the above mentioned law; to perform all kind of procedures as required to solve the Company's matters; and to act or execute any agreement related to labor relationships. It is resolved that a power of attorney is granted to Messrs. Jorge Leon Orantes, Jaime Roberto Rendon Graniell, Juan Carlos Jimenez Villasenor, Jose Oscar Gonzalez Gonzalez, Jorge Bernardo Sierra Navarro, Jaime Delgado Reyes, Lorenia Espinosa Urbano, Francisco Capetillo Traeger, Julio Flores Luna, 131 Gustavo Garcia Cuencia, Victor Adame Calderon, Jose Luis Lopez Ramirez, Raul Moreyra Suarez, Alejandro Calderon Aguilera, Octavio Varela Mejia, Luis Hector Trujillo Saca, David H. Brill, Luis Capin Lopez, Enrique Ramirez Ramirez, Adriana de Aguinaga Girault, Jose Luis Martinez Fernandez, Maria Antonieta Tena Sanchez and Manuel Andres Traslosheros Romero, jointly or severally, to act in the name and on behalf of the Company, with the following authority: General power of attorney for lawsuits and collections pursuant to the first paragraph or Article 2554 of the Civil Code for the Federal District and the corresponding Articles of the Civil Codes for all the States of the Republic of Mexico, with all of the general authority and such authority as may require a special clause pursuant to Article 2587 of the Civil Code for the Federal District and the corresponding Articles of the Civil Codes for all the States of the Republic of Mexico, such as but not limited to the following authority: to exercise all kinds of rights and actions before any authorities of the Federation, the States, the Federal District and the Municipalities, whether under voluntary, adversary or joint jurisdiction, and whether they are civil, judicial or administrative authorities or labor authorities, whether Conciliation Boards of Arbitration Courts, whether local or federal; to answer complaints and file exceptions and counterclaims; to submit to any jurisdiction; to answer and propound interrogatories; to challenge magistrates, judges, clerks, experts and other persons challengeable under Law; to withdraw from the main cause of action, its incidentals, any appeal and amparo proceedings, which they may file as many times as they deem advisable; to produce all kinds of evidence: to acknowledge signatures and documents, and to object to them and to challenge them on the grounds that they are false; to attend meetings, proceedings and actions; to bid or outbid and to obtain for the grantor company the award of all kinds of properties, and assign rights under any title; to file accusations, denunciations and complaints; to grant acquittals and to join criminal causes of action or assist the public prosecutor, in which causes of action they may exercise the fullest authority that may be required. 132 EXHIBIT 4.5 It is resolved that a the Board of Directors of the Company be composed as follows: Gerald McClure Walter Kellogg Jack McSweeney Gary Johnson It is resolved that Mr. Miguel Kafka be appointed Examiner of the Company. It is resolved that Mr. Rudi Samuel Birkenfeld be appointed General Director of the Company. EX-10.53 7 EXHIBIT 10.53 133 SECOND AMENDMENT TO LEASE AGREEMENT THIS SECOND AMENDMENT TO LEASE AGREEMENT (hereinafter referred to as the "Second Amendment") is made as of the 25th day of March, 1996, by and between WEEKS REALTY, L.P., (hereinafter referred to as "Landlord"), and CHATWINS GROUP, INC., (hereinafter referred to as "Tenant"). WITNESSETH: WHEREAS, RTF Properties, L.P. and Tenant entered into that certain Lease Agreement dated May 31, 1994, as assigned to Landlord by that certain Lease Assignment dated August 1, 1994, as amended by that certain First Amendment to Lease Agreement dated August 9, 1994 (hereinafter referred to as the "Agreement") for the lease of 127,800 sq. ft. of office/warehouse space in Northpoint Park located at the intersection of Georgia Highway No. 92 and Interstate Highway No. 75 in Cherokee County, Georgia, and certain easements, rights and privileges appurtenant thereto (hereinafter referred to as the "Leased Premises"); and WHEREAS, Weeks Realty, L.P. succeeded to the interest of the Landlord under the Agreement and is the Landlord with respect to the Leased Premises; WHEREAS, Landlord and Tenant desire to enter into this Second Amendment in order to amend certain terms and conditions of the Lease upon terms and conditions mutually acceptable to Landlord and Tenant; NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by Landlord and Tenant to one another, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Landlord and Tenant, Landlord and Tenant amend the Agreement as follows: 1. Section 2.01 of the Agreement is hereby amended to set forth that the commencement date is March 13, 1995 and the lease term shall continue until midnight on March 12, 2005. 2. Pursuant to Paragraph 7.01, Tenant and Landlord have agreed to a Change Order to the Plans and Specifications, attached hereto as Exhibit "A". Paragraph 3.01 of the Agreement is hereby amended to provide that the base rental for the Leased Premises shall be as set forth below: Years 1 - 5 $351,705.60/year $29,308.80/month Years 6 - 10 $392,473.80/year $32,706.15/month which payments shall be due and payable on or before the first day of each calendar month during the term, together with any other additional rental as set forth in the Agreement. 3. At beneficial occupancy, several areas of the concrete slab experienced cracking as a result of crane loading and adverse weather conditions as more specifically described in the report and floor plan prepared by Atlanta Testing & Engineering dated February 1, 1996 attached as Exhibit B. Although the Tenant is responsible for the floor pursuant to the terms of the Agreement, Landlord and Tenant agree that the responsibility for repairs to the concrete slab in the manufacturing and warehouse area shall be separated as follows: (a) In the event that the cracking interferes with Tenant's use of the Leased Premises and Tenant and Landlord reasonably determine that 134 it is necessary to replace the slab sections in those areas, Landlord shall be solely responsible for removing and replacing in an expeditious manner those concrete slab sections noted in accordance with the original design. Landlord shall cause such work to be performed in a manner that does not unreasonably interfere with Tenant's use of the Leased Premises. Upon satisfactory completion of this replacement and acceptance by an independent third party structural engineer, the responsibility for any further repairs shall reside with Tenant. Notwithstanding this paragraph 3(a) or anything to the contrary contained in the Lease, Landlord acknowledges and agrees that Tenant shall have no responsibility whatsoever for said cracking or any further cracking directly relating to the cracking identified on said Exhibit B. (b) Notwithstanding that which is set out in Paragraph 3(a) above, Tenant shall be responsible for the repair of any concrete slab sections in the manufacturing and warehouse area throughout the term of the lease that have not been specifically identified as Landlord's responsibility in the report attached as Exhibit B (including specifically, during any construction warranty periods). 4. Except as expressly modified by this Second Amendment, all provisions, terms and conditions of the Agreement shall remain in full force and effect. 5. In the event a provision of this Second Amendment conflicts with a provision of the Agreement, the Second Amendment shall supersede and control. 6. All terms and phrases used herein shall have the same meaning as assigned to them in the Agreement. 7. This Second Amendment shall not be of any legal effect or consequence unless signed by Landlord and Tenant, and once signed by Landlord and Tenant it shall be binding upon and inure to the benefit of Landlord, Tenant, and their respective legal representatives, successors and assigns. 8. This Second Amendment has been executed and shall be construed under the laws of the State of Georgia. 135 IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to be executed under seal and delivered as of the day and year first above written. Signed, sealed and delivered LANDLORD: WEEKS REALTY, L.P., in the presence of: a Georgia limited partnership ____________________________ Witness By: Weeks Corporation, a Georgia corporation, ____________________________ its General Partner Notary Public By: ______________________ Name:______________________ Title:_____________________ (Corporate Seal) Signed, sealed and delivered TENANT: CHATWINS GROUP, INC. in the presence of: ____________________________ Witness By: ___________________________ Name:__________________________ ____________________________ Its:___________________________ Notary Public ATTEST: By: ____________________________ Name:___________________________ Its:____________________________ (Corporate Seal) EX-10.54 8 EXHIBIT 10.54 136 THIRD AMENDMENT TO LEASE AGREEMENT THIS THIRD AMENDMENT TO LEASE AGREEMENT (hereinafter referred to as the "Third Amendment") is made as of the 10th day of June 1996, by and between WEEKS REALTY, L.P. (hereinafter referred to as "Landlord") and CHATWINS GROUP, INC. (hereinafter referred to as "Tenant"). WITNESSETH: WHEREAS, RTF Properties, L.P. and Tenant entered into that certain Lease Agreement dated May 31, 1994, as assigned to Landlord by that certain Lease Assignment dated August 1, 1994, as amended by that certain First Amendment to Lease Agreement dated August 9, 1994, and as further amended by that certain Second Amendment to Lease Agreement dated March 25, 1996 (hereinafter collectively referred to as the "Agreement") for the lease of 127,800 sq. ft. of space at Northpoint Park located at the intersection of Georgia Highway No. 92 and Interstate Highway No. 75 in Cherokee County, Georgia and certain easements, rights and privileges appurtenant thereto (hereinafter referred to as the "Leased Premises"); and WHEREAS, Tenant desires to exercise its option under Section 35 of the Agreement to lease an additional 95,100 square feet of space to be constructed as an expansion to the Building (hereinafter the "Additional Space"); and WHEREAS, Landlord and Tenant desire to enter into this Third Amendment in order to provide for said expansion of the Leased Premises and to provide for an extension of the term of the Lease upon terms and conditions mutually acceptable to Landlord and Tenant; NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by Landlord and Tenant to one another, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Landlord and Tenant, Landlord and Tenant amend the Agreement as follows: 1. Effective upon substantial completion of construction of the improvements to the Additional Space as hereinafter defined ("Substantial Completion of the Additional Space"), paragraph 1.01 of the Agreement is hereby amended to provide for the lease by Tenant of an additional 95,100 square feet of space which together with the 127,800 square feet being leased by Tenant under the Agreement (hereinafter the "Existing Space"), equals a total of 222,900 square feet (the Additional Space, the Land, and the Existing Space shall be collectively hereinafter referred to as the "Leased Premises" for all purposes of the Agreement, as amended hereby). Substantial Completion of the Additional Space shall mean the earlier of: (1) completion of construction of the Additional Space substantially in accordance with the Approved Plans and Specifications (as hereinafter defined), subject only to punchlist items as specified in the next succeeding sentence; or (2) the date upon which the Additional Space is in fact substantially occupied by Tenant for the conduct of its business therein. It is understood and agreed by Landlord and Tenant that in order to achieve Substantial Completion of the Additional Space the only permitted incomplete or defective punchlist items must be those which , if taken either individually or in the aggregate, do not materially or substantially interfere with Tenant's taking possession of, moving its personal property and effects into, or using and enjoying the Additional Space for the purposes for which it was intended. Landlord agrees to provide to Tenant at least fifteen (15) days prior written notice of the date on which it expects to achieve Substantial Completion of the Additional Space. 137 2. Paragraph 2.01 of the Agreement is hereby amended to provide that the term of the lease shall be extended for an additional three (3) year period continuing until midnight on March 12, 2008. 3. Paragraph 3.01 of the Agreement is hereby amended to provide that commencing on Substantial Completion of the Additional Space, Tenant shall pay the base rental as set forth below: ADDITIONAL SPACE BASE RENTAL: Substantial Completion - 3/12/00 $25,597.75/mo. $307,173.00/year March 13, 2000 - March 12, 2005 $26,548.75/mo. $318,585.00/year March 13, 2005 - March 12, 2008 $29,243.25/mo. $350,919.00/year EXISTING SPACE BASE RENTAL: March 13, 1995 - March 12, 2000 $29,308.80/mo. $351,705.60/year March 13, 2000 - March 12, 2005 $32,706.15/mo. $392,473.80/year March 13, 2005 - March 12, 2008 $35,997.00/mo. $431,964.00/year TOTAL LEASED PREMISES BASE RENTAL: 3/13/95 - Substantial Completion $29,308.80/mo. $351,705.60/year Substantial Completion - 3/12/00 $54,906.55/mo. $658,878.60/year March 13, 2000 - March 12, 2005 $59,254.90/mo. $711,058.80/year March 13, 2005 - March 12, 2008 $65,240.25/mo. $782,883.00/year which payments shall be due and payable on or before the first day of each calendar month during the applicable term, together with any other additional rental as set forth hereunder or as set forth in the Agreement. 4. The base rental provided in paragraph 3 hereof, includes all costs and expenses of construction of the Additional Space on the basis set forth in the preliminary site plan and specifications (hereinafter referred to as the "Preliminary Site Plan and Specifications"), attached hereto as Exhibit A. Landlord and Tenant agree that, at Landlord's sole cost and expense, final plans and specifications shall be prepared to match the design criteria contained in Exhibit A and shall be submitted to Tenant for approval (after approval by Tenant, hereinafter the "Approved Plans and Specifications"). Any modifications to the scope that is defined by the Preliminary Site Plan and Specifications shall be considered Change Orders (as defined below). (A) The Additional Space shall be constructed by Landlord in compliance with all federal, state, county, municipal or local government laws, ordinances regulations, rules and orders (including, without limitation, the Occupational Safety and Health Act of 1970, as amended) and shall be of similar quality as the Existing Space. All costs of construction of the Additional Space pursuant to the Approved Plans and Specifications and in accordance with the allowances set forth therein shall be borne by Landlord. Changes in the Approved Plans and Specifications shall be made only pursuant to written change order (hereafter a "Change Order") signed by both Tenant and 138 Landlord and shall be in compliance with the Protective Covenants. Such Change Order shall specify the cost of such change (which shall be the sum of all actual out of pocket costs and expenses attributable thereto and the cost of financing with respect thereto), and any additional time required for Substantial Completion required by reason of such change. In the event of an increase or decrease in the cost of construction resulting from Change Orders requested by Tenant and from costs incurred either less than or in excess of the allowances set forth in the Approved Plans and Specifications, the base rental shall be adjusted upwards or down by multiplying 11% times the net increases or decreases. The total amount allowed of increase or decrease pursuant to this Paragraph 4(A) shall be $100,000.00. In the event of an increase above $100,000.00 in the cost of construction by reason of any specialty items (above building standard) requested by Tenant or increase in office build out requested by Tenant, at Tenant's option, Landlord shall invoice Tenant for the net increase upon Substantial Completion of the Additional Space, in which event Tenant shall pay Landlord the amount thereof within twenty (20) business days after delivery of such invoice, or Landlord shall amortize the cost of construction of such items or build out over the term at a rate equal to 10.5% per annum. Landlord shall indemnify and hold Tenant harmless from or in connection with any occurrence during construction of the Additional Space, unless such claims or demands are caused, directly or indirectly, by any act or negligence of Tenant or its agents, contractors, employees or invitees. (B) Tenant shall have a representative review and approve proposed drawings and details for conformity with the Approved Plans and Specifications. So long as such proposed drawings and construction schedule are delivered to Tenant in a timely manner, such review shall be conducted so as not to delay the construction schedule. During the course of construction of the Additional Space, Tenant may enter upon the Additional Space for purposes of inspecting and reviewing the work, taking measurements, making plans, installing trade fixtures and telephones, erecting temporary or permanent signs and doing such other work as may be appropriate or desirable without being deemed thereby to have taken possession or obligated itself to pay rent but Tenant agrees that: (a) Landlord shall have no liability for injury to any person or damage to any property of Tenant stored on the Additional Space except for damages caused by the willful act or negligence of Landlord or its employees or agents, (b) Tenant shall not interfere with Landlord's construction work on the Additional Space, (c) Tenant shall indemnify, protect and hold harmless Landlord from and against any and all claims, demands, damages, losses, costs, expenses, liabilities and actions at law or in equity based upon any occurrence or condition arising out of or attributable to Tenant's exercise of such right except for demands, damages, losses, costs, expenses, liabilities and actions caused by the willful act or negligence of Landlord or its employees or agents, and (d) Tenant shall be solely responsible for the permitting of any such work it performs. At least forty-five (45) days before Substantial Completion of the Additional Space, Landlord shall give Tenant written notice of such projected date of Substantial Completion of the Additional Space. From the date such notice is given, Tenant, its agents, and its employees shall have access to the Leased Premises for the purpose of installing furniture, fixtures, equipment and other items necessary for the commencement of Tenant's operations; provided that Tenant has the approval of any applicable governmental authority for its activities in the Leased Premises, that there shall be no interference with the completion of the construction nor shall Tenant begin conducting its business in the Leased Premises during such forty-five (45) day period. (C) No later than Substantial Completion of the Additional 139 Space, Tenant and Landlord shall prepare an agreed final punch list setting forth the work, if any, remaining to be done, or requiring correction, on the Additional Space, and Landlord shall promptly commence, and thereafter with due diligence prosecute to completion, the work required by said punch list (which shall in no event include, except on condition Tenant shall pay to Landlord the actual cost thereof plus ten percent (10%) of such amount, work required as a consequence of injury or damage to the Additional Space attributable to Tenant, its agents, employees, contractors or movers). If the parties cannot agree upon the final punch list, then the punch list shall be determined by an independent professional engineer employed by the mutual agreement of Landlord and Tenant. 5. Landlord agrees at its expense during the term of the Agreement to keep in good repair, the roof and structural components of the Additional Space, except that repairs rendered necessary by the negligence of Tenant, its agents, employees or invitees shall be undertaken by Landlord at Tenant's expense payable, as additional rent, upon demand. Notwithstanding anything elsewhere in the Agreement to the contrary, Landlord shall, at its sole cost and expense, upon notice by Tenant (with a copy of such notice being sent to the holders of any mortgages, or deeds to secure debt, which notice shall also provide such holders with an opportunity to cure such defect within said thirty (30) day period) but only for a period of one (1) year immediately subsequent to the Substantial Completion of the Additional Space, repair, replace or otherwise correct structural or other construction defects, as well as defects in any of the additional items to be constructed or installed by Landlord in accordance with the Agreement, provided that any correction or repair of any defect or condition caused by the acts or failure to act of Tenant, its agents, contractors, employees or invitees shall be paid by Tenant as herein provided. 6. Landlord's obligation to construct the Additional Space is subject to Landlord's acquiring the real property adjacent to the Leased Premises necessary to construct the Additional Space. Landlord shall use diligent efforts, following the final execution and delivery by Landlord and Tenant of this Third Amendment to acquire said real property; if Landlord is unable, within ninety (90) days following the execution and delivery of this Third Amendment, to acquire said real property, on terms and conditions satisfactory to Landlord in Landlord's sole and absolute discretion, Landlord shall have the right to rescind Tenant's election to lease the Additional Space. Thereafter, the Agreement and all of the terms and conditions thereof (other than Article 35 thereof) shall remain in full force and effect. 7. Landlord has agreed to use its diligent good faith efforts to cause Substantial Completion of the Additional Space to occur on or before February 1, 1997 provided that Tenant approves the construction drawings within fourteen (14) calendar days of Tenant's receipt of such construction drawings. In the event of any delay in Substantial Completion of the Additional Space beyond March 1, 1997 for any reason other than justifiable weather related delays approved by tenant in writing or delays by Tenant, its agents, employees or invitees, Landlord shall pay to Tenant as liquidated damages the amount of $500.00 per day for the first seven days of such delay and $800.00 per day thereafter for each day of such delay until Substantial Completion of the Additional Space shall occur. Landlord agrees to give Tenant notice of any weather related delay detailing the reason for and the extent of such delay promptly upon commencement of such delay for Tenant's review and approval. Landlord and Tenant acknowledge that Tenant's actual damages in the event of a default by Landlord under the Agreement will be difficult to ascertain, and that the liquidated damages provided above 140 represent Tenant's best estimate of such damages. The parties expressly acknowledge that the foregoing liquidated damages are intended not as a penalty, but as full liquidated damages, as permitted by Section 13-6-7 of the Official Code of Ga. Annotated. 8. Landlord and Tenant agree that Tenant has exercised its option to lease additional space under Article 35 of the Agreement and Landlord and Tenant agree that Tenant shall no longer have any rights under Article 35 in the event Landlord rescinds this Third Amendment as provided in Section 6 of this Third Amendment or upon Substantial Completion of the Additional Space. In no event shall the immediately preceding sentence limit any rights of Tenant under any other provision of the Agreement. 9. Landlord agrees that on or before Substantial Completion of the Additional Space, Landlord shall have the Additional Space and the land upon which it is located fully re-zoned by the appropriate governmental authority to the same classification as the Leased Premises so that the entire Leased Premises (including the Additional Space) is zoned to permit the Tenant's intended use. In the event such re-zoning does not occur on or before Substantial Completion of the Additional Space, Tenant, at its option, may terminate this Third Amendment. Landlord shall deliver evidence of such re- zoning promptly to Tenant. Except as expressly modified by this Third Amendment, all provisions, terms and conditions of the Agreement shall remain in full force and effect. 10. In the event a provision of this Third Amendment conflicts with a provision of the Agreement, the Third Amendment shall supersede and control. 11. All terms and phrases used herein and not defined shall have the same meaning as assigned to them in the Agreement. 12. This Third Amendment shall not be of any legal effect or consequence unless signed by Landlord and Tenant, and once signed by Landlord and Tenant it shall be binding upon and inure to the benefit of Landlord, Tenant, and their respective legal representatives, successors and assigns. 13. This Third Amendment has been executed and shall be construed under the laws of the State of Georgia. 141 IN WITNESS WHEREOF, the undersigned have caused this Third Amendment to be executed under seal and delivered as of the day and year first above written. Signed, sealed and delivered LANDLORD: WEEKS REALTY, L.P., in the presence of: a Georgia limited partnership By: Weeks Corporation, ____________________________ a Georgia corporation, Witness its General Partner ____________________________ By:______________________________ Notary Public Name:___________________________ Its:______________________________ ATTEST: By:_____________________________ Name:__________________________ Its:_____________________________ [Corporate Seal] Signed, sealed and delivered TENANT: CHATWINS GROUP, INC. in the presence of: ____________________________ By:___________________________ Witness Name:_________________________ Its:__________________________ ____________________________ Notary Public ATTEST: By:____________________________ Name:_________________________ Its:____________________________ [Corporate Seal] EX-27 9 EXHIBIT 27
5 This schedule contains summary financial information extracted from the registrant's financial statements included in the Form 10-Q for the period-end indicated below and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 377 0 29,605 664 20,093 53,094 46,020 18,256 104,336 25,077 49,864 0 7,342 3 (6,894) 104,336 77,966 77,966 62,038 62,038 10,803 0 4,758 367 65 102 428 0 0 530 1.03 1.03
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